Publication - Report

Minimum unit pricing of alcohol : final business and regulatory impact assessment

Underlines the rationale for minimum unit pricing from health and economic perspectives, setting out anticipated costs and benefits for all parties affected by a minimum price of 50 pence per unit.

Contents
Minimum unit pricing of alcohol : final business and regulatory impact assessment
11. Summary and recommendation

11. Summary and recommendation

Summary Costs and Benefits Table

Minimum price per unit of alcohol

Recommendation

11.1. It is recommended that the Scottish Government introduces a proposed minimum price of 50p per unit of alcohol.

Option Total benefit per annum:

- economic, environmental, social
Total cost per annum:

- economic, environmental, social

- policy and administrative
Introduce a prohibition on sales of alcohol below a proposed minimum price of 50p per unit Consumers Health harms:
2016 University of Sheffield report estimated that deaths will reduce by 121 per annum at full effect (20 years) and hospital admissions will reduce by 2,042 per annum at full effect ( paragraph 8.21 and Table 4).

Harm is differentially distributed with health gains being greatest in hazardous and particularly harmful drinkers in poverty: an estimated 119 deaths per year averted per 100,000 harmful drinkers in poverty under a minimum price of 50p per unit; 16 deaths averted per 100,000 harmful drinkers not in poverty. Similarly, for hospital admissions, estimates of 1,440 fewer admissions per year per 100,000 harmful drinkers in poverty under a 50p per unit minimum price, compared to 356 fewer admissions per year per 100,000 harmful drinkers not in poverty ( paragraph 8.23 and Tables 6 and 7).

2012 report estimated a reduction in healthcare service costs of around £6.7m in the first year, and a full 10 year cumulative effect of around £114m. An update was not carried out in the 2016 modelling. It is likely that the reduction in healthcare costs will be reduced but will still be significant ( paragraph 8.28).

2012 report estimated the value of a reduction in health harms using Quality Adjusted life Years ( QALYs) to be £17.2m in year 1 with a cumulative value of £492 million after 10 years. Again, although the estimated impact has lessened, a financial valuation of the reduction in health harm would still be sizeable ( paragraph 8.29).

Crime harms:
2012 report estimated that crime volumes were estimated to fall by around 3,500 offences per annum. The distribution of the effect varies across the drinker groups with reductions in this case of around 800 offences from moderate drinkers, around 900 from hazardous drinkers and around 1,700 offences from harmful drinkers ( paragraph 8.31).

The harm avoided in terms of victim quality of life is valued at around £2.2m in the first year and around £20m over 10 years. Direct costs of crime were estimated to reduce by around £2.9m in the first year and by around £24m over 10 years. An update was not carried out in the 2016 modelling. It is likely that the reduction in crime costs will be reduced but will still be significant ( paragraph 8.31).

Employment harms:
2012 report estimated that workplace harms would reduce by around 1,300 fewer unemployed people and around 32,300 fewer sick days per year. The estimated reduction in unemployment was modelled for the harmful drinking group only. Sick days were differentially distributed across the groups with a reduction of around 11,000 amongst moderate drinkers, around 8,900 amongst hazardous drinkers and around 12,200 amongst harmful drinkers ( paragraph 8.32).
For the first year after implementation, the cost of sick days was estimated to fall by around £3m and the cost of unemployment by £32.1m. The cost of sick days and unemployment was estimated to reduce by around £292m over 10 years. An update was not carried out in the 2016 modelling. It is likely that the reduction in workplace costs will be reduced but will still be significant ( paragraph 8.32).

Retailers – off-trade
A minimum unit price of 50p is estimated to result in increased revenue to the alcohol industry as a whole of around £34m per annum (excluding VAT and duty) – £41m of which would accrue to the off-trade ( paragraph 8.40 and Table 10).

Retailers – on-trade
A minimum unit price of 50p is estimated to result in increased revenue to the alcohol industry as a whole of around £34m per annum (excluding VAT and duty) – with a reduction of £7m in the on-trade ( paragraph 8.49 and Table 10).

Wholesalers
A minimum unit price of 50p is estimated to result in increased revenue to the alcohol industry as a whole of around £34m per annum (excluding VAT and duty). It is not possible to ascertain where this increased revenue will end up in the supply chain ( paragraph 8.51).

Producers
A minimum unit price of 50p is estimated to result in increased revenue to the alcohol industry as a whole of around £34m per annum (excluding VAT and duty). It is not possible to ascertain where this increased revenue will end up in the supply chain ( paragraph 8.52).

Local government and public bodies
Benefits from estimated reductions in health, crime and employment harms and associated costs ( paragraph 8.54).

Central government
Benefits from estimated reductions in health, crime and employment harms and associated costs ( paragraph 8.55).
Consumers
The moderate drinker is estimated to reduce mean annual consumption by 4.1% (for those drinkers in poverty) with no increase in spend, and by 0.8% (for those drinkers not in poverty) with an increase of £2 per annum.

