Coffee House

How to implement a minimum price for alcohol

15 February 2012

Pete posted earlier on the Prime Minister’s latest intervention on the issue of problem drinking. The new proposals — like a greater police presence in A&Es, and ‘drunk tanks’, special units where drunks are taken to sober up — are sensible enough, but seem small relative to the scale of the supposed problem, and focus on peripheral (though important) side-effects, rather than the core of the issue. The ‘big idea’ seems to be missing, even though the Conservatives have been flirting with it for some years, is a minimum unit price (MUP) for alcohol: far more controversial, but potentially far more effective.

The last Labour government, in which I was an adviser, looked at this idea in some depth. I was attracted to it, but believed we should pursue the same objective in a different way: namely, by fixing an effective MUP through increases in alcohol duty (together with a ban on selling alcohol below the level of duty). The justification is that problem drinking has clear ‘negative externalities’: costs imposed on others which are not compensated for through the market. These include costs to the taxpayer — especially NHS treatment — and the (non-financial) cost of anti-social behaviour and violent crime. Tax is often the most efficient and least illiberal way of tackling negative externalities. It would also raise revenue: a crucial advantage in the present fiscal context.

Imposing an MUP directly, as campaigners suggest, and as the Scottish government is now committed to doing, would channel the resulting price increases straight to industry profits. Last year’s IFS study (which Pete linked to earlier) estimated that, assuming ‘no behavioural response from consumers and no wider price effects’, the 45p MUP proposed by the SNP in 2010, if introduced across the UK, ‘would transfer £1.4 billion from alcohol consumers to producers and retailers’. By contrast, an MUP implemented indirectly, via changes in duty, would transfer this money to the Exchequer, which could reduce the need for spending cuts or tax increases elsewhere.

Claim your gift

In terms of the level at which an MUP might be set, the Scottish proposal of 45p is towards the ambitious end. The IFS study found that in 2010 this would have raised the price of ‘71% of all off-licence alcohol units, including 87% of cider units and 81% of lager units’. Even this doesn’t satisfy the more zealous health campaigners, who favour an MUP set at 50p, but modelling suggests that significant health and social benefits start to kick in below 45p. A sensible approach — leaving the politics aside for the moment — would be to start at 35p per unit, but announce an intention to increase in 5p increments over a number of years, after monitoring the effects on tax revenue, health, and crime. (The main drink types that would be caught at the initial level of 35p would be strong cider, supermarket multi-buy beer, and supermarket own-brand spirits.)

The main counter-arguments to an MUP are the same however it is implemented, and whatever level is chosen — and they are the same today as they were when Labour was considering this three years ago. First, that an MUP is a blunt instrument. Moderate drinkers are already drinking less; the problem is that heavier drinkers are drinking even more heavily. These are the drinkers who are imposing costs on others, either through NHS treatment or crime, but a blanket MUP would treat all drinkers the same — particularly unfair for moderate drinkers on low incomes. Second, the political version of that argument, that it would be mad for any government, at a time of squeezed living standards, suddenly to jack up the price of one of life’s cheap luxuries. And third, that an MUP is illegal under EU regulations.

As an advocate of an MUP, I believed these objections were serious, but not conclusive. The legal issues are too complex to go into here, but are certainly not as clear-cut as opponents suggest: the experience of the Scottish government will be a useful test. The blunt-instrument objection is true as far as it goes. Whether an MUP is imposed directly, or indirectly via changes in duty, people will pay more for their drink — including, regrettably, moderate drinkers and, even more regrettably, moderate drinkers who are badly off. The health experts and academics who lobbied me and others in support of an MUP were not able, at that time, to provide any evidence that it would target problem drinkers very effectively: problem drinkers do buy cheap alcohol, but so do many moderate drinkers (especially those taking advantage of supermarket multi-buy promotions); and there is some evidence that problem drinkers are more likely than moderate drinkers to adjust to rising prices in part by reducing spending elsewhere, rather than reducing their drinking. However, health experts are able to provide convincing evidence that higher prices will reduce problem drinking to some extent, and also reduce the negative externalities in health and crime. A blunt instrument maybe, but still an effective one.

In the end, it was probably the political objection which tipped the balance in our internal debate, and I expect the same will apply to the present government, despite some of the briefing around Cameron’s speech today. But, over the longer term, when living standards start to rise, there will be a strong argument for returning to the issue of alcohol prices. If the costs of problem drinking continue to rise, a future government should at least raise duty to offset the fall in the real price of off-sales over recent decades. (This could also have a side-effect of helping pubs — the change in relative cost of on-sale and off-sale being one of the drivers of their decline.)

