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The Absurdity Of Minimum Pricing On Alcohol

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There’s much to be said about – and therefore against – the idea of minimum pricing on alcohol. The most important of which is hinted at here by the IFS:

Putting a minimum price of 50p per unit on alcohol would cost the taxpayer £390 million in lost revenue and hand a windfall to the drinks industry, the Institute of Fiscal Studies (IFS) has warned.

Start by conceding much of the argument. Booze kills, it’s cheap booze that does, increase the price and less will be drunk and lives will be saved.

Gloss over all of the interim bits there – or go read Chris Snowdon for why we shouldn’t – and just take that as our starting point.

So, we’ve two ways of making elixir more expensive. We can increase the amount of tax we charge upon it. We have the system to charge already extant. We have that bottomless pit of the welfare state that can use the extra cash.

Hmm, well, that’s a plan then.

We could also just insist upon booze costing more. Pass a law that no one may charge less than x for it. Everyone who does make the cheap stuff now will lose some sales. For why not trade up to better pickle if it’s all the same price? But on what they do still sell they’ll be making wider profits. Makers of cheap cider will make out like bandits in fact because it’s alarmingly cheap stuff to make.

That lacks a certain something as a plan really. We don;t gain any revenue from booze being more expensive, we just increase the profits of those whose sales we’re trying to restrict. Umm, why?

So, of our two options it’s obvious which we should use. The tax one. So, what actually is it that the political system spits out as the solution to be implemented? The minimum price one.

Yep, these people are insane. Which is, of course, why we see so many problems when we look around. The polity is run by politics.

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4 COMMENTS

  1. No. It’s not as obvious as you claim. If we really do need to reduce alcohol consumption, it is quite dangerous to use taxation to do it because governments get addicted to taxes, which then gives them a perverse incentive to preserve the very thing that they are supposed to be getting rid of. When you use a technique like minimum pricing the people with the incentive to preserve the undesireable behaviour are outside government so there is a better chance that they will be unable to protect what should be eliminated (it’s far from perfect – once the addiction to unfair profits gets entrenched, there will be howls of protest at loss of jobs once the undesired behaviour starts to fall).

  2. Perhaps, but I suspect that the demand for alcohol is pretty inelastic. Most people, particularly the most impulsive types, will cut back on other things to keep having a few belts every day.

  3. Here’s the really odd bit. There are 2 ways to raise the price. The people arguing that we should raise prices are the type who always claim the gov’t needs more money & power, but they didn’t opt for that approach?

  4. The people demanding minimum pricing are the ones who buy the stuff that isn’t affected by minimum pricing. The demand here is that they should be allowed their booze but poor people shouldn’t be able to afford theirs. Because people who write for the IFS are clearly capable of handling it whereas the great unwashed aren’t. Raising duty would make IFS writers’ tipple more expensive, and that just doesn’t bear thinking about.

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