Alcohol - minimum unit pricing - continuation and future pricing: interim business and regulatory impact assessment
This business and regulatory impact assessment (BRIA) contains an assessment of two policy proposals: 1) continuing the effect of the minimum unit pricing (MUP) legislation and 2) in the event of continuation, an increase in the price per unit, to 65ppu.
5. Costs and Benefits (of preferred price)
As set out above, the preferred policy option of the Scottish Government is to continue the effect of the MUP provisions. Alongside the continuation of the effect of MUP, it is proposed to increase the level of minimum price from 50p per unit to 65p per unit. Following careful consideration of the available evidence from the evaluation of the minimum unit price policy, the continued scale of alcohol-related harms, the price distribution of alcohol sold in Scotland, and the potential benefits accrued from different minimum unit prices, the Scottish Government considers a 65p per unit minimum price is an appropriate response to tackling alcohol related harm as part of a range of measures across prevention and treatment of harm in Scotland. It strikes a reasonable balance between public health and social benefits and intervention in the market. This section examines the costs and benefits of this option in more detail.
5.1 Estimating the impact of minimum unit pricing at the proposed price: Evaluation and the Sheffield Model
There are two key sources of evidence to estimate the impact of the continuation of minimum unit pricing at the new proposed price level. The first is the Public Health Scotland evaluation of the policy for the period following its introduction at 50ppu in 2018. The second is updated modelling from the University of Sheffield which modelled the potential impact of amending the price level of MUP.
The Sheffield Model has been carried out using a 2019 baseline year for modelling the change in the level of MUP. This was done to avoid the modelling results being impacted by the significant shifts in behaviours during the pandemic.
To take account of price inflation since 2019 the modelled MUP threshold has been converted to current prices using the Consumer Price Index including housing costs (CPIH). The results of the model as presented henceforth are in relation to these updated prices.
The driver for the continuation of MUP with an updated price remains the protection and improvement of public health.
Prior to the policy's introduction in 2018 it was noted that the effects of price increases may not be disadvantageous to the alcohol industry as a whole, because the estimated decrease in sales volume may be more than offset by the unit price increase, leading to overall increases in revenue. This has subsequently been found to be the case - the evaluation of MUP found there to be no strong evidence of adverse impact to the industry as a whole from the introduction of the policy.
Also as expected, the impacts of the policy were not felt uniformly across the industry, and this will likely again be the case in the event of continuation of MUP at a proposed price of 65ppu.
When MUP was first proposed it was not possible to present the costs and benefits against a situation in which MUP did not exist. Given MUP has now been in place for over 5 years it is more challenging to select/model the counter-factual against which to compare the benefits.
This is particularly the case because MUP is a price-based policy which has used a fixed cash price since its introduction, its impact will decrease over time as the real value of its level decreases due to inflation. This has clearly been amplified due to the record levels of inflation over the previous two years.
Where possible, the costs and benefits of the proposed level of MUP are compared to the impacts which were seen/expected upon its introduction in 2018. While the Sheffield Model is based on a 2019 intervention, given this was a year of relatively low inflation we consider we can approximate the results as being broadly comparable to the impacts upon MUPs introduction in 2018.
The Sheffield Model also presents a "remove MUP" scenario, which provides an indication of the impacts of the policy at the preferred price relative to a scenario in which the policy was removed.
The results of the modelling have been used to provide consistency and allow comparison across different options, but should be considered alongside the results of the MUP evaluation, which reported on the evidenced impact of the policy's introduction.
The modelling results are presented across a 20-year policy span, with annual or cumulative figures noted where appropriate. The modelling also assumes that the level of MUP would remain constant in real terms over the 20-year period.
5.2 Benefits
Benefits to consumers
Health
A minimum unit price of 65ppu now is higher in real terms than the price of 50ppu when MUP was introduced – i.e. when taking into account inflation.
It is expected that the preferred price would therefore result in increased health benefits over those experienced when MUP was introduced.
The PHS evaluation estimated that MUPs introduction at 50ppu in 2018 reduced deaths directly caused by alcohol consumption by 13.4% and hospital admissions by 4.1%. The estimated reductions were greatest for men and in those living in the most deprived areas of Scotland.
They also found no consistent evidence of MUP's impact on other health outcomes, either positive or negative.
The Sheffield Model compares the results of different MUP levels to a counterfactual case of 50ppu in 2019 (60ppu in 2023). This means the central modelling results for a price of 65ppu in 2023 prices are reported broadly relative to its original impacts, although noting that MUP had been in place for one year prior to the modelling. The results are also shown compared to the scenario of removing MUP, in effect representing the absolute impacts of the policy at 65ppu.