Ideally, the government should go further and both raise and adjust levels of duty to impose an effective MUP, as outlined above, increasing the level gradually while monitoring the effects, and using the revenue raised to reduce spending cuts or tax increases elsewhere. If this truly does require changes in EU regulations, the government should start lobbying for these changes now. I would hope that many people would agree that the UK should have the option to adjust its alcohol duty regime in this way — whether or not they believe we should actually exercise that option.

Matt Cavanagh is an Associate Director at IPPR.

Give the perfect gift this Christmas. Buy a subscription for a friend for just £75 and you’ll receive a free gift too. Buy now.

Show comments
  • Downtown

    @ McClane “Why does does government seem to obsess about controlling people’s lives and habits?

    And why does the only answer they come up with inevitably involve tax and money?”

    Right on. And would the extra income go into industry’s pockets? Or would it be tax?

    Just an excuse for further ineffectual meddling and getting more money out of people.

    To get the economy moving we need less of this type of thinking and not more.

  • Mark M

    WetherspoonThree – so you’re happy to pay for the consequences other people’s actions? How about I sign up to Sky TV and send the bill to you, if you’re happy to foot the bill for costs that have nothing to do with you? By your logic, you saying no to that request makes you selfish and self-centered.

  • michael

    If the market must be regulated the the cheapest booze ought to be the premise of LICENSED victuallers …names to professional faces and a focal hub for communal behaviour.
    A leg up for pubs and a bit of old fashioned clout for publicans.(Big what?)- And its all in the price.

  • Hexhamgeezer

    If a MUP is intended to address the costs to society incurred by over consumption, surely those areas housing last years rioters should also be taxed at a higher rate to cover the damage their behaviour caused. Additionally, those areas housing a high proportion of folk suffering ‘whiplash’ injuries should be taxed higher to cover increased NHS and insurance costs. Ditto foreign owned cars and lorries whose accident rates impose disproportionately on the NHS.

    I must admit though, I’m at a loss as to why there is a need to cover the results of the ‘Booze Holocaust’. Were we not told that the smoking ban would result in massive savings to the NHS? Has there been billions saved? If so, is this not just another tax oportunity to fund Greece and the burden imposed by unemployable immigrants and their families?

  • Drinkers’ Voice

    Minimum pricing is quite the worst policy the government could pursue… it takes money from the pockets of the poor and puts it straight into the profits of the big retailers and booze manufacturers. While of course penalising millions of blameless drinkers. Join my campaign on Twitter @drinkersvoice

  • WetherspoonThree

    I like alcohol preferable, whenever possible, in moderation but have never been attracted to other the ‘recreational drugs’ that are allegedly so popular amongst people of all ages. But I am told by those who claim to know, that alcohol and cigarettes are far more addictive and harmful that the plethora of illegal substances available on the street almost anywhere from a petty criminal near you, even though their production is entirely unregulated.
    So why do we still permit the drinks industry and tobacco companies to have such a disproportionate influence on public policy and why are we reluctant to discuss the social ills associated with all forms of substance abuse.
    The call ‘why should I pay for the misconduct of others’ pretty well sums just how selfish and self centred as a country we have become.

  • Mark M

    “costs imposed on others which are not compensated for through the market. […] especially NHS treatment”

    That’s what happens when you have socialised medicine. Much better would be an insurance system in which drunk & disorderly arrests were used to increase insurance premiums for those who cause the problem.

    However, as we’ll never go down that road, how about put a large fine on those arrested for alcohol related problems? I fail to see why those who drink responsibly and don’t cause these ‘negative externalities’ should pay for the cost of them through higher drink prices. The costs should be borne by those who cause the problems. Besides, If the cost of drinks was related to incidence of these ‘negative externalities’ then we’d be seeing punch ups every day in the taxpayer subsidised MP’s bar.

    Make people aware that you are free to drink – however if you cause any problems it’s going to cost you.

  • Milton Freeman

    “health experts are able to provide convincing evidence that higher prices will reduce problem drinking”. When did health experts become masters of economics?

  • DeeJay

    I am not sure if my local supermarket is a convenience store which now sells mountains of alcohol or an off-licence which sells a small selection of food.
    But seriously, Dave’s debate about the misuse of booze dwells on the public face of this problem. He totally neglects to mention the devastating impact that it has upon relatives, friends and above all, children.
    A problem ignored for far too long in my opinion.

  • alastair harris

    no no no no no no. message to cameron. MYOB.

  • Sir Everard Digby

    I love it when the corporatists tie themselves in knots; Cameroon cannot take any effective measures as to do so would go against his interests. The sensible approach would be to restrict sales at all
    access points and hike prices.

    Had he,or any other policy maker spent a Saturday evening in a town centre, I suspect they might realise the scale of the problem.The scenes are quite shocking.It is now culturally acceptable to be falling down drunk in public and a trip to A&E seems to be a part of the night out.

    I see the problem though – addictions like gambling and drinking are subliminally encouraged by legislation but smoking is stamped on. Anyone would be forgiven in thinking a drink and a bet are fine as a result.

