Alcohol minimum pricing – Reversing the Facts

A PRESS RELEASE FROM MY DAD. Plenty more to come on this topic I feel

Website: www.ffar.org Email: gwiggs@ffar.org
Media Release
Box 776, Noosa Heads Queensland 4567 Australia
ALCOHOL MINIMUM PRICING – Reversing the Facts
The Scottish Government is actively pursuing the introduction of a policy of minimum pricing for alcohol. The proposed minimum price would be 40 pence per unit. The Chief Medical Officer of Health for England also supports a minimum price policy and suggests a minimum of 50 pence per unit but this has been firmly rejected by the Prime Minister.

In Australia the Preventative Health Taskforce (PHT) has recommended the development of “the public interest case for minimum (floor) price of alcohol to discourage harmful consumption and promotes safer consumption.”

In New Zealand the Law Commission favours minimum pricing and says in its report “Earlier this year, Professor Sir Liam Donaldson, the Chief Medical Officer for the United Kingdom [actually England], also recommended that a minimum price model be adopted based on research carried out by The University of Sheffield.”
Both the PHT and Law Commission favour increased price by way higher excise tax.
The rationale adopted by the Chief Medical Officer for England is set out in his Annual Report “There is a clear relationship between price and consumption of alcohol. As price increases consumption decreases, although not equally across all drinkers. Price increases generally reduce heavy drinkers’ consumption by a greater proportion than they reduce moderate drinkers’ consumption.” (Emphasis added) He based this conclusion on the Sheffield University study that was commissioned by the Department of Health. The same argument would apply if price were increased by other means such as higher excise taxes.
A research report by the Centre for Economics and Business Research (CEBR) analysed the University of Sheffield research along with other research. A study by Wagenaar et al (also cited by the PHT and Law Commission) covered much the same ground as the University of Sheffield study on the effect of an increase in price on moderate and heavy drinkers.
The CEBR study found, “Heavier drinkers are generally less responsive to price changes than moderate drinkers, in terms of overall consumption”. In technical terms “The elasticity of -0.21 found in the Sheffield study implies that a 10% general price increase across all alcohol products would only lead to a 2.1% reduction in alcohol consumption amongst heavy drinkers”. On the other hand the Sheffield study found that the elasticity of moderate drinkers is -0.47 which would be a 4.7% reduction in consumption. The Wagenaar study had similar results. The CEBR study prepared the following graph showing the two studies and clearly illustrates that the consumption reduction by moderate drinkers will be more than twice the rate of heavy drinkers.

So how could the Chief Medical Officer of Health justify the claim that price increases will reduce consumption by heavy drinkers by a greater proportion than moderate drinkers when the opposite is the case? It seem that the University of Sheffield data was misinterpreted. As CEBR observe, “Unfortunately this evidence appears to have been misinterpreted by the proponents of minimum pricing, including the Chief Medical Officer of Health.
This misinterpretation has had far reaching consequences with the Law Commission repeating the error, as has the PHT to a lesser degree.
The evidence is crystal clear. Increased pricing will have minimal effect on reducing consumption of the heavy drinker but far greater impact on the moderate drinker. Policy should be evidence based – not based on factual error.
Glen Wiggs Director
Foundation for Advertising Research
Adjunct Professor of Advertising Regulation
University of the Sunshine Coast, Queensland
16 October 2009

About Lance Wiggs

@lancewiggs
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3 Responses to Alcohol minimum pricing – Reversing the Facts

  1. LC relies on a WHO paragraph that has three anecdotes about heavy drinkers responding somewhat to price increases, and deems that evidence that heavy drinkers respond just as much as moderate drinkers and sufficient to outweigh the Wagenaar et al metastudy of over 120 papers. Hopefully they’ll fix this in their final report; is in the submission I’ll be sending in later today….

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  2. Lance and Glen, the evidence you cite relating to incidence effect on heavy drinkers is the minimum price studies whereas (as far as I can tell) the evidence you cite on the impact being more on medium intensity drinkers is tax, excise or price increases across the board.

    It appears that you’re not comparing apples to apples. Either way the cost to society can be just as high from medium drinkers who are more numerous than heavy drinkers. So a decrease in medium intensity consumers consumption could still be a good thing.

    More broad analysis is obviously needed. From a pure economics perspective minimum price floors are an inefficient mechanism and create a deadweight loss where everyone loses. Maybe that’s the real problem?

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  3. Glen Wiggs says:

    Peter is right. The evidence of both Wagennar and University of Sheffield really relate to a general increase in price rather than a minimum price per standard drink. The problem is that Sir Liam cited the University of Sheffield study to justify minimum pricing. The Law Commission in turn cited Sir Liam and the Sheffield study.

    To their credit the Law Commission noted that as “the proposal is further developed in Scotland” it would keep a watching brief.

    My concern is that policy should not be based on a misinterpretation of data. So Peter is right again in that a more broad analysis is needed.

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