Minimum unit pricing is aimed at reducing the number of hazardous and harmful drinkers. Table 34 shows the modelling estimates that a 65ppu MUP reduces the number of harmful drinkers by almost 11,403, or 8%, compared to the control group, and by 38,244, or 26.7% compared with MUP being removed. The number of hazardous drinkers is estimated to be 26,426 fewer with MUP at 65ppu compared to its removal.
| Comparison scenario | 50ppu in 2019 (60ppu in 2023 prices) | Compared to Removal of MUP | ||||
|---|---|---|---|---|---|---|
| Moderate | Hazardous | Harmful | Moderate | Hazardous | Harmful | |
| Absolute change | +27,146 | -15,742 | -11,403 | +64,671 | -26,426 | -38,244 |
| Relative change | +1.1% | -1.8% | -8.0% | +2.6% | -3.0% | -26.7% |
The reduction in consumption and fewer hazardous and harmful drinkers as a result of the policy is reflected in improved health outcomes.
Table 35 shows the change in absolute deaths and alcohol-specific deaths compared to the control group. It shows in the first year, all cause deaths are estimated to be reduced by 60 compared to the control group of 50ppu in 2019 (34 fewer alcohol specific deaths), and an estimated 191 fewer deaths in the first year than if MUP was removed, including 110 fewer alcohol specific deaths.
| Comparison scenario | 50ppu in 2019 (60ppu in 2023 prices) | Compared to Removal of MUP | ||||
|---|---|---|---|---|---|---|
| Year 1 | Cumulative 5 years | Cumulative 20 years | Year 1 | Cumulative 5 years | Cumulative 20 years | |
| Absolute change in deaths (all-cause) | -60 | -363 | -1,003 | -191 | -1,053 | -2,672 |
| Relative change in deaths (all-cause) per 100,000 person years | -1.4 | -1.7 | -1.2 | -4.4 | -4.9 | -3.2 |
| Absolute change in deaths (alcohol-specific) | -34 | -214 | -802 | -110 | -646 | -2,099 |
| Relative change in deaths (alcohol-specific) | -4.00% | -5.40% | -5.00% | -11.80% | -14.70% | -12.10% |
*change per 100,000 person years versus control
To note, that the modelled results for periods past the first year of the policy assume that the MUP would be raised each year in line with inflation to keep it constant in real terms.
| Comparison scenario | 50ppu in 2019 (60ppu in 2023 prices) | Removal of MUP | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SIMD Q1 | SIMD Q2 | SIMD Q3 | SIMD Q4 | SIMD Q5 | SIMD Q1 | SIMD Q2 | SIMD Q3 | SIMD Q4 | SIMD Q5 | |
| Absolute change in deaths – Year 1 | -5 | -6 | -12 | -15 | -22 | -18 | -22 | -33 | -42 | -77 |
| Relative change in deaths per 100,000 person years – Year 1 | -1 | -1 | -1 | -2 | -3 | -2 | -3 | -3 | -5 | -10 |
*change per 100,000 person years versus control
Table 36 shows that reductions in deaths as a result of the policy are concentrated in the most deprived groups. MUP set at 65ppu in 2023 is estimated to reduce all-cause deaths in the most deprived quintile by 77 in the first year compared to removing the policy. This is an estimated 22 fewer deaths than compared to the control of 50ppu in 2019.
Hospitalisations are expected to show similar results to deaths. Increasing MUP to 65ppu is an increase in real terms, and we would therefore expect reduced hospitalisations compared to the control case, broadly of the impact of when MUP was introduced. The modelling estimates the increase to 65ppu would result in 774 fewer hospital admissions in the first year compared to MUP of 50ppu in 2019.
The absolute impact of the policy is modelled to be a reduction in admissions of 2,525 in the first year compared to the removal of MUP (Table 37).
| Comparison scenario | 50ppu in 2019 (60ppu in 2023 prices) | Compared to Removal of MUP | ||||
|---|---|---|---|---|---|---|
| Year 1 | Cumulative 5 years | Full 20 years | Year 1 | Cumulative 5 years | Full 20 years | |
| Absolute change in hospital admissions | -774 | -4,207 | -13,864 | -2,525 | -12,658 | -36,043 |
| Relative change in admissions per 100,000 person years | -18 | -20 | -16 | -59 | -59 | -42 |
Hospital admissions are expected to follow a similar patterns to mortality across SIMD groups. Reductions in hospitalisations as a result of the policy are expected to be substantially larger for the most deprived SIMD quintile, in both absolute and relative terms (Table 38).
| Comparison scenario | 50ppu in 2019 (60ppu in 2023 prices) | Compared to Removal of MUP | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| SIMD Quintile (Q5=most deprived) | SIMD Q1 | SIMD Q2 | SIMD Q3 | SIMD Q4 | SIMD Q5 | SIMD Q1 | SIMD Q2 | SIMD Q3 | SIMD Q4 | SIMD Q5 | |
| Absolute change in admissions– Year 1 | -76 | -80 | -131 | -192 | -296 | -235 | -257 | -381 | -578 | -1075 | |
| Relative change in admissions per 100,000 person years – Year 1 | -8 | -9 | -15 | -23 | -37 | -25 | -29 | -44 | -70 | -134 | |
The Sheffield Model also estimates changes to years of life lost to premature death. These again follow a similar pattern to the mortality results, with the largest impacts of minimum unit pricing being on those in the most deprived SIMD quintile.