    Joined up thinking required. Fat chance.

  • David L

    Hey, while we’re at it let’s dust off that Blairite wheeze of marching offenders to the nearest cashpoint…..

    As long as Cameron holds the line on the economy he gets my vote, but sometimes I do despair!

  • Fergus Pickering

    Jesus, Clear Memories, you jest surely. The English have always been famous for boozing – see Hamlet, see Hogarth. Our present ills have nothing to do with booze, plenty to do with bankers and such who wrought their wickedness when stone cold sober. Some of our greatest leaders, think William Pitt the Younger, think Churchill, liked a dram, sometimes even two. Lady Thatcher liked her scotch. Come, fellow, dos’t think, because thou art virtuous, there shall be no more cakes and ale? It is not drunkenness but idleness and ignorance taht are our scourges. And I don’t know that things were different, booze-wise in the wonderful fifties. Not in Edinburgh they weren’t, where the drunks could be seen staggering about any afternoon after the pubs shut. And as for not drinking when you are sixteen or seventeen, are you bloody mad? That horrible time in your life is just when you need it most.

  • Herbert Thornton

    I think there should be a very heavy tax on Non-Drinkers – doubled if the reason for not drinking is that your religion forbids it, and after that doubled in each following year. Failure to pay up should result in deportation.

  • Simon

    Let’s be really radical instead. Why not enforce the laws against being drunk and disorderly? Why not take these out of the CPS’s hands and let the police bring the case to court?

  • Baron

    A minimum wage, a minimum price for alcohol, what’s next? A minimum imbecility level for a politician?

    Verity gets in right, the concept itself stinks.

  • Clear Memories

    There are other ways. Perhaps the government might consider the system used in Qatar, of all places.

    A simple ID card is issued to those entitled to drink – no card, no booze. The only details on the card are your name, photograph and the amount you are allowed to spend per month on alcohol (stored electronically in the stripe). This sum is related to your income and could reasonably be linked to the benefit cap as the starting point ie zero entitlement. A small fee covers the cost of administration of the system – I feel sure the alcohol industry would offer to do it for free.

    Of course, no under 18’s are allowed a card and nor are Muslims. The penalties for contravention of the drinking laws are harsh and always involve confiscation of the card. It is an absolute offence to buy drink for others, but social drinking in bars is ignored as the card is required to gain entry. Because a reader is required to check the sum remaining on the card, removal of these from non-compliant vendors (especially the corner shops owned by guess who) would give an added incentive for outlets to be compliant.

    Thus, in one (relatively) simple step, underage drinking would be limited, binge drinking made more controllable (cost and loss of card), drunks better controlled and no financial penalty for the sensible. All drink-related offences see either suspension of drinking privelages or complete loss of the card.

  • Mirtha Tidville

    Another load of blather by a former Liebour adviser….We dont need any new taxes, in whatever form they may take so just forget this silly idea and go away before the smugglers go back into business and ship it all in from Calais again.EU rules and all that

  • Jon Stack

    Yawn! That was so boring. If you want to get your ideas adopted then you’ve got to be more interesting than that. Lighten up. Go have a drink while you can still afford it.

  • ButcombeMan

    Years ago the first cases on every morning in the Magistrates Courts were the drunks brought up from the cells. They used to be fined between £10 and £20. Nowadays that would be £100 at least. It would need to be back to the cells until the fine is paid (by someone) or seven days.

    The Police tend nowadays not to presss charges because of the problems of holding and supervising drunks overnight and the fact that the cases then were dealt with by the duty Sergeant or Inspector in the Mags Court. Nowadays the CPS would be interfering and putting up the cost of the whole process. No doubt the paperwork now is twenty times more.

  • Ron Todd


    Except when people do drink themselves to death there is likely to be health care costs that the tax payer will have to cover. There will sometimes be extra crime to pay for, depending on the type of drunk they are , they don’t all sit quietly in a room with a bottle, break up of families children with problems all potentially causing the state money, not to mention disruptiot to the lives of unfortunate neighbours.

  • alan scott

    Absolutely spot on. Penalise the offenders, not the rest of us taxpaying ordinary citizens. I did not vote for 24 hour boozing and mayhem in our streets after 8 pm.
    As a 78 yr old consistent Conservative voter, the idea of penalising us and not the offenders, will lose the Party my vote next time, no question about that.
    The Conservative Party must listen and act in the necessary direction: no more soft nonsense on this issue.

  • Cynic

    Part 3! We need more condemnation and judgmentalism, together with an end to open shelves of drink in supermarkets (time was drink was behind the counter and you had to ask for it) and a return to the old licensing laws. Oh, and while we’re about it, ditch those awful alcopops!