The hazardous drinker is estimated to reduce mean annual consumption by 6.1% (for those drinkers in poverty) with an increase in spend of £1 per annum, and by 2.1% (for those drinkers not in poverty) with an increase of £16 per annum.

The harmful drinker is estimated to reduce mean annual consumption by 15.1% (for those drinkers in poverty) with an increase in spend of £88 per annum, and by 5.4% (for those drinkers not in poverty) with an increase of £20 per annum ( paragraph 8.66 and Table 11).

Retailers – off-trade
A minimum unit price of 50p is estimated to result in increased revenue to the alcohol industry as a whole of around £34m per annum (excluding VAT and duty) – £41m of which would accrue to the off-trade ( paragraph 8.68 and Table 10).

Administrative costs of re-pricing and maintaining separate prices for Scotland and rest of UK will depend on size of retailer and whether they are UK or Scotland based. For smaller independent retailers, a maximum cost of around £738,000 has been estimated. The actual figure will be less than this given not all off-sales premises will be affected and not all products in off-sales will be affected ( paragraph 8.80).

Retailers – on-trade
A minimum unit price of 50p is estimated to result in increased revenue to the alcohol industry as a whole of around £34m per annum (excluding VAT and duty) – with a reduction of £7m in the on-trade. This is due to consumers’ switching behaviour ( paragraph 8.100 and Table 10).

Wholesalers
It is estimated there will be a decrease in volume of sales and an increase in the value of sales, however it is not possible to ascertain where this increased revenue will end up in the supply chain (paragraphs 8.101 - 8.102).
Producers
It is estimated there will be a decrease in volume of sales and an increase in the value of sales, however it is not possible to ascertain where this increased revenue will end up in the supply chain.

The supply side reaction to the introduction of a minimum price is not known, and there are differing views within the industry resulting in different scenarios. Producers that are likely to be most affected by a minimum price are those whose production consists of a significant volume of products which routinely retail below 50p per unit (paragraph 8.1038.115).

SWA estimate that “copy-cat” discrimination in other jurisdictions could reduce Scotch Whisky exports. No information has been provided in respect of which countries are contemplating or are likely to pursue such discriminatory action ( paragraph 8.138).

Jobs
Given the uncertainty in assessing the impact of minimum unit pricing on the market, it is difficult to estimate any impact on jobs in the alcohol industry. In the 2012 BRIA, producers considered there would be job losses for companies heavily involved in own/ private label production. Whilst it is not yet clear what will happen to own/ private label products, it is likely that value products (i.e. products currently at or below the minimum unit price) will still be sold, although in reduced quantities and likely at the minimum price (paragraph 8.117 and 8.118).

However, there is evidence that declining alcohol consumption may not affect employment in the way described by the industry ( paragraph 8.118).

Local government and public bodies
Minimal (paragraphs 8.1408.141).

Central government
A reduction of around £15m to VAT and alcohol duty receipts is associated with a 50p unit price, which represents 0.01% of total UK VAT and alcohol duty receipts, and 0.12% of total Scottish VAT and alcohol duty receipts ( paragraph 8.142).

There will be initial set up costs for the Scottish Government in introducing a minimum price per unit of alcohol in order to provide guidance to licence holders about the necessity to comply with the provision. The Scottish Government has budgeted funding of up to £50,000 for this ( paragraph 8.143).

The total cost of monitoring and evaluating minimum unit pricing is £1.1m. These costs are over a 5 year period (2017/18 – 2022/23) ( paragraph 8.144).

Conclusions

11.2. There is strong and consistent evidence linking the price of alcohol to the demand for alcohol and that increasing the price reduces consumption and alcohol-related harm. The evidence supports the assertion that a minimum price per unit of alcohol will lead to reductions in health, crime and employment harms.

11.3. The policy aim is to reduce consumption generally but, in particular, to target a reduction in consumption of cheaper alcohol relative to its strength. Evidence shows that this type of product is more favoured by hazardous and, particularly, harmful drinkers. Minimum pricing achieves this because it is both a whole population approach and a targeted approach – it applies to the whole population, but hazardous and harmful drinkers are likely to be affected more than moderate drinkers, in terms of the amount they drink, how much they spend and how much they benefit from reductions in harm. In addition, hazardous and harmful drinkers in poverty are more likely to respond to minimum pricing and, given they are more likely to suffer greater harms, they will benefit from the greatest reduction in health harms.

11.4. The Scottish Government considers that the increased costs to individuals are outweighed by the benefits in the reduction of societal harms. It is estimated there will be administrative costs for the industry in setting up and maintaining a separate pricing structure to the rest of the UK (unless they voluntarily adopt the Scottish pricing arrangements across the UK). However, the alcohol industry as a whole is estimated to benefit from increased revenues. Some parts of the industry may incur costs; however, we consider this is offset by the benefits they are also likely to experience.


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