Cost savings are associated with a reduction in health harms.
The change in costs to the NHS as a result of mortality and hospitalisations follows the same pattern. Compared to the control group of 50ppu in 2019, a 65ppu minimum unit price in 2023 prices is estimated to lead to savings in NHS costs of £5 million over the first 5 years, rising to £16.4 million over the full 20 year period (undiscounted). In absolute terms, i.e. compared to the removal of MUP, MUP at 65ppu is expected to result in cumulative savings to the NHS of over £15m over the next 5 years, rising to £42.8m over the full 20 year period (undiscounted). Noting the modelling assumes that the MUP level would rise in line with inflation annually.
The PHS evaluation provided monetary estimates of the impacts of reduced health harms estimated in their evaluation. They estimate the social value of wholly attributable deaths averted by MUP to be around £300m per year in 2020 prices, ranging from approximately £134m to £469m (range based on the degree of uncertainty around the estimates of deaths prevented)[77]. They also estimate benefits to society valued in monetary terms arising from partially attributable deaths prevented by MUP of approximately £215.5 million over a year, ranging from approximately £3.6m to £428m.
Similarly, they estimated the value of the prevented hospital admissions estimated in their evaluation. The averted costs for admissions for causes wholly attributable to alcohol were estimated to be approximately £407,000 per year, and for admissions partially attributable to alcohol the estimated costs averted were £483,000 per year.
With additional reductions in heath harms as a result of the increased in the real value of MUP, we would expect to see greater social and economic benefits than those estimated by the PHS evaluation.
Benefits to retailers – off-trade
Minimum unit pricing at 65ppu is estimated to result in increased revenue to the alcohol industry as a whole, compared to both removing MUP and compared to the impact of 50ppu in 2019. However, with the increase in MUP representing an increase in real terms compared to its original value, a larger share of products will be captured by the policy which could increase the potential for variation in how different retailers are impacted (i.e. depending on the share of their sales made up of the products most impacted).
Table 39 shows that, for a minimum unit price of 65ppu, the impact on retailer revenues would be estimated to increase by £4.4m in the first year compared to the impacts at 50ppu in 2019, and estimated to be an increase in retailer revenue (excluding VAT and duty) of around £17.9 million per annum compared to removing MUP.
For the off-trade specifically, retailer revenues are expected to be £16.5m higher in the first year compared to MUP at 50ppu in 2019, and £45.8m higher in the first year with a MUP at 65ppu compared to the removal of MUP.
| Comparison | 50ppu in 2019 (60ppu in 2023 prices) | Compared to Removal of MUP | ||||
|---|---|---|---|---|---|---|
| Off-trade | On-trade | Total | Off-trade | On-trade | Total | |
| Absolute change in retailer revenue | £16.5m | -£12.1m | £4.4m | £45.8m | -£27.9m | £17.9m |
| Relative change in retailer revenue | 2.1% | -0.5% | 0.1% | 5.8% | -1.1% | 0.5% |
These are high-level estimates of revenue changes, and it is important to note that this is revenue and not profit.
The PHS evaluation reports that quantitative analysis of sales data shows an overall increase in the monetary value of off-trade alcohol sales, with increases in sale price compensating for declines in sale volumes for retailers, as predicted in the modelling.
We do not know where change in revenue may accrue, i.e. whether the estimated increases would benefit retailers, wholesalers or producers, or all of them to some extent. The alcohol market is highly segmented, and this makes it particularly difficult to identify potential effects.
Qualitative evidence in the survey was more mixed on revenues and profits to retailers. The PHS evaluation notes that large retailers did not report observing any change in revenue or profits due to MUP, but convenience stores were more likely to have noted a decrease in revenue and profits.
Benefits to retailers – on-trade
On average, on-trade prices are well above a 65ppu minimum price. The average price of a unit of alcohol in the on-trade in 2021 was £2.04 (compared to £0.64 in the on-trade). In 2021, only 15% of alcohol was sold in the on-trade, although this figure was 27% in 2019 prior to the covid pandemic.
