Lifestyle Economics

An evaluation of Scotland’s minimum alcohol pricing experiment


When minimum unit pricing was introduced in Scotland in May 2018, it became illegal to sell alcohol for less than 50p per unit. This flagship SNP policy aimed to reduce alcohol-related harms, including death and crime, by raising the price of the cheap, off-trade (that is, sold to be consumed at home) alcohol that is often associated with harmful drinking. Lacking the power to raise alcohol duty itself, the Scottish government turned to a floor price as a way of using the price mechanism to reduce consumption.

Even if it worked, minimum pricing was always going to be a financial burden to many drinkers. How much it would cost was contested, with advocates of the policy insistent that moderate drinkers would barely be affected. Although Public Health Scotland is currently evaluating minimum pricing, the financial impact on consumers has not yet been investigated. And so, in our latest IEA paper, two colleagues and I used off-trade sales figures to estimate the cost of minimum pricing to Scottish consumers in the four years since it was implemented. We calculate that it exceeds a quarter of a billion pounds.

Minimum pricing was a big change. Before it began, 45% of Scotland’s off-trade alcohol was sold below 50p per unit. After it was implemented, there was a sharp rise in the sale of alcohol sold at between 50p and 54p per unit. This was no surprise, but we also found evidence of displacement to the 55-64p range and there was even some suggestion of the policy prompting a rise in sale of alcohol that cost 70p or more per unit. It seems that drinkers of the cheapest alcohol did not just switch to drinks costing the new legal minimum, but often turned to even pricier brands.

Over the whole four year period, we estimate that minimum pricing cost Scottish consumers £270 million. This equates to £59.39 per adult or £71.12 per drinker and is significantly more than the figure of £20 that was projected by the computer model cited by the Scottish government when it pushed the policy through parliament. 

Overall, we estimate that off-trade sales were 4% lower in 2019 than they would have been in the absence of minimum pricing. This is line with other estimates. The official evaluation found that per capita sales of pure alcohol from the off-trade were 7.5 litres in 2017, 7.44 litres in 2018 and 7.21 litres in 2019, before rising to 8.38 litres in the extraordinary year of 2020 when the on-trade industry was closed for months. Assuming the drop between 2017 and 2019 to be mainly due to minimum pricing, a decline in consumption of around 4% is a relatively small effect. Moreover, evidence of cross-border sales between England and Scotland (including online sales, which remained legal) suggests that the decline in consumption was even smaller than this in practice.

Demand for off-trade alcohol in Scotland therefore seems to be quite inelastic. Although nearly half the off-trade alcohol sold in 2017 cost less than 50p per unit, raising the price of these drinks was associated with only a modest reduction in overall purchases.

From an economist’s perspective, the unusual natural experiment of minimum pricing offers a chance to see how human beings respond to floor prices. The sale of wine stayed more or less unchanged, but the sale of fortified wine rose by 25%. Much of this came from a surge in the sale of the notorious tonic wine Buckfast which was never sold below 50p per unit to begin with.

Spirits sales fell overall, but the sale of whisky rose by 11%. The Scotch Whisky Association, who delayed the introduction of minimum pricing through a series of legal challenges, must be wondering why they bothered.

Another interesting finding from our research is that consumers often shifted to significantly more expensive drinks after minimum pricing began. Perhaps this is not so surprising. Minimum pricing effectively wiped out the bottom end of the market and pushed consumers towards the mid-range. It encouraged many consumers to experiment with mainstream brands that they might not otherwise have bought, such as Famous Grouse whisky or Gordon’s gin. If you’re going to spend more money on alcohol, why not buy a brand you recognise? Mid-range brands have never competed purely on price and do not cluster around the 50p per unit price point. 

By shifting consumers towards mid-range and premium brands, it is likely that minimum pricing has benefited the drinks industry. This is ironic since it was the alcohol industry, in the form of the Scotch Whisky Association, that delayed the policy for years with a series of legal challenges. Nevertheless, it does seem that minimum pricing has helped the industry in its efforts to move consumers towards more expensive – and more profitable – brands, a strategy known commercially as ‘premiumisation’.

But it is far from clear whether anybody else benefited from the floor price being introduced, however. The aim of minimum pricing was not to reduce alcohol consumption per se, but to tackle the problems associated with heavy drinking. Looking at the data over the past four years, we were unable to find any discernible impact on crime, absenteeism, unemployment, hospitalisations or deaths, all of which were projected to improve after the policy was implemented. Admittedly, some of the projected benefits were so small that they would be difficult to identify in aggregate data, but all of the key indicators have remained unchanged or worsened since minimum pricing began.

This raises the question of whether such trivial benefits were ever likely to be worth the projected cost to drinkers of £76 million, let alone the actual cost of over a quarter of a billion pounds that we estimate has been incurred.

 

This article was first published on CapX.

Head of Lifestyle Economics, IEA

Christopher Snowdon is the Head of Lifestyle Economics at the IEA. He is the author of The Art of Suppression, The Spirit Level Delusion and Velvet Glove; Iron Fist. His work focuses on pleasure, prohibition and dodgy statistics. He has authored a number of papers, including "Sock Puppets", "Euro Puppets", "The Proof of the Pudding", "The Crack Cocaine of Gambling" and "Free Market Solutions in Health".



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