  • Cynic

    Part 2. Alcohol is too easily available, not necessarily too cheap, and there is a culture of thinking it smart to get paralytic. We need to change the culture. Years ago it was considered the done thing – indeed, a point of honour – to be able to hold your liquor.

  • Cynic

    I don’t know about MUP; MUPpet springs to mind. Everyone who likes a drink, however moderate, will be punished, any extra will go into the pockets of the drinks industry, but there will be a rise in home brewing and smuggling.

  • McClane

    Why does does government seem to obsess about controlling people’s lives and habits?

    And why does the only answer they come up with inevitably involve tax and money?

    My habits are my business, and my money is my business.

    I wish government would just go away and leave me alone.

    And why doesn’t Matt Cavanagh understand that a blog is a blog, it’s not an opportunity to catch up on your English coursework. Too damn long!

  • Hexhamgeezer

    Slap control orders on those who drink out of cans.

    Problem solved.

  • WIlliam Blakes Ghost

    Well perhaps we should stop buying alcohol at all and instead brew/ distil our own. The the Government will get sweet FA. That’ll serve them.

    The simple answer which doesn’t swell the coffers of big business and conveniently incidentally the Treasury at the price of taxpayers would be to follow the example of how Police attendance at football matches are addressed.

    Make those who profit out of cheap booze (the alcohol and entertainment industries) pay for the police and health services their products demand and leave it to them to decide whether to pass the cost on to their customers hence undermining the saleability of their products.

  • Boo

    Wouldn’t it be better to have a “polluter pays” system instead of minimum pricing. If someone is drunk and clogging up A&E they should pay their bills same to those in the drunk tank. Let the people causing the trouble pay the bill and not sensible drinkers

  • Tony (Somerset)

    The point of all this is being completely missed. All that is needed is to actually enforce the “drunk and disorderly” laws, and increase penalties substantially. The current penalty of £80 is derisory, the fines should be along the lines of £200 for first offence, £500 for second offence, and so on.

    Why should the sensible drinker be penalised by increased prices ?

    (The government, of course, want increased prices in order to maintain the tax take. The common sense approach would reduce the amnount of tax and duty collected . Another stealth tax coming !)

  • AAE

    Why do governments, whatever the question, always choose more tax as the answer? Is there any evidence that increased taxation in any area, let alone trying to curb addictive behaviour, has ever succeeded? Wouldn’t be a much better idea to very much restrict where and when alcohol can actually bought? It’s mad that every corner shop in the country sells booze and the imposition of an across the board MUP penalises the already overburdened pubs which I think provide a generally safer supervised environment for drinking. And in an age where people are hounded for dropping a cigarette butt, why doesn’t Plod arrest those who throw up buckets of vomit on the streets?

  • Verity

    Part Two – Dave should keep his sticky, ignorant fingers out of the free economy.

    The reasons for the desire to get smashed and block out reality should be addressed. For example, the indigenes’ country being slid out from under them and handed to those from primitive societies.

  • Robert Christopher

    It’s quality over quantity every time.
    Help reduce food miles. Support your local industries!

  • Verity

    The government has no business setting minimum or maximum prices for anything in a free economy. This isn’t war time.

  • Robert Christopher

    However, microbrewery produced beers are a different matter, but they do need to be consumed slowly to savour the taste.

  • Robert Christopher

    We should be discouraging consumption of cheap mass produced alcoholic products. It cannot be a pleasurable experience to those who know what a good beer should be like.

  • chevron.

    For me, the health argument does not stack up: if people want to drink themselves to death, that must be their right, and it is not for the government to penalise everyone in order to disuade a tiny minority who are doing themselves some really serious harm. Instead, provide very heavy support for alcoholics and those who request help.

    Health aside, is heavy drinking the problem, or the common antisocial results of heavy drinking?

    My suggestion would be to give a hefty jail term for being drunk in a public place, make alcohol a strict aggravating factor in all other crimes, and make it an offence to be drunk when in charge of vulnerable persons. Clamp down enough, and people will cease the Saturday-night recreational binges in public. Yes, that is not going to stop them getting plastered in their own homes, but as I’ve said above, I cannot see the private actions of consenting individuals being the business of the state, as long as those actions do not affect others.

  • Heartless Curmudgeon

    Sorry, after an uncertain start, never got beyond “ externalities

    Anyone who uses **** words like that is in the same league as the “neo-endogenous” chap, – and therefore just as worthless.

    Go and tidy your bedroom, there’s a good boy.

  • Chris

    Cameron’s only prime minister because people got sick to death of a bossy, nannying government that thought it had to micro manage people’s lives. He should drop this daft idea, quickly.

  • Andy Carpark

  • telemachus’

    Booze consumption is price sensitive so however you do it the price should be raised.
    Tax however applied is the only way to ensure benefit to the public without lining the pockets of Diageo and friends

Can't find your Web ID? Click here