The Sheffield Modelling does indicate that switching behaviours, between drink types and where alcohol is consumed, has the potential to result in MUP indirectly impacting on on-trade revenues. As shown above, in comparison to the removal of MUP a 65ppu level is expected to lead to a reduction in on-trade revenues by around £27.9m in the first year. This is a decrease in on-trade revenues of £12.1m in the first year compared to a minimum unit price of 50ppu in 2019.
However, the PHS evaluation found no evidence of any material impacts on the on-trade as a whole as a result of MUP's introduction. With 65ppu being an increase in the price level in real terms, the potential for these modelled impacts on on-trade revenues increases.
Benefits to wholesalers
Wholesalers deal mainly with smaller retailers on a trade to trade basis. Minimum pricing at 65ppu is estimated to result in increased revenue to the alcohol industry as a whole, compared to the both the removal of MUP and relative to when MUP was 50ppu in 2019.
There is uncertainty about the distribution of any increased revenues through the supply chain, including to wholesalers. The PHS evaluation found no quantitative evidence that MUP had a material impact on the wholesale sector (including specialised alcohol wholesale).
Benefits to producers
The direct impact to producers will vary depending on the exposure of their products to prices below the proposed MUP level. There is also the potential for producers of higher priced products to benefit if the increase in the MUP reduces the gap in prices and results in an increase in demand.
These varying impacts on drink types were highlighted in the PHS evaluation, which reported evidence from studies estimating reductions in off-trade sales of spirits, cider and perry but increases in off-trade sales of wine, fortified wine and ready-to-drink spirits. The evaluation found that alcoholic drink categories that had the greatest price increases following MUP's introduction (namely cider, perry and own-brand spirits) tended to see greater reductions in sales; whereas it appeared that alcoholic drink categories that exhibited smaller price increases or maintained their price were more likely to maintain or slightly increase their sales.
Benefits to central and local government and public bodies
As outlined above, compared to removing MUP there will be continued savings through reduced health harms reducing pressure on the NHS, and further savings beyond those seen with 50ppu in 2019.
The theory of change for MUP has identified the potential for further benefits arising from reduced consumption, such as decreased crime and improved productivity, which could reduce police costs or increase tax revenues. While no evidence of these was identified in the PHS evaluation of MUPs introduction, increasing MUP in real terms does increase the potential for these to arise, but there is significant uncertainty.
5.3 Costs
Costs to consumers
While minimum unit pricing increases the price of the cheapest alcohol, it also reduces the level of consumption on average. At the population level, this reduced demand is expected to outweigh the increased price and therefore is expected to lead to overall falls in expenditure on alcohol compared to the removal of MUP and the control group of MUP at 50ppu in 2019 (Table 40 to Table 43).
| 50ppu in 2019 (60ppu in 2023 prices) | Removal of MUP | |
|---|---|---|
| All drinkers | All drinkers | |
| Absolute change in weekly consumption (units) | -0.33 | -0.98 |
| Relative change in consumption | -2.7% | -8.1% |
| 50ppu in 2019 (60ppu in 2023 prices) | Removal of MUP | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SIMD Q1 | SIMD Q2 | SIMD Q3 | SIMD Q4 | SIMD Q5 | SIMD Q1 | SIMD Q2 | SIMD Q3 | SIMD Q4 | SIMD Q5 | |
| Absolute change in weekly consumption (units) | -0.33 | -0.26 | -0.33 | -0.35 | -0.39 | -0.97 | -0.78 | -0.99 | -1.03 | -1.18 |
| Relative change in consumption | -2.4% | -2.3% | -2.7% | -3.1% | -3.4% | -7.1% | -6.9% | -8.1% | -9.1% | -10.3% |
Consumer spending is estimated to fall with 65ppu MUP compared to the control group of 50ppu in 2019, by £0.12 per week on average (or 0.4%). Compared to removing MUP, the Sheffield Model estimates this spending on alcohol will be lower on average by £0.28 per week per drinker, or 1%.
| 50ppu in 2019 (60ppu in 2023 prices) | Removal of MUP | |
|---|---|---|
| All drinkers | All drinkers | |
| Absolute change in weekly spending | -£0.12 | -£0.28 |
| Relative change in spending | -0.4% | -1.0% |
| 50ppu in 2019 (60ppu in 2023 prices) | Removal of MUP | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SIMD Q1 | SIMD Q2 | SIMD Q3 | SIMD Q4 | SIMD Q5 | SIMD Q1 | SIMD Q2 | SIMD Q3 | SIMD Q4 | SIMD Q5 | |
| Absolute change in weekly spending | -£0.11 | -£0.08 | -£0.11 | -£0.13 | -£0.14 | -£0.25 | -£0.19 | -£0.27 | -£0.31 | -£0.37 |
| Relative change in spending | -0.4% | -0.3% | -0.4% | -0.5% | -0.6% | -0.9% | -0.7% | -1.0% | -1.2% | -1.5% |
The biggest falls in spending as a result of the policy are expected to be in the most deprived group, which is modelled to be £0.37 per week on average lower, or 1.5%, compared to the removal of MUP. The least deprived quintile spending is forecast to be £0.25 per week lower, or 0.9% at 65ppu compared to the removal of MUP.
