Andy: Don’t Increase the Price of Cheap Drink, Increase Taxes on All Drink

In my nearest supermarket in Rathmines, I can buy a can of beer for less than €1. On summer evenings along the nearby canal, groups of people meet to share a few relaxed drinks – an economical alternative to going to the pub. The cost of their social life might, however, be about to rise.

The Public Health (Alcohol) Bill, recently debated in the Seanad, proposes a minimum pricing regime for alcoholic drinks. Its target is precisely the supermarkets that are currently flogging cheap booze.

The C&C company – producers and distributors of Bulmers cider – supports the bill on the grounds that it will reduce “harmful” and “irresponsible” drinking (as well as, perhaps, the pretty responsible drinking of my canal-side neighbours).

But, as Mark Paul in the Irish Times has noted, C&C is not motivated by altruism. Prices for the cheapest supermarket alcohol products might rise by 30 to 50 percent under the legislation.

The C&C drinks are not at the bottom end of the price range, so their relative price advantage would be boosted. So more of them likely would be sold.

And if punters desert the supermarkets for the pubs, then they will likely be buying some C&C stuff there too. All in all, the C&C chief executive is quoted as saying that the measure “will put more profit back in the market” – for them.

For the same reason, off-licence owners and publicans broadly support this portion of the bill – they dislike the fact that they are currently losing custom to the cheap supermarket own-brands, which are accused of selling below cost. Publicans want the people sipping from cans along the canal to come inside their warm, if relatively pricey, premises.

Trinity College economist and former Senator Sean Barrett cites research that estimates that the proposed legislation would boost the overall profits of the alcohol sector here by €78.3 million per year.

Barrett says it should be renamed the “Alcohol Sector Profits Enhancement Bill”, though industry sources claim that other aspects of the legislation – including advertising restrictions – would damage their interests.

In fairness, the bill would likely improve public health – higher minimum prices would not just shift some alcohol consumption from lower-priced to higher-priced drinks, they would probably reduce total alcohol consumption as well.

Having said that, higher prices across the board would reduce overall consumption too. And for addicts of any sort, demand for their drug of choice is what economists call “price inelastic”.

In other words, they will pay almost any price to obtain it. So most people with alcohol problems will just spend more of their (and their families’) money to buy the amount they crave.

Barrett suggests that the government should put more tax on alcohol, rather than insist the retailers impose minimum prices or that they be blocked from selling below cost (which is the policy change some in the sector, brewers and distillers mainly, favour).

A tax-based response means the exchequer could, if it wished, have more money to fund alcohol awareness/education campaigns and addiction-treatment services.

If the tax was to be levied on the currently cheapest products only – which is the (not necessarily compelling) logic of minimum pricing – then those (like C&C) selling the more expensive brands would still make competitive gains. However, the latter’s increased profits could then also be subject to increased taxes (over and above the normal taxes on corporate profits).

The pubs, off-licences and big drinks companies might complain, but we’d just be asking them to kick back to the state (again perhaps to fund further awareness and addiction services) some of the gains they would accrue from that same state clamping down on their competitors and gifting them €78.3 million per year.

In summary, there is a way this proposal (if it should be persisted with at all) could be tweaked to do three things at once: reduce overall alcohol consumption with associated public-health benefits; stop certain businesses reaping disproportionate gains; and generate much-needed funding for socially useful programmes to prevent and treat alcohol abuse.

As for the people drinking by the canal banks, living in Dublin would, sadly for them, get even more expensive than it already is – and it is hard to see why it is they who should bear the brunt of ham-fisted attempts to deal with complex alcohol abuse and public-health issues.

But as the legislation will almost certainly not be passed unless and until Northern Ireland does likewise – for fear that shoppers will just buy the stuff in bulk across the border – my neighbours may yet get to enjoy a few more sociable evenings in the open air.