Jonathan Brown: Price war that left drinkers raising a glass

Monday 16 March 2009 01:00 GMT

Few in the world of alcohol research would disagree with Sir Liam Donaldson's central premise linking cheap alcohol to rising consumption. Nor could many dispute the existence in Britain of a sea of cut-price booze with potentially disturbing consequences for physical and mental health. As a nation, we drink twice as much as we did in the 1960s. Chronic liver disease and cirrhosis are increasing, as is alcohol-related anti-social behaviour.

But, like any other product, alcohol becomes less attractive the more it costs. Supermarkets have pioneered eye-catching deals to sell wine, beer and spirits as "loss leaders" at less than the considerable cost of duty and VAT imposed by the Treasury. They then recoup a profit on other goods. This, say alcohol campaigners, makes the case for a minimum unit price.

The Chief Medical Officer hopes that by fixing a figure of 50p per unit – which could raise prices of some own-brand drinks by as much as 400 per cent – there will be a 7 per cent fall in alcohol consumption in the UK. Of course, the 50p figure is a compromise. By raising the minimum cost to 60p per unit, drinking might be expected to decline by 12.8 per cent, potentially saving thousands of lives. But the risk of alienating most moderate drinkers is politically unappealing.

Last month, Scotland became the first country in the world to commit to a minimum unit policy. But the Edinburgh government has yet to set a figure, thought most likely to be 40p.

The model they are drawing on is Canada. Health experts north of the border examined the Canadian system where a minimum pricing policy (known as social referencing pricing) is well established. Eight out of 10 provinces in Canada allow the Government to set minimum prices for different drinks, based on alcohol content. It has so far proved effective in reducing demand, and survived legal challenges from retailers. Some countries in Europe, including Belgium, France, Greece, Portugal and Spain, have already banned "below-cost" sales of alcohol.

The most recent data, taken from international studies between the 1950s and the 1980s, suggests that for every 10 per cent hike in the price of beer, consumption can be expected to fall by 3.5 per cent. The demand for wine and spirits appears less resilient, falling by 6.8 per cent and 9.8 per cent respectively with a similar increase.

Research shows that while consumption will nearly always fall as prices rise, there remain differences in the way drinkers react between countries, and even regions. Drinkers' behaviour also changed depending on context: one study found demand was twice as likely to fall (relative to price) when buying from supermarkets and off-licences as it was when drinking in pubs and bars.

In Britain, with its deeply ingrained drinking culture, people seem less put off by price rises than in other countries, although campaigners believe across-the-board price rises will have a profound effect in the long-term. They draw parallels with the campaign to make seatbelts compulsory and the advent of the smoking ban, another measure first championed by Sir Liam in the face of political ambivalence.

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