The response to price changes by consumers is not uniform across the population. The evaluation of MUP found some evidence of increased harms as a result of the increase in spending on alcohol, particularly for those with alcohol dependence on low incomes, with evidence it led to creating increased financial strain, leading them to employ a number of existing strategies such as reducing spending on non-alcohol essentials including food and paying bills, seeking help from charities or borrowing money[78].
The risk of these adverse impacts increases as the MUP level increases in real terms to 65ppu. This requires careful mitigation through consideration of implementation time for any new price and support for services in preparation of this potential increased risk.
Economic inefficiencies from market distortions
A minimum unit price for alcohol results in a loss of economic efficiency – referred to as a deadweight loss. This occurs when the market equilibrium for a good or service is not achieved, and results in a lower combined utility for consumers and surplus for consumers.
In the case of minimum alcohol pricing, a deadweight loss arises because the price floor prevents some transactions from taking place that would have been mutually beneficial to buyers and sellers. This is because some consumers who would be willing to pay for goods below the minimum price for alcohol are unable to do so, and some sellers who would be willing to sell alcohol below the minimum price are unable to find buyers.
The size of the deadweight loss depends on how responsive consumers and producers are to changes in price – estimates for demand price elasticities, and how far the minimum unit price is from the equilibrium price are set out in this BRIA. The Scottish Government are not able to quantify the size of deadweight loss, and any reduction in consumer welfare from reduced alcohol consumption and higher prices needs to be considered against the positive impact on social welfare.
Costs to retailers – off-trade
The PHS evaluation concluded that the evidence on the impact of the post MUP changes in price and sales on revenues of retailers and producers is mixed. Quantitative analysis of sales data shows an overall increase in the monetary value of off-trade alcohol sales, with increases in sale price compensating for declines in sale volumes for retailers, while the effect on producers' revenues was negative, but was considered by some, but not all, interviewees to be small.
Large retailers did not report any change in revenue or profits due to MUP, but convenience stores were more likely to have noted a decrease in revenue and profits, particularly if they previously relied on high-strength, low-cost alcohol products.
Implementation costs
There will be minor operational costs to retailers associated with the change in the minimum unit price level. However these costs, including re-pricing of products, shelf tickets and price lists, will be significantly lower than costs associated with the policy's original introduction. The evaluation, and feedback from business during consultation to date, has highlighted that MUP quickly became "business as usual" in the industry. Given it is only a change in the level of MUP now being proposed, we would not expect retailers would have to offer any training to ensure staff are familiar with the legislation or any other additional familiarisation or adaption costs.
Those retailers that operate on a UK-wide basis have already had to ensure they have a different pricing and promotion regime operating in Scotland.
Changes in alcohol duty imposed by the UK Government also result in the need to re-price, and often at very short notice. This is true for the reforms which the UK Government introduced in August of 2023.
Cross-border sales
MUP results in a price differential between the cheapest alcohol products in Scotland and England. The greater this price differential, the greater the incentives for cross-border purchasing as the savings make up for travel and time costs.
The MUP evaluation found some evidence of cross-border trade of alcohol, but reported that this was only on a small-scale, with cross-border purchasing most likely to be conducted by the small proportion of people in Scotland living near the border with England. The evaluation concluded that while there is unlikely to have been a substantial impact on population-level consumption as a result of cross-border purchasing, it may have been the case that there was less of an impact of the policy for those living nearest to the border.
The final evaluation noted qualitative research which found no evidence of a substantial impact on profitability, turnover or employment of retailers in Scotland close to the border, which was supported by quantitative analysis of turnover of off-trade licenses which found no evidence of a difference in patterns for retailers either side of the border.
Wider Social Harms
Increases in the price of cheap alcohol has the potential to lead to unintended harmful consequences, such as increased crime to fund purchasing, switching to illicit drugs or non-beverage or illicit alcohol, or nutritional impacts.
However, the PHS evaluation noted there is a lack of evidence of MUP having an impact on social outcomes at a population level. The report noted the following:
- For people who already used illicit drugs before MUP was implemented, quantitative analyses from four studies found no effect of MUP on illicit drug behaviours and, while there were qualitative reports of increased illicit drug use, these were often difficult to attribute to MUP.
- There was no evidence that participants who did not use illicit drugs prior to MUP began using them after implementation, meaning there was no suggestion that people started to use illicit drugs because alcohol increased in price. There was little indication of increased use of non-beverage or illicit alcohol.
