Minimum Unit Pricing
What is minimum unit pricing?
Minimum unit pricing (MUP) is a “floor price” beneath which alcohol cannot legally be sold and is based on the amount of alcohol in a product, measured in grammes. One standard drink in Ireland contains 10 grammes of alcohol and an MUP would apply per standard drink.
It is a targeted measure, designed to stop strong alcohol being sold at very low prices in the off-trade, particularly supermarkets, where alcohol is frequently used as a “loss leader” and sold below cost. The easy availability of such cheap alcohol has contributed to a dramatic shift in our alcohol purchasing and consumption habits from pubs towards the off-trade sector, which now accounts for 60% of the alcohol sold in Ireland.
How does MUP work to reduce alcohol harm?
MUP is able to target cheaper alcohol relative to its strength because the price is determined by and directly proportionate to the amount of alcohol in the drink. This is important as these strong and cheap drinks are the alcohol products favoured by the heaviest drinkers among us, who generally seek to get as much alcohol as they can for as little money as they can and are most at risk of alcohol-related illnesses and death, and our young people, who generally have the least disposable income and have the highest prevalence of binge drinking.
MUP is therefore particularly important for public health policy due to the fact that while a price increase may induce some consumers of higher priced alcohol products to switch to less costly brands, or to switch purchases to venues where alcohol is less costly, those who are already drinking the lowest-priced products can only respond by changing the quantity they drink, which leads to greater responsiveness at the lower end of the price spectrum, which is largely occupied by heavy and young drinkers.
A study of liver patients by the University of Southampton showed that MUP “is exquisitely targeted at the heaviest drinkers, for whom the impact of alcohol-related illness is most devastating”. The higher the threshold at which an MUP is set, the greater the reduction in alcohol consumption and alcohol-related harms
Will MUP be introduced in Ireland?
The Government plans to introduce MUP as one of the key measures to be included in the Public Health (Alcohol) Bill, which is currently being drafted by the Department of Health. It is planned to introduce a minimum price for alcohol in conjunction with the Government in Northern Ireland.
Alcohol consumption levels are lower now than 15 years ago – so where’s the problem?
Consumption levels have decreased from a record high of 14.3 litres of pure alcohol per capita (every Irish person aged 15+) in 2001 to around 10.7 litres in 2013, rising again to 11 litres in 2014. Though our consumption has decreased from its peak, we still have one of the highest levels of alcohol consumption in the world, with binge drinking (which is particularly harmful to health) very prevalent in Ireland. This harmful drinking has a huge impact on our nation’s physical and mental health, causing the loss of 88 lives due to alcohol every month.
The Health Research Board (HRB) found that more than half (54%) of 18-75 year old drinkers were classified as harmful drinkers which equates to 1.35 million harmful drinkers in Ireland. The HRB also found that:
75% of alcohol in Ireland is consumed as part of a binge drinking session
One third (33%) of men and more than one fifth (23%) of women who consumed alcohol in the week prior to the survey consumed more than the HSE’s low-risk weekly guidelines
One in eight (13%) men and almost one in ten (9%) women drank the HSE’s low-risk weekly guidelines in one sitting in the week prior to the survey. Among 18 to 24 year olds, 28% of men and 22% of women consumed the weekly guidelines in one sitting
Harmful drinking is highest among 18-24 year old age group (at 75%)
Dependent drinking is highest among 18-24 year old age group (at 15%)
Four in five drinkers would reduce their risk of death from any causes if they cut their alcohol consumption by just one standard drink a week. Therefore, there is wide scope for improving the health and wellbeing of those drinking to harmful levels in Ireland if we can reduce our levels of alcohol consumption.
What will be the benefit of MUP for people who don’t drink to harmful levels?
The World Health Organisation (WHO) has pointed out that, beyond health consequences, the harmful use of alcohol brings significant social and economic losses to individuals and society at large. In Ireland, the burden of alcohol related harm is often experienced by those around the drinker, such as a family member, friend, co-worker or innocent bystander.
Alcohol’s harm to others undermines public safety and is experienced in every community, ranging from the nuisance factor to feeling unsafe in public places, and drink-driving to a violent attack by an intoxicated drinker. Although not often publicly visible, alcohol’s harm to others within the family can have very serious consequences for the safety and well-being of family members, with children being the most vulnerable. Life-long damage, through foetal development disorders, can also be caused to the unborn child by alcohol consumption during pregnancy.
Alcohol-related harm costs the State an estimated €3.7 billion annually, with €2.4 billion of that figure accounted for by health and crime-related costs alone, and road traffic collisions and work-related losses (e.g. absenteeism and loss of productivity) costing more than €850 million. Therefore it’s clear that while drinking alcohol is an individual choice, it is one that has significant social and economic impacts, with substantial costs borne by the State and, ultimately, the taxpayer. Therefore a reduction in harmful drinking through the introduction of MUP will benefit everyone in Irish society.
Why do we need MUP – isn’t Ireland already one of the most expensive countries in the EU for alcohol?
MUP is about tackling the very cheapest alcohol and reducing harm amongst the heaviest drinkers. We have relatively high excise duty on alcohol but it is also relatively affordable, particularly, in the off-trade which now dominates alcohol sales in Ireland.
