What is Minimum Unit Pricing?
A minimum unit price (MUP) sets a floor price below which a unit of alcohol cannot be sold to consumers. This means that the floor price is directly linked to the amount of alcohol contained in the product. For example, a 50p MUP would mean that a pint of beer containing two units of alcohol would need to cost at least £1.00 and a bottle of wine containing nine units would need to cost at least £4.50. The table below shows the effect of a 50p MUP on a range of alcohol types.
MUP only directly affects products sold below the floor price. This means the price of a pint in the pub would not be affected, nor would most other drinks sold in pubs, restaurants or nightclubs. All of these are already priced at well above 50p per unit. Instead, the main impact of MUP would be on alcohol sold in supermarkets and off-licenses, particularly multipacks of beer and cider, cheaper spirits brands and strong ‘white’ ciders.
MUP is not a tax. Shops and supermarkets would keep the additional revenue from selling alcohol at higher prices. As a result, their profits are expected to increase under this policy.
Which countries have introduced minimum unit pricing?
Scotland passed legislation to introduce MUP in 2012 and implemented a 50p MUP in May 2018 after a five-year legal challenge led by the Scotch Whisky Association.
In 2018, Wales and the Republic of Ireland also passed legislation to introduce the policy and the Australian Northern Territory introduced an MUP of AUD$1.30.
England, Northern Ireland, Western Australia, the Australian Commonwealth Government, several Canadian provinces and New Zealand have all given serious consideration to introducing MUP in recent years.
What is the evidence for minimum unit pricing?
There is an extensive and robust body of international evidence showing that increases in the price of alcohol are associated with falls in both alcohol consumption and alcohol-related harm. This evidence includes several systematic reviews and meta-analyses that bring together evidence from over 100 studies. The University of Sheffield summarised the evidence in a major review.
MUP is a specific form of price increase which targets the price of cheap, high-strength alcohol that is disproportionately purchased by those drinking larger amounts of alcohol.
The Sheffield Alcohol Policy Model (SAPM) is an influential modelling tool created by the University of Sheffield. It has estimated the impacts of a MUP in different countries and at different times. The model consistently finds that the policy is an effective and well-targeted approach to reducing alcohol-related harm. As well as cutting the number of deaths, hospital admissions and crimes caused by alcohol, it also avoids increasing the price of alcohol purchased by moderate drinkers, including those moderate drinkers who are on low incomes.
Figure 2 shows that estimates from an updated version of the model show that if a 50p MUP was introduced in England, alcohol consumption would fall by 3.7%. Each year, this would lead to 920 fewer deaths, 22,200 fewer hospital admissions and 49,000 fewer crimes due to alcohol. Over 20 years, this would reduce the cost of alcohol to the NHS by £1.3bn.
We have also used to SAPM to estimate the potential effects of MUP in Scotland, Wales, Northern Ireland, the Republic of Ireland and two Canadian provinces, Ontario and British Columbia.
How does minimum unit pricing affect particular groups?
MUP affects different groups in the population differently depending on their individual characteristics, how much alcohol they buy and how much they pay for it (Figure 3).
Figure 4 shows that moderate drinkers, including those with low incomes, buy very little alcohol for less than 50p per unit. As a result, these drinkers do not need to reduce significantly their alcohol consumption or increase their spending.
In contrast, high risk drinkers buy large amounts of cheaper alcohol and they respond differently depending on their income. High risk drinkers with low incomes reduce their consumption and spend a similar amount of money on alcohol as before. High risk drinkers with high incomes increase their spending in response to the higher prices and reduce their consumption by a smaller amount (Figure 5).
Alcohol-related health problems are concentrated among heavier drinkers on lower incomes and, as a result, alcohol contributes to large inequalities in health outcomes between lower and higher income groups. As the effects of MUP are largest among these high risk, low income drinkers, MUP is well-targeted to reduce health problems and health inequalities.
Who else has examined the effects of minimum unit pricing?
Most Canadian provinces have set minimum prices for alcohol for many years. These policies are less stringent than minimum unit prices as the floor price does not increase consistently as the alcoholic content of drinks goes up. Nonetheless, across a series of studies, researchers have found increases in these minimum prices are associated with falls in alcohol consumption, deaths and hospital admissions due to alcohol and, in some cases, alcohol-related crimes. Reductions in hospital admissions were also larger in low incomes areas than high income areas. These findings are in line with the estimates obtained from SAPM.
Several other researchers and analysts have examined the potential effects of MUP. These include analyses by the Institute for Fiscal Studies in England and the OECD in high income countries, as well as further studies in Australia, New Zealand and Scotland.
Why introduce minimum unit pricing rather than alcohol duty increases?
Increasing alcohol taxes is another effective way of reducing alcohol consumption and related harm. However, MUP specifically targets the cheaper and higher-strength alcohol that is favoured by heavier drinkers. As a result, it leads to larger reductions in consumption among high risk drinkers and larger reductions in deaths and hospital admissions caused by alcohol. To achieve the same impact as a 50p MUP, alcohol taxes would need to increase by between 27% and 70% depending on which outcome you wish to match.
Other considerations when comparing the two policy options include that the additional revenue from higher prices goes to retailers under MUP but to Government under increased taxes. MUP also enforces prices whereas the cost of tax increases can be either absorbed by the industry, distributed unevenly across alcoholic products or passed on to non-alcoholic products. In line with these possibilities, our analyses suggest that when alcohol taxes go up, cheaper drinks increase in price by slightly less than would be expected and the price of more expensive drinkers increases by slightly more than would be expected.
MUP should not be treated as an alternative to increasing alcohol taxes as both policies can be enacted together.
Does the UK Government’s ban on selling alcohol below the cost of the duty and VAT tackle the problem of cheap alcohol?
In 2014, the UK Government banned the sale of alcoholic products for less than the cost of the excise duty and VAT payable on the product. This created a minimum price but a very low one. When the policy was introduced, less than 1% of alcohol units were sold for less than this minimum price. SAPM estimated that alcohol consumption would fall by just 0.04%. Figure 6 shows the comparison between a MUP and banning below cost sales across five alcohol types.