Arc of Prosperity

Scottish Independence within the EU – with a Scandinavian Slant


Minimum pricing: Will it lead to booze trips or dope?

booze photo
Photo by Twofish
I am not a huge fan of minimum pricing of alcohol. The money raised ought to go the government, not to the supermarkets, and I cannot see how it can work in an era of Internet shopping. However, it is clearly the only option the Scottish Government has, given that alcohol duties are reserved to Westminster.

It will be interesting to see how the shops will implement minimum pricing. Let us imagine a shop that used to sell five brands of vodka (A: own brand at £11, B: cheap brand at £13, C: normal brand at £15, D: quality at £18, and E: premium at £25). Minimum pricing now stipulates that the minimum price for these products is £15.

The shop basically has three choices:

  1. It might sell all their cheapest products at the same price and leave all others unchanged: A: £15, B: £15, C: £15, D: £18, E: £25. This won’t happen – nobody would buy A or B.
  2. It might stop selling their cheapest products: C: £15, D: £18, E: £25. This is a possibility, especially in chains that want to keep their prices the same in Scotland and England. It will cost the shops a bit of money – their profit margins will remain the same on all products, but people will buy less.
  3. It might increase the prices of everything, e.g., A: £15, B: £16, C: £18, D: £20, E: £26. This will be great for shops – because they keep the money generated by minimum pricing, this will basically boost their profits dramatically, even if people are buying less. Because of this, I think this is the most likely outcome.

Whether minimum pricing will affect people’s behaviour really depends on how the shops implement it. If they go for the second scenario, I don’t think it will affect average consumers a lot, but in the third one, it suddenly becomes very attractive to buy everything in England. Lots of people might start using Internet shopping for alcohol (I don’t presume the Scottish Government can force an English retailer to apply Scottish legislation on alcohol), and people will start bringing back booze every time they go to England.

The savings probably won’t be big enough to make booze trips to England very popular, but it will at least pay for the petrol if you decide to go on a daytrip to Carlisle.

None of this is likely to affect underage drinkers. They will have to pay more for their booze, so the big question is whether this makes more of them opt for cannabis, given that it now will be significantly cheaper (and tends to be readily available in secondary schools).

It is all rather complicated, and it will be interesting to see whether it works in practice. I tend to believe that it won’t survive Scottish independence, however: Once the Scottish Government is able to set its own alcohol duties, that will be a much better option.

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