Some of the off-trade alcohol, particularly in supermarkets, where alcohol is often sold as a ‘loss leader’ or below cost, is so cheap that a woman can reach her low risk weekly drinking limit for just €6.30, while a man can reach this weekly limit for less than €10. To put that affordability into perspective, one hour worked on minimum wages is €8.65.
Irrespective of income levels, low-risk drinkers are little affected by MUP, with the impacts of MUP increasing in line with the levels at which a person is drinking. As harmful drinkers purchase more alcohol at less than the proposed MUP thresholds compared with other groups, they would be affected most by this policy, leading to substantial health gains and a significant reduction in alcohol harm.
As well as having little impact on low-risk drinkers, MUP will also not affect the price of any alcohol sold in pubs, clubs and restaurants in Ireland, with alcohol in the on-trade already sold well above the threshold for any proposed MUP. Notably, MUP has the support of the Vintners Federation of Ireland, the Licensed Vintners Association, and the National Off-Licence Association.
How will increasing the price of the cheapest alcohol make any difference to how much people drink and alcohol harm?
The price of alcohol is directly linked to how much people drink across the population and to levels of alcohol-related harms and costs in a country. Pricing impacts on general consumption and lower consumption levels mean reduced harms and costs.
An increase in the price of alcohol has been found to reduce alcohol consumption, hazardous and harmful alcohol consumption, alcohol dependence, the harm done by alcohol, and the harm done by alcohol to those others than the drinker. The WHO has found that the alcohol policies most effective in reducing harms and costs are pricing and availability policies, making it clear that there is “indisputable evidence that the price of alcohol matters. If the price of alcohol goes up, alcohol-related harm goes down”.
Is there any popular support for MUP in Ireland? Two year-on-year surveys carried out by a leading market research firm on attitudes to pricing found that there was between 55% to 60% support for minimum pricing. Almost half of people surveyed (47%) said they would buy less alcohol if the price were to increase by just 10%.
Alcohol Action Ireland has brought together a coalition of well over 30 organisations, including medical representative organisations, charities and NGOs, who are calling for the introduction of minimum pricing to tackle alcohol-related harm in Ireland.
Are any other countries considering MUP?
The Scottish Government introduced minimum pricing in May 2012. The bill was challenged by several alcohol industry bodies, who claimed that minimum pricing breaches the UK’s European Union (EU) Treaty obligations because it would restrict trade.
However, in May 2013 the Court of Session, Scotland’s supreme civil court, ruled in favour of the legality of the Scottish Government’s plans to introduce minimum pricing. This ruling was appealed and the matter came before the European Court of Justice which is due to deliver its opinion on the case in September 2015, with a decision later in the year.
Ministers in Northern Ireland have also stated their commitment to introducing MUP for alcohol and, in conjunction with the Irish government, commissioned a health impact assessment as part of the process of developing a legislative basis for MUP. A joint approach between both Governments will see the cheapest alcohol here sold at the same level as in the North of Ireland. The Welsh Government has also indicated that it plans to introduce MUP, with a consultation process due to end in December 2015.
What would the likely impact of MUP in Ireland be?
The leading experts in this area, from the University of Sheffield, carried out a model-based appraisal of MUP in the Republic of Ireland. They concluded that:
-MUP would be effective in reducing alcohol consumption, alcohol-related harms (including alcohol-related deaths, hospitalisations, crimes and workplace absences) and the costs associated with those harms
-A ban on below-cost selling (implemented as a ban on selling alcohol for below the cost of duty plus the VAT payable on that duty) would have a negligible impact on alcohol consumption or related harms
-A ban on price-based promotions in the off-trade, either alone or in tandem with an MUP policy, would be effective in reducing alcohol consumption, related harms and associated costs
-MUP and promotion ban policies would only have a small impact on low-risk drinkers. Somewhat larger impacts would be experienced by increasing risk drinkers, with the most substantial effects being experienced by high risk drinkers
-MUP and promotion ban policies would have larger impacts on those in poverty, particularly high risk drinkers in poverty, than on those not in poverty. However, those in poverty also experience larger relative gains in health and are estimated to very marginally save money due to their reduced drinking under the majority of policies
Is there any evidence for MUP’s effectiveness other than modelling studies?
Canada is one of several countries that have already introduced MUP and research findings on the minimum pricing systems operating in two Canadian provinces provide empirical evidence of the effectiveness of minimum pricing.
In Saskatchewan province in Canada a 10% increase in the MUP was associated with an 8.4% decrease in total alcohol consumption, along with an increase in Government revenue from alcohol of €40 million. In British Columbia a 10% increase in the minimum price was associated with a 32% fall in wholly alcohol related deaths.
A 10% increase in the average minimum price of alcohol in British Columbia was also found to lead to reduced crime, as it was associated with decreases of 19% in alcohol-related traffic offences and of 9% in crimes against the person.
Why doesn’t the Government just increase tax on alcohol?