- Quantitative studies on crime (including drug crime), switching to non-beverage alcohol, spend on food and the nutritional value of food all found no positive or negative impact, and quantitative evidence on the impact of road traffic accidents was mixed.
- There were some qualitative insights that suggest that for some drinkers, especially those with probable alcohol dependence and particularly the financially vulnerable, existing social harms, particularly those related to financial pressures, may have been exacerbated, but there is no evidence of those experiences being prevalent or typical. It is not possible to say whether children and young people in families affected by alcohol use were positively or negatively affected.
With 65ppu represents a real terms increase in the level of MUP compared to when it was introduced, and the falls in real incomes, particularly amongst the most deprived groups, over the last two years, the potential for these wider social harms to emerge may increase.
Costs to retailers – on-trade
The Scottish Ministers' proposed minimum unit price of 65p falls well short of the average price of £2.04 per unit in on-trade premises in 2021, so any negative impact on the on-trade is likely to be marginal. The alcohol market is complex and changes in price induce changes in behaviour including switching between products and between on and off-sales.
In comparison to the removal of MUP a 65ppu level is expected to lead to a reduction in on-trade revenues by around £27.9m in the first year.
However, the PHS evaluation found very little evidence of any change to per-adult sales of alcohol through the on-trade following the introduction of MUP. It noted there was little or no significant change in on-trade sales and producers reporting no change in the market share of the on-trade in response to MUP.
Costs to wholesalers
Wholesalers deal mainly with smaller retailers on a trade to trade basis. Minimum pricing at 65ppu is estimated to result in increased revenue to the alcohol industry as a whole, compared to the removal of MUP and compared to when it was first introduced.
There is uncertainty around the distribution of any increased revenues through the supply chain, including wholesalers. The PHS evaluation found no quantitative evidence that MUP had a material impact on the wholesale sector (including specialised alcohol wholesale).
Costs to producers
The PHS MUP evaluation noted that:
- quantitative analysis of sales data shows an overall increase in the monetary value of off-trade alcohol sales, with increases in sale price compensating for declines in sale volumes for retailers,
- The 2019 economic impact study noted that effect on producers' revenues was negative, but the impact was considered by some, but not all, interviewees to be small
- There was limited evidence that any potential increase in revenue for retailers had been passed on to producers
While at the industry level it is not expected that there would be an adverse impact from increasing the level of MUP in real terms – with modelling suggesting an increase in retailer revenues overall - there will likely be distributional impacts, with some producers benefiting from the change in the MUP and others being negatively impacted.
Producers that are likely to be most affected by a minimum price are those with a significant volume of products which routinely retail below 65p per unit.
It is estimated that in 2022 64% of alcoholic beverages (by volume of alcohol) were sold below 65ppu[79]. This share will likely be lower by the time that the MUP level increase is enacted due to subsequent inflation, including the potential impact on prices of UK Government duty rises on 1 August 2023.
Spirits
Table 44 shows the share of different spirits sold below 65ppu in the off-trade in 2022. This highlights that Vodka is most likely to be directly impacted by a minimum unit price of 65ppu, with an estimated 92% of sales by volume below 65ppu in 2022. This is followed by rum and gin, at 76% and 78% respectively. The estimated share of these three spirit types sold below 65ppu in 2022 is higher than the share sold below 50ppu in 2017 ahead of the introduction of MUP.
The share of whisky sold below 65ppu in 2022 is estimated to be smaller at 61%. This is also a similar share to that sold below 50ppu in 2017 ahead of MUPs introduction.
| Share of off-trade sales sold below 65ppu in 2022 (by volume) | Share of off-trade sales sold below 50ppu in 2017 (by volume) | |
|---|---|---|
| Vodka | 92% | 69% |
| Rum | 78% | 54% |
| Gin | 76% | 56% |
| Whisky | 61% | 58% |
| Other spirits | 26% | 26% |
The high share of vodka sold below 65ppu is reflected at the product level when considering spirits from the top-50 selling off-trade brands in Scotland (by volume). These are shown in Table 45 alongside their estimated average unit price in 2022.
| Sales Rank in Top 50 Brands | Product (Brand) | Average price per unit, £ (2022) | Average price per unit, £ (2017-18)[80] |
|---|---|---|---|
| 1 | Smirnoff | 0.55 | 0.49 |
| 6 | Glens | 0.54 | 0.49 |
| 7 | The Famous Grouse | 0.54 | 0.48 |
| 9 | Gordons | 0.56 | 0.48 |
| 10 | Whyte & Mackay | 0.52 | 0.47 |
| 13 | Captain Morgan Original Spiced | 0.51 | 0.53 |
| 17 | Smirnoff Red Label | 0.56 | 0.49 |
| 18 | Grants Vodka | 0.55 | |
| 21 | Bacardi | 0.54 | 0.47 |
| 25 | Glen Catrine | 0.52 | |
| 29 | Gordons Premium Pink | 0.58 | |
| 31 | Absolut Vodka Blue Label | 0.58 | |
| 41 | Bombay Sapphire | 0.60 | |
| 43 | Bells Scotch Whisky | 0.52 | 0.47 |
| 48 | Jack Daniels Tennessee | 0.63 | 0.66 |
It is estimated that all of the top selling spirits sold for below 65ppu on average in 2022 in the Scottish off-trade. Where 2017-18 average prices are available, it was predominately the case that popular spirits also sold below 50ppu ahead of the introduction of MUP, but the difference between their average price and the minimum unit price was smaller.
