The politics of cheap cider and single malt

3rd September, 2011

“Dad, aren’t monks supposed to be holy people?”

“So they say, my love.”

“Then why are monks trying to make the Scots do bad things?”

“This isn’t about Buckfast Tonic Wine, is it?”

“I saw someone on the television saying that there were these monks in Devon and they were making this special wine that made people naughty, and then sending it to Scotland.”

“That does sound rather unsavoury, doesn’t it? What did the person on the TV suggest doing about it?”

“He was saying that Scotland was going to introduce a minimum price on alcohol.”

“Very interesting. Could you pass me that bottle of whisky? I need a top-up.”

“But will a minimum price work? Will it stop Scottish people drinking tonic wine?”

“It certainly won’t stop them drinking Buckfast Tonic Wine, since – unless I am mistaken – the price of Buckie is above the minimum price. But even if we simply banned Buckfast, other sweet alcoholic beverages are available. There’s always rum and Coke – unless they’re going to ban rum. Or I suppose they could ban Coke instead. It seems unlikely.”

“Dad, if the minimum price is lower than the price of the drink that everyone says is causing the problem, then surely it won’t change anything.”

“That’s not true. It will change a few things. It will raise the price of the cheapest drinks. I’m no longer the expert I once was about cheap cider, but I reckon the price would more than double. And nicer drinks may get more expensive too. If paint-stripper must legally be priced at £12 a bottle, the price of a decent single malt may rise, too. And I am almost sure it will raise the profit margins of supermarkets. If they actually got together and agreed to charge a minimum price for alcohol they might end up in prison. They must think it’s awfully decent of the politicians to make it obligatory for them to raise prices rather than obligatory for them not to.”

“Can’t the politicians make all alcohol more expensive?”

“They can: they can tax it. They already tax it a lot and they can tax it some more. If they tax the value, then the price of everything will rise in proportion. If they tax the alcohol content then the cheaper, stronger drinks will become more expensive, relative to the original price.”

“Why don’t they do that?”

“There are a couple of reasons. One is that people don’t like the idea of the government getting their money. They’d rather have a minimum price than a tax. Of course this means the money going to the supermarkets rather than being available to reduce deficits, cut taxes or fund public spending, but there it is. The other reason is that it would work too well: it would increase the price of the drinks that voters buy, and especially the price of drinks that journalists buy. This creates bad publicity.”

“But don’t voters buy cheap drinks too?”

“Have you studied Venn diagrams at school?”

“We did them last term.”

“Let me just speculate – without evidence – that the set of voters does not hugely overlap with the set of people who regularly buy two litres of cider for £1.50. But lots of people buy drink in general, so this would be a tax on lots of people. Politicians often levy taxes on lots of people but they try to avoid crowing about it when they do. As the cliché has it, this would be a tax on the vast majority of responsible drinkers.”

“Are responsible drinkers in the vast majority in Scotland, Dad?”

“I don’t know. Casual observation suggests they are not even in a slim majority in England.”

“What I don’t understand is why a price increase would change anything – after all, we’re already talking about alcoholics and irresponsible drinkers, aren’t we?”

“I’m surprised you know what an alcoholic is.”

“I assumed it was like a chocoholic, only with whisky.”

“Your deductive powers are admirable. But even alcoholics, and chocoholics, respond to incentives. There’s a study from the 1980s by the economists Philip Cook and George Tauchen which found that when taxes on alcohol rose in some US jurisdictions, you could track the fall in liver disease in the local hospitals. And there are other academic studies which find that demand for addictive products such as gambling and cigarettes even responds to prospective price increases – the addicts realise their habit is about to become expensive and try to quit before that happens.”

“Gosh. Scottish drinkers may already be cutting back.”

“All the more for me, then.”

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