Student Videos

Minimum Prices for Alcohol: Evaluation

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 11 Apr 2018

Should there be a minimum legal price for alcoholic drinks in the UK as an intervention to tackle the market failures associated with excessive drinking?

The UK government introduced a ban on the sale of alcohol below cost price from May 2014. A can of average strength lager cannot be sold for less than 41p and a standard bottle of vodka cannot be sold for less than £9.06.

Arguments for a minimum price on alcohol sold in supermarkets:

  • Reduces some of the externalities from people pre-loading cheap supermarket alcohol at home
  • In the long term, a minimum price intervention would cut premature deaths, reduce workplace absenteeism and also reduce the burden of treating chronic illnesses linked to alcoholism. Alcohol is estimated to cost the NHS over £billion a year and there is an estimated £11 billion annual cost of alcohol-related crime.
  • Pubs may benefit from higher minimum prices in supermarkets
  • A minimum price might target cheaper, higher-strength drinks often used by younger drinkers

Counter-arguments against using minimum prices for alcohol:

  • Minimum price is a tax on responsible drinkers – this is inequitable
  • Might be better for drinsk producers to agree voluntary policies on alcohol price / strength
  • Better to raise alcohol duties which will raise tax revenues to be used for socially-beneficial projects
  • Demand for alcohol among problem-drinkers is likely to be inelastic and, thus, any increase in price is likely to have little effect upon their consumption
  • Imposing a minimum price will require extra spending on enforcement e.g. across every drinks retailer   

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