Alcohol Pricing: Mulled Whines
The Economist, DEC. 25, 2013
BY DAY tourists flock to Plaza de España in central Madrid to snap photos beside the sculpture of Miguel de Cervantes, author of “Don Quixote”. By night a newer facet of Spanish culture is on display: loitering groups of young people downing plastic bottles of whisky and vodka mixed with Fanta Lemon. The ground is littered with empties. Nearby, three young men help a friend vomiting on the pavement.
Such carousing was once rare in Spain. A Mediterranean drinking culture prevailed in which alcohol was taken only with food. That is changing. In Spain and many other rich countries, alcohol intake is becoming a bigger problem—for some groups. Overall, the global consumption of alcohol has been stable since 1990, according to the World Health Organisation. Around half of the planet’s population is teetotal. But those who drink alcohol do so more hazardously. Policymakers are looking for ways to address this. A new and much-watched experiment in Scotland, for example, involves setting a minimum price for each unit of alcohol.
Individual consumption peaked in Spain in 1975 but young people are increasingly indulging in the botellón, (literally “big bottle”): drinking outdoors to get drunk. In France, another country with traditionally moderate drinking patterns, a similar trend is emerging. In the past three years hospital admissions from alcohol abuse have risen 30% there, to 400,000 a year. Bingeing is so common that in July it gained an official name, beuverie express. Across much of the rich world, many people (not just the young) are drinking greater quantities in a single session.
Responsible drinkers pose little risk to others. But the growth in hazardous drinking habits has far-reaching implications. Deaths from the overuse of alcohol rose from 750,000 in 1990 to 2.5m in 2011, nearly 4% of all fatalities worldwide. Alcohol causes long-term ill-health, but even a single binge can end in hospital: in Britain, for example, such admissions doubled in 2003-10. It is not only drunks who suffer from their excess. Booze contributes to a third of all deaths on Europe’s roads each year and stokes abuse and violence. It features in almost all public-order offences in Ireland; up to 80% of Australian police work is alcohol- and drug-related; across the European Union, it is linked to 65% of domestic violence and 40% of murders. When lower output and higher social costs are taken into account, alcohol costs Europe and America hundreds of billions a year, up to 1.5% of GDP by some estimates.
The industry has introduced some modest schemes to encourage responsible drinking. Governments have stepped up education campaigns; most restrict the sale of alcohol in some regard, by licensing premises, setting opening hours and banning purchases by children. But all that is largely outweighed by another factor: health campaigners say that in many countries booze is simply too cheap.
Increasingly alcohol is drunk at home, rather than in bars or restaurants, and is often deeply discounted. In Britain and Ireland supermarkets frequently sell drinks at or below cost, to lure in customers: cheap strong cider means a Scotsman can reach his recommended weekly drinking limit of 21 units (210ml of pure alcohol)for just £4.62 ($7.50); an Irishwoman can buy her 14 units for EUR6.30 ($8.70). The trend is spreading. Walmart, an American chain, recently started selling beer almost at cost.
The cheaper the liquor, the more people drink. That is not just bar-room wisdom. A 2009 paper in Addiction, a public health journal, reviewed 112 distinct studies of changes in alcohol taxes and found an unambiguous link. This suggested that a 10% price rise in prices would cut consumption by around 5%.
Two groups are particularly price sensitive. Heavy drinkers tend to trade down and seek out cheaper booze to maintain their intake. They drink at home and are likely to die early of alcohol-related illness. Such topers account for a large share of consumption: in Scotland 80% of alcohol is drunk by 30% of boozers. A second category is young and underage merrymakers who often have low or minimal income. They cannot afford to drink as much when prices rise.
Most government initiatives on prices have been tentative. In 1998 Germany introduced a so-called “apple-juice law”: in places where booze is consumed, at least one alcohol-free beverage must cost less than the cheapest alcoholic one. This does not deal with domestic consumption, though, which accounts for most hazardous drinking. In 2014 Britain will introduce a ban on selling alcohol at below cost price, but this will affect less than 1% of all booze on sale, according to the Sheffield Alcohol Research Group, a British academic consortium. Alcohol duties in some tax-thirsty European countries have been rising for a decade but wine and cider are both taxed by volume, not just strength. That means a sweet wine with 6% alcohol bears the same tax as a riesling with 10%.
More convincing are the efforts of several Canadian provinces, which have a floor price for a unit of each type of alcohol: the stronger a drink, the more it costs. When this policy was introduced in British Columbia in 2002, with an average 10% price increase, an immediate, substantial and significant reduction in wholly alcohol-attributable deaths followed, says Tim Stockwell of the province’s University of Victoria. The longer-term effect is striking too. Over the 2002-09 period, figures show a 32% drop in such deaths. In Saskatchewan a similar price rise in 2010 was associated with an 8.4% drop in drinking.
Scotland is raising the bar. In May 2012 its devolved parliament passed an ambitious bill to introduce a minimum unit price of 50p. This would affect the price of 60% of booze on sale: a 70cl bottle of Tesco Value Vodka would rise by around £4.50, to around £13, but classy Smirnoff by only 13p, according to Scottish government calculations. The Scotch Whisky Association (SWA), a trade body, has challenged the legislation, which was due to come into force in 2013. It would breach European law and could affect exports, says its spokeswoman, Rosemary Gallagher. The SWA lost the case in Scotland’s highest civil court, but its appeal will be heard in February. If it loses again, it may appeal to London or to Europe.
Five continental wine-producing nations have joined the fight against Scotland’s law. Bulgaria, France, Italy, Portugal and Spain say it is illegal and could hurt their own drinks industries. Cheap plonk (mostly foreign) would suffer more than pricey whisky (mostly domestic), they say.
What happens in Scotland will affect policy elsewhere; other governments are watching the legal battle with interest. One house of the Swiss parliament has already voted for a minimum price though the other voted against. New Zealand is considering a bill. The British government pulled back from an earlier plan to introduce a nationwide floor price but may reconsider its policy if Scotland’s proves successful. The Irish cabinet is discussing a similar notion but awaits the Scots’ verdict.
For all their reputation as a nation of soaks, Scots actually constitute a small market. The SWA says its big concern is other countries introducing similar bills if the Scottish legislation goes ahead. The real fear is of “contagion”, agrees Martin McKee of the London School of Hygiene and Tropical Medicine: “Scotland shows Europe what is possible.” Just as bans on indoor smoking spread rapidly from country to country, the Scottish decision on the price of booze could raise drink prices all over the world. A sobering thought in the festive season.