The Institute of Fiscal Studies (IFS) has suggested minimum pricing could transfer as much as £700 million from consumers to retailers and producers, advising tax increases as a preferred longer-term strategy.
See the IFS report 'The impact of introducing a minimum price on alcohol in Britain' [pdf]
In a press release, the IFS said:
“Minimum alcohol prices would transfer large sums from consumers to those firms that retail and produce alcohol, but may target households that consume the most alcohol more directly than increases in alcohol taxes. However, higher taxes would generate much needed revenue. The Government should seek to change European regulations on how alcohol taxes can be structured, so that taxes can mimic the impact of minimum prices whilst ensuring the resulting revenues go to the Government and not firms.”
The report references the key work on minimum pricing including the University of Sheffield's independent review, but does not take account of possible market responses such as how retailers might change the prices of alcohol or other products. Therefore suggestions that supermarkets use alcohol as a loss-leader whilst making up the prices on other products were not accounted for; however the report suggests 'retailers would almost certainly respond by changing other alcohol prices'.
The Government is currently reviewing alcohol taxation following a recent HM Treasury consultation, having pledged to "review alcohol taxation and pricing to ensure it tackles binge drinking without unfairly penalising responsible drinkers, pubs and important local industries".
The Coalition has indicated they are not willing to consider a national minimum pricing approach, though is looking at how best to implement its pledge to 'ban below cost-sales'. However critics and the on-trade have warned that a below-cost ban will not have a significant impact on the majority of cheap alcohol sales.
Professor Petra Meier, who led the University of Sheffield review, highlighted that discussions on minimum pricing and tax changes should not be confined to an "either or" approach as they would each have differing impacts. A combination of both tax increases and minimum pricing is also advocated by the World Health Organisation.
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