COMMON OBJECTIONS TO MINIMUM PRICING POLICIES
4.6 Increased industry revenue
The final concern raised against minimum pricing policies is that the economic gains they bring will accrue to the alcohol industry in countries that do not have government alcohol monopolies. Profit margins on alcoholic beverages will rise with the implementation of minimum pricing policies, which will incentivize the alcohol industry to attract new consumers through different means. These higher profits may be used to increase marketing expenditures by economic operators to promote their brands and expand further, especially in the digital sphere; evidence shows clearly that marketing activities are crucial to reinforcing the concentration of the global alcohol market and ensuring the
dominance of a few companies, especially in the case of the beer market (Jernigan & Ross, 2020;
WHO Regional Office for Europe, 2020c).
At the same time, and especially if countries choose to introduce minimum pricing policies instead of raising alcohol taxes because of less resistance to these measures, governments will have fewer resources available to mitigate the consequences of increased marketing activities and to offset fiscal costs stemming from alcohol consumption and alcohol-related harm.
There are no evaluation studies of the long-term consequences of minimum pricing policies to offer guidance on the issues raised.
The concerns are legitimate, but it is important to balance any potential longer-term harms that may arise from increased alcohol industry revenue against the health and economic benefits that arise from the policy itself. It may be possible to take additional policy action to recoup some or all of the additional revenue from industry into the public purse by, for example, imposing an additional so-called windfall tax or levy on alcohol retailers and/or producers. Such an approach was attempted in Scotland, with the introduction of a Public Health Supplement in 2012 that levied an additional tax on large retailers selling alcohol and tobacco (Scottish Government, 2011). Ultimately, the policy was scrapped in 2015, but there are important lessons that may make similar measures more successful in other contexts (Hellowell, Smith & Wright, 2016). An alternative option may be to introduce a minimum price alongside an increase in alcohol taxation, particularly where alcohol taxation is levied in a way that is consistent with public health (on the basis of alcohol content). In this way, minimum pricing and taxation may work together to reduce alcohol-related harm while increasing government revenue directly.
It is also important to recognize the political reality faced by many policy-makers investing in improving public health. The alcohol industry generally opposes alcohol pricing policies (precisely because they are effective in reducing consumption), which can lead to effective policies not being implemented (Gornall, 2014). The fact that minimum prices might increase industry revenue may reduce this opposition and enable effective policies to be implemented. In Canada, the alcohol industry is generally supportive of minimum pricing (Thompson et al., 2017).
Infobox 3.
Summary of common objections to minimum pricing
The six most commonly voiced objections against minimum pricing are very similar to the objections used against higher alcohol taxation. The arguments and counterarguments are very similar for both pricing measures, and the evidence shows that most of the objections do not stand up to fact checks.
Moderate and heavy drinkers
Modelling studies have suggested that the price increases occurring under a minimum price policy are effectively targeted at heavier drinkers, with only modest impacts on moderate drinkers (Hunt, Rabinovich & Baumberg, 2011). Increases in taxation, by contrast, are more likely to affect the prices paid by all drinkers (Angus et al., 2016b). Real-world evidence from Scotland appears to bear this out (O’Donnell et al., 2019).
Inequality
Alcohol harm is more severe among lower socioeconomic groups. As minimum pricing policies effectively target the alcohol purchased by heavier drinkers on lower incomes, this means that the most deprived groups see the greatest reductions in harm, leading to a reduction in health inequalities (Meier et al., 2016; Zhao & Stockwell, 2017)
Businesses and the economy
The introduction of minimum prices is likely to increase revenue to alcohol retailers and producers, as a reduction in overall sales value is more than offset by an increase in average prices paid. There would also be benefits to the wider economy, with fewer years of working life lost to alcohol-related ill health and reduced levels of workplace absence or workplace productivity due to the aftereffects of alcohol consumption.
Tax revenue
Although no comprehensive evaluation has yet been published on the net revenue impacts of minimum pricing policies to government, it is likely that the introduction of a minimum price will reduce government revenue from alcohol taxation. However, the tax revenue losses are likely to be offset by economic gains elsewhere through reduced health-care and criminal justice costs, greater economic productivity because of a heathier workforce and increased VAT receipts.
Unrecorded alcohol
It is possible that the introduction of a minimum price may lead to increased consumption of unrecorded alcohol, but there is little evidence to suggest this has happened to date where MUP policies have been implemented. In settings where unrecorded alcohol is a major concern, it is advisable to introduce complementary policies to address the issue alongside minimum pricing.
Increased industry revenue
The introduction of a minimum price is likely to lead to increased revenue to the industry, which in turn might be spent by economic operators on further expansion and marketing strategies.
There are no evaluation studies on the long-term impact of minimum pricing on the alcohol market and industry activities. It is important to balance any potential longer-term harms that may arise from increased alcohol industry revenue from minimum pricing against the health and economic benefits that arise from the policy itself. The crucial thing for countries to consider is that minimum pricing policies should not be implemented instead of taxation and that various options for a complementary approach are available.