It has just been announced that the Welsh Assembly Bill to introduce minimum unit pricing (MUP) in Wales has been given Royal Assent. Predictably, the usual suspects – Alcohol Concern, Alcohol Focus Scotland and the Institute of Alcohol Studies are all crowing about this and calling for its immediate introduction in England. So, the Welsh Assembly government clearly aren’t interested in seeing how MUP works out in Scotland first – so much for “evidence-based policy”.
But there never was any real-world evidence for MUP, its supporters rely entirely on the discredited speculative numerology of the Sheffield Alcohol Pricing Model (SAPM). This purports to show how a minimum unit price at different levels will reduce consumption, and the benefits in terms of reduced alcohol-related harms of all kinds will cascade down in a sort of hierarchy.
But there were two things that SAPM neglected to model and that economists have identified as likely unintended consequences of this kind of government price intervention. One is market displacement; the other product substitution. Let me explain: market displacement is what happens when consumers wake up one morning and find a popular product has suddenly rocketed in price and they can no longer afford it. Consumers vote with their feet and seek a similar product in the black market.
This happened in Russia in 2010 when the government imposed a minimum price of 220 roubles for a half litre bottle of vodka. Consumption was displaced into the black market where people bought cheap and dangerous moonshine. In response, the Russian Government was forced to reduce the minimum price to 185 roubles in 2012 – approximately the price it was sold at before the government intervened. Consumer responses to government regulation completely neutered the minimum price policy. Will consumers do this in Scotland and Wales? Too early to tell, but anecdotally we know that Tesco’s car park in Carlisle is full of cars and vans with Scottish number plates! Some of these will no doubt rock-up on council estates in Glasgow and flog cheap English booze to price-conscious Scots.
But what of product substitution? Remember all those stories about cheap white cider being sold to vulnerable street drinkers and alcoholics with chaotic lives? MUP will solve all that by pricing these products out of reach of the poor. So, in Scotland a 3 litre bottle of Frosty Jack’s white cider made from apple concentrate and with an ABV of 7.5% was selling for £4.25 before MUP. OMG! Pocket money prices; alcohol cheaper than water – something must be done. Well, now it has been. A 3 litre bottle of Frosty Jack’s in Scotland now costs £11.25 – thanks to MUP - and sales have fallen off a cliff. So, problem solved then? Not quite.
If you’re the kind of drinker who necks a 3 litre bottle of strong white cider in one session it’s safe to say you’re not a cider connoisseur. To be blunt, you do it to get off your head – blotto! These people haven’t gone away; they haven’t all signed the pledge. They still want to get blotto but their tipple of choice is now priced out of reach. So, might they seek a substitute product? What else can get you off your head for the night? Well, a gram of the synthetic cannabinoid known as ‘Spice’ sells for just £6. A bag of heroin off the streets of Glasgow can be bought for as little as £8. If you want to understand the effects of Spice on the homeless, visit Piccadilly Gardens in Manchester and see for yourself. And deaths from heroin and other opioids are now at a record high.
So, what happens next? Answers on a postcard please. I simply ask: in what rational universe would we contrive for a bag of heroin to be nearly 30% cheaper and a gram of spice 46% cheaper than a 3 litre bottle of cider? Victory for public health! Vindication of the policy of minimum unit pricing!
Ah, but you see, these things weren’t in the Sheffield model – so can’t possibly happen – it’s been peer-reviewed you know! And the academics are quietly confident this will all work. This is what can happen when politicians who don’t understand how markets work throw a price regulation into the middle of a free market, and it enters culture. The unintended consequences kick-in. This is what can happen when activist academics, living in ivory towers, persuade dumb politicians that if only they can control the price mechanism they’ll be able to socially engineer the sober society and we’ll all live happier, healthier lives. Meanwhile, back in the real world, I just don’t think it’s that simple.