Proposing a minimum price for alcohol?: Key issues for the 2015 Parliament

There is continuing concern about high levels of drinking and its effects on health and public order, and a widespread belief that much of the alcohol that contributes to these social problems is irresponsibly priced and sold.

One widely-proposed means of reducing excessive alcohol consumption and associated harm is through minimum pricing.

Chart 1: alcohol consumption in the UK

Alcohol consumption in the UK has been higher than the average of OECD countries since 1995 (litres per capita of alcohol consumed per year, 1980-2011)

Chart showing alcohol consumption in the UK has been higher than the average of OECD countries since 1995

What is minimum pricing?

“Minimum pricing” refers to a baseline price below which alcohol cannot be sold. A form of minimum pricing – a ban on the sale of alcohol below ‘cost’ price (in effect, the cost of duty plus VAT) – has been in force in England and Wales since May 2014.

A separate minimum pricing policy – a minimum price per unit of alcohol – has been legislated for in Scotland, but has not yet been implemented (see below).

What are the arguments?

Those in favour of minimum pricing argue that there is a clear relationship between price and the consumption of alcohol.

As might be expected, when the price of alcohol increases, consumption decreases; but importantly, drinkers’ sensitivity to changes in price varies. In particular, heavier drinkers tend to be more price-sensitive and choose cheaper drinks, meaning a minimum price would tend to reduce their consumption by a greater proportion than it would moderate drinkers’ consumption.

Critics of minimum pricing claim that it unfairly punishes those who can drink responsibly, particularly if they are on low incomes, while doing little to help those with serious drink problems, whose dependency is such that they would simply cut back on other purchases to maintain their alcohol consumption.

It is also pointed out that minimum pricing could generate a windfall for the alcohol industry, whereas higher taxes could have a similar impact on problem drinking while raising Government revenue.

Minimum unit pricing in Scotland

Alcohol licensing is devolved to Scotland, and in May 2012 the Scottish Government passed legislation that would enable it to introduce a minimum unit price for alcohol. The intended price is 50p per unit but it has not yet been implemented due to a legal challenge being led by the Scotch Whisky Association.

One of the main grounds of the challenge is that imposing a minimum price is contrary to EU law because of its adverse impact on trade and free movement of goods.

The case was referred to the Court of Justice of the European Union in April 2014. A ruling, which could have relevance for policymaking in the rest of the UK and other EU Member States, is not expected until summer 2015 at the earliest.

Changing policy in England and Wales

The previous Government committed to introducing a minimum unit price in its March 2012 alcohol strategy.

A subsequent consultation document sought views on a minimum price of 45p per unit, with an associated Impact Assessment stating that there was “consistent evidence that limiting the availability of alcohol through an increase in price leads to a reduction in consumption, and in turn, reductions in alcohol related harm”.

The Impact Assessment also argued that consumers who drink alcohol at harmful and hazardous levels would be most affected by a minimum unit price and that there would be a limited impact on responsible consumers.

But the previous Government did not, in the end, introduce a minimum unit price. In July 2013, it announced that the consultation had “not provided evidence that conclusively demonstrates that minimum unit pricing will actually do what it is meant to: reduce problem drinking without penalising all those who drink responsibly.”

It said minimum unit pricing would be delayed, pending “conclusive evidence”, and announced that it would instead introduce a ban on the sale of alcohol below cost price.

This came into force on 28 May 2014.

Continuing calls for a minimum unit price

Many argue that the ban on below-cost sales in England and Wales is having only a limited impact on alcohol consumption and associated harm: a study published in the British Medical Journal found that 0.7% of all units of alcohol sold prior to the ban fell below the cost threshold, whereas nearly a quarter fell below a 45p minimum unit price.

The All Party Parliamentary Group on Alcohol Misuse, meanwhile, has described the impact of the ban as “negligible”.

For this reason, alcohol charities and public health groups, as well as some academics and parliamentarians, continue to argue for the introduction of a minimum unit price.

Alcohol Concern is campaigning for a minimum unit price of at least 50p, a policy supported by 20 senior health professionals in a January 2015 letter to the Telegraph.

Whether the Government decides to heed these calls in the new Parliament may depend in part on the outcome of the legal challenge to minimum unit pricing in Scotland.

Chart 2: ban on selling alcohol below cost price

The ban on selling alcohol below cost price resulted in a significantly lower minimum price per unit than the 45p originally proposed - effective minimum price, per unit under the May 2014 ban on the sale of alcohol below cost price, pence

Chart showing the price per unit of alcohol following the ban on selling alcohol below the cost price

Party Lines

  • Greens: put a minimum price on alcohol of 50p per unit.
  • Labour: (…) take targeted action on low cost alcohol products
  • Liberal Democrats: introduce Minimum Unit Pricing for alcohol, subject to the outcome of the legal challenge in Scotland
  • UKIP: oppose minimum pricing of alcohol

 

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