Beer and lager
In 2022, it is estimated that three quarters (76%) of beer and lager in the Scottish off-trade was sold below 65ppu by volume. This is significantly higher than the corresponding share in 2017 ahead of the introduction of MUP at 50ppu of an estimated 51%. (Table 46).
| Share of off-trade sales sold below 65ppu in 2022 (by volume) | Share of off-trade sales sold below 50ppu in 2017 (by volume) | |
|---|---|---|
| Beer and lager | 76% | 51% |
There were 16 beers and lagers in the top 50 selling off-trade brands in Scotland in 2022. Of these 10 had an average price below 65ppu in 2022. The average price in 2017-18 was below 50ppu for a number of the beer and lager brands for which estimated data is available (5 out of 14, Table 47).
| Sales Rank in Top 50 Brands | Product (Brand) | Average price per unit, £ (2022) | Average price per unit, £ (2017-18) |
|---|---|---|---|
| 2 | Tennents | 0.56 | 0.66 |
| 3 | Budweiser | 0.55 | 0.50 |
| 4 | Stella Artois | 0.58 | 0.46 |
| 11 | Corona Extra | 0.67 | 0.70 |
| 16 | Birra Moretti | 0.74 | |
| 19 | Heineken | 0.66 | 0.56 |
| 20 | Fosters | 0.60 | 0.46 |
| 21 | San Miguel | 0.59 | 0.54 |
| 22 | Brewdog | 0.74 | 0.76 |
| 27 | Guinness | 0.67 | 0.57 |
| 28 | Peroni Nastro Azzurro | 0.77 | 0.77 |
| 35 | Mcewans | 0.54 | 0.48 |
| 39 | Kronenbourg 1664 | 0.52 | 0.47 |
| 42 | Coors Light | 0.54 | 0.50 |
| 48 | Carling | 0.52 | 0.39 |
| 49 | Innis & Gunn | 0.60 |
Of the top selling beer and lager brands, the majority are from multi-brand owners. For instance, Budweiser, Stella Artois, Corona Extra and Bud Light are owned by Anheuser-Busch InBev; Birra Moretti, Heineken, Kronenbourg 1664 are owned by Heineken; Fosters, and San Miguel are owned by the Carlsberg Group.
Cider and perry
Three quarters (75%) of cider and perry off-trade sales are estimated to have been below 65ppu in 2022. This is only slightly higher than the share of sales below 50ppu in 2017 (Table 48).
| Share of off-trade sales sold below 65ppu in 2022 (by volume) | Share of off-trade sales sold below 50ppu in 2017 (by volume) | |
|---|---|---|
| Cider and perry | 75% | 70% |
There were four ciders in the top 50 selling off-trade brands in 2022. Three of these had a unit price below 65ppu in 2022 (Table 49).
| Sales Rank in Top 50 Brands | Product (Brand) | Average price per unit, £ (2022) | Average price per unit, £ (2017-18) |
|---|---|---|---|
| 5 | Strongbow | 0.57 | 0.38 |
| 24 | Kopparberg | 0.92 | 0.91 |
| 36 | Magners | 0.54 | 0.45 |
| 50 | Thatchers | 0.61 |
Wine
Around a half of red and white wine (54% and 49% respectively) and a quarter of rose wines (27%) sold below 65ppu in 2022. This compares to around 15% of table wines' sold below 50ppu ahead of the introduction of MUP, but caution should be used in the comparison due to differences in categorisation across datasets.
