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Monday, 26 November 2012

Alcohol minimum price, economically flawed?

There are two questions regarding action on alcohol abuse. Should the government act to artificially raise the price of alcohol and should it do this through duty (taxation) or setting a minimum price per unit.

I don't much care for the ideological debate about whether the government should act; but if it does intend to act, is minimum price setting the right way forward?

I have a major concern about how the wholesale market will work.  In a free market there is no legal distinction between someone who sells to an end user (retailer) and someone who sells to other traders (wholesaler).

Whilst many wholesalers erect, for various reasons, artificial barriers, e.g. only admitting customers who can prove they are working on behalf of a vat-registered entity; there is nothing in law to prevent a member of public buying direct from a wholesaler.

Nor is there anything to prevent a retailer buying discounted goods from another retailer and selling themselves at profit (although again there are sometimes attempts to prevent this by the retailer).

It's the free market.  We are free to buy and free to sell.

So if a minimum price per unit for alcohol is set, will this also apply to wholesalers?  And breweries?

It's an important question, because either way it really messes up the economy.  If it does apply to all sales, then there will need to be a mark-up each time the alcohol is traded.  A 45p minimum unit price could easily reach 60p at retail.

For this reason small shops who can't afford to buy direct from the brewery will be disproportionately affected (supermarket chains rarely if ever buy from wholesalers).

If it doesn't apply to wholesale then what's to stop those of us with access to a wholesaler bulk-buying cheaper alcohol for personal use?  In fact wholesalers could be in for a cash bonanza.

Whilst officially they don't like members of the public shopping there, secretly it's positively encouraged. Cash is cash.  Someone once told me the only reason they have membership requirements is because the manufacturers insist on it in order to qualify for huge buyer discounts.

Buying in bulk from wholesalers will encourage stockpiling, and this is known to be bad for health.  I haven't got references (sorry) but a Swedish researcher once told me experience in Sweden where shops were banned from selling alcohol at weekends was that people stockpiled on Friday, over-stocked for fear of running out, yet invariably drank all they bought.

And of course many will be encouraged to illegally resell wholesale alcohol if the profits available made up for the risks of getting caught.  After all, who's going to dob in the guy selling 4-packs down the Crown that *didn't* fall off the back of a lorry?

I can see why the government favours minimal pricing over taxation - the middle classes don't want to see a £9.99 bottle of Cab Sauv rise in order to hike the price of Buckfast and Tennent's Super.

But I seriously wonder if this well-intended move will either do little for public health (maybe encourage home brewing too?) or cause a major headache for the alcohol trade.


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