Large multiple retailers can sell deeply discounted alcohol as a draw to attract customers – an increase in tax can easily be absorbed and off-set by increasing the prices of other goods. MUP sets a ‘floor price’ for alcohol and cannot be undercut and therefore is a more targeted measure than increasing excise duty, which applies to all alcohol products and consumers equally.
Even if excise duty were increased, once the retailer pays the tax owed to the Government, retailers are under are under no obligation to pass this on to consumers so alcohol could still be sold as a ‘loss leader’. However, excise duty and MUP are not irreconcilable policies and can work together to reduce alcohol harm.
Would banning below-cost selling of alcohol not have the same effect as MUP?
A ban on below cost selling is likely to be far less effective than MUP and also much more difficult to enforce. There is no agreed definition of below-cost selling in Ireland or how it could be calculated. However, if below-cost selling is interpreted as alcohol being sold below VAT and excise duty then a relatively small amount of alcohol is sold at this price in Ireland and a ban on below-cost selling in Ireland has been estimated to have almost no impact on population consumption.
The cheapest priced alcohol generally skims the top of combined VAT and excise duty. Defining cost as just excise duty and VAT, means ignoring the manufacturing, transportation and retail costs associated with the product. In other words, it is not a true reflection of the total costs. Working out a cost price of alcohol, that incorporates all of these contributing costs, would be a complex and expensive exercise, making a ban on below-cost selling of alcohol almost impossible to implement, monitor and enforce.
At what level should a MUP be set?
A MUP needs to be set at a level the evidence indicates will reduce the burden of harm from alcohol use. A minimum price will need to be reviewed on a regular basis and adjusted when necessary to maintain its value in line with inflation.
The University of Sheffield estimated that with a €1 MUP per standard drink (assuming that it’s updated annually in line with inflation):
-Across the whole population, mean weekly consumption would reduce by 8.8%
-Across the whole population, 37.5% of alcohol purchased would be affected
-In both income groups (those in poverty and not in poverty), absolute reductions in consumption are estimated to be small for low risk drinkers and much larger for high risk drinkers
-Across the whole population, spending increases by 1.3% or €15.70 per drinker per year (€0.30 per week)
-Effects on health are estimated to be substantial, with alcohol-attributable deaths estimated to reduce by approximately 197 per year after 20 years, by which time the full effects of the policy will be seen
-Similar patterns are observed amongst reductions in alcohol-related hospital admissions, with an estimated 5,878 fewer admissions per year across the population
-Direct healthcare costs are estimated to reduce by €7.4m in year 1 and €254.7m cumulatively over the first 20 years of the policy
-Crime is estimated to fall by 1,493 offences per year overall and the costs of crime and policing are estimated to reduce by €7m in year one and by €102.7 cumulatively over 20 years
-Workplace absence is estimated to be reduced by 115,600 per year. This is estimated to lead to an annual saving of €16.1m in year one and €236.6m over 20 years
-The total societal value of these reductions in health, crime and work place harms is estimated at €1.7bn over the 20 year period modelled. This includes direct healthcare costs (€255m), crime costs (€103m), workplace costs (€237m) and a financial valuation of the quality adjusted life year (QALY) gain (€1.1bn)
-Overall revenue to the Exchequer from duty and VAT receipts is estimated to reduce by 2.1% or €34.3 million
-Revenue to retailers is estimated to increase by €68.5million (18.1%) in the off-trade and €9.3million (0.7%) in the on-trade. This is as reduced sales volumes are more than offset by the increased value of remaining sales
Times are tough – would MUP have a disproportionate impact on people on low incomes?
MUP will impact on both drinkers in poverty and not in poverty and within each income group in Ireland. The impacts on high-risk drinkers will be substantial and greater than the impacts on low-risk drinkers. However, a key policy concern is whether low-risk drinkers in poverty are ‘penalised’ by MUP.
The University of Sheffield found that MUP has a greater relative impact on the consumption of drinkers in poverty*, as drinkers in poverty tend to buy more products from the cheaper end of the spectrum. However, alcohol consumption amongst low risk drinkers in poverty and not in poverty respectively would fall by just an estimated 0.5 standard drinks (i.e. ¼ of a pint of beer) and 0.1 standard drinks per week with an MUP of €1, while the corresponding figures for high risk drinkers are 10.4 standard drinks (in poverty) and 9.25 standard drinks per week (not in poverty). The greater fall in consumption amongst drinkers in poverty also leads to greater reductions in alcohol-related health harms, with greater estimated reductions in deaths and hospital admissions per 100,000 population for drinkers in poverty.
The greater health benefits of MUP for drinkers in poverty suggest the policy may also contribute to the reduction of health inequalities. Due to existing health inequalities, the worst effects of alcohol are currently felt by those who can least afford it. Even though those on low incomes do not consume as much alcohol as more affluent groups, they are disproportionately more likely to suffer the impacts of alcohol harm, including alcohol-related crime and health problems.
Meanwhile, as those living in poverty have a much higher proportion of non-drinkers and lower rates of alcohol consumption among low-risk drinkers, MUP will even more accurately target those who, though in poverty, consume alcohol at increasing risk or high risk levels.
3 September Alcohol Ireland