Minimum price for alcohol

Court rules that Scotland can introduce minimum price for alcohol

A ruling by the UK’s Supreme Court has opened the way for the Scottish government to introduce a minimum price for alcohol. This follows an unsuccessful challenge by the Scotch Whisky Association against the legislation that the law was a breach of EU law. The legislation was passed in 2012, but could not be implemented until the ruling on November 15th, 2017.

The minimum price will be set at 50p per unit of alcohol, which will raise the price of low priced supermarket beers and wines, but leave pub prices unchanged, given that most pub drinks exceed the 50p minimum.

Evidence from research conducted in Canada suggests that price elasticity of demand at the low range of prices is close to unity, with a 10% increase in minimum prices leading to an 8% decrease in alcohol consumption per head. How this will translate in Scotland remains to be seen.

If demand is price elastic, then the effect on reducing the quantity of alcohol demanded may be significant, as shown below.

However, the effect of the minimum price on alcohol consumption will be limited to the cheapest alcoholic drinks, and will not affect pub prices. Also, if demand is inelastic the effect of demand will also be limited, as shown in the diagram below.

Given that the impact will be on the poorest groups, the minimum price is likely to have little effect on the growing problem of ‘middle income – middle aged’ drinking. Indeed, the express aim of the minimum price is to ‘strike at alcohol misuse and overconsumption manifesting themselves in particular in the health and social problems suffered by those in poverty in deprived communities‘.

Read more on the Supreme Court’s judgement.

Source: BBC news