Only a negligible fraction of sparkling wine sold below 65ppu in 2022, similar to ahead of the introduction of MUP (Table 50).
| Share of off-trade sales sold below 65ppu in 2022 (by volume) | Share of off-trade sales sold below 50ppu in 2017 (by volume) | |
|---|---|---|
| Red Wine | 54% | 15%[81] |
| White Wine | 49% | |
| Rose Wine | 27% | |
| Sparkling wine | 4% | 2% |
There are ten wines in the top 50 selling brands. Four of these sold for below 65ppu on average in 2022 (Table 51).
| Sales Rank in Top 50 Brands | Product (Brand) | Average price per unit, £ (2022) | Average price per unit, £ (2017-18) |
|---|---|---|---|
| 12 | Barefoot | 0.694 | |
| 14 | Yellow Tail | 0.71 | |
| 15 | Casillero Del Diablo | 0.70 | 0.66 |
| 26 | I Heart | 0.728 | 0.67 |
| 32 | Trivento | 0.663 | |
| 33 | 19 Crimes | 0.699 | |
| 37 | Isla Negra Seashore | 0.584 | 0.63 |
| 38 | Jam Shed | 0.641 | |
| 40 | Blossom Hill | 0.694 | |
| 44 | Hardys Varietal Range | 0.612 | 0.59 |
| 45 | Hardys Stamp | 0.564 |
Fortified Wines and Ready to Drink spirits
Fortified wines and ready to drink spirits are not expected to be impacted significantly by the increase in MUP to 65ppu, with only a small share sold below 65ppu in 2022 (Table 52).
| Share of off-trade sales sold below 65ppu in 2022 (by volume) | Share of off-trade sales sold below 50ppu in 2017 (by volume) | |
|---|---|---|
| Fortified Wine | 16% | 21% |
| Ready to Drink | 6% | 1% |
The two brands in the top 50 selling off-trade brands, Buckfast Tonic Wine and Dragon Soop, sold for around 75ppu in 2022, well above the proposed minimum unit price (Table 53).
| Sales Rank in Top 50 Brands | Product (Brand) | Average price per unit, £ (2022) | Average price per unit, £ (2017-18) |
|---|---|---|---|
| 8 | Buckfast Tonic Wine | 0.76 | 0.67 |
| 30 | Dragon Soop | 0.75 | 0.82 |
Alcohol duties
A new UK duty system was introduced on 1 August 2023. The UK Government have stated it is intended to introduce greater simplicity, with comparable rates for all products at the same strength with the exceptions of beer and cider between 3.5% and 8.4% ABV, and the more consistent application of the principle that products at higher alcohol strengths should attract higher rates of duty, as they are associated with greater levels of harm.
HMRC estimates of the impact of the new duty rates on individuals, households and families are reproduced below[82]. At the current VAT rate, and assuming 100% pass through wherever alcohol is purchased, from 1 August 2023 the tax on a typical:
- 4% ABV pint of draught beer will be 0 pence higher
- 4% ABV 500ml bottle of non-draught beer will be 5 pence higher
- 5% ABV pint of draught cider will be 2 pence higher
- 5% ABV 500ml bottle of non-draught cider will be 5 pence higher
- 40% ABV 25ml serving of whisky will be 3 pence higher
- 5.4% ABV 250ml can of spirits-based RTD will be 6 pence lower
- 11% ABV 250ml glass of still wine will be 5 pence higher
The duty changes are estimated to bring a large reduction in duty rates for RTDs (pre-mixed drinks such as canned gin and tonic or alcopops), although these represent a small overall proportion of alcohol consumption in Scotland. Wine makes up a much greater proportion of the alcohol market and the duty reform is estimated to lead to a 12.2% increase in wine duty per unit in the off-trade and a 9.5% increase in the on-trade. This difference, which is also behind the on-trade specific reductions to beer and cider duty in the on-trade is the product of the 'draught relief' system. The net effect of these reforms is a small (2.5%) increase in average duty rates per unit.
The options section highlighted that the duty reforms have only a minor impact on the equivalent levels of duties required to achieve the same health benefits as MUP, and therefore do not fundamentally impact the assessment of the effectiveness of MUP as a policy at our preferred price.
In terms of the market impact, increases in duty have the potential to lower the market distortions resulting from MUP, by shifting the price distribution upwards (to the right) and therefore lowering the share of products directly impacted by the minimum unit price.
However, there is uncertainty as to the extent to which duty rates are passed on to consumers, particularly for the cheapest products. For instance there is evidence alcohol retailers in the UK appear to respond to increases in alcohol tax by undershifting their cheaper products (raising prices below the level of the tax increase) and overshifting their more expensive products (raising prices beyond the level of the tax increase).[83]
Jobs
The PHS evaluation did not find any quantitative evidence of changes in employment at the industry level following the introduction of MUP. Similarly, from qualitative interviews in the economic impact study, no respondent reported any changes in employment or facilities owing to MUP.
Off-sales market: product range
Scottish consumers have a wide range of alcohol products available to them. These are sourced across a number of countries worldwide and, as shown by the sales data, cover a range of prices.
The PHS evaluation noted that while there was no evidence of all the variants of any product or brand disappearing completely following the introduction of MUP, there was some evidence that some retailers delisted larger sizes of brands that had experienced the greatest price increases post MUP implementation.
The evaluation also noted:
- there is quantitative evidence that MUP was associated with an increase in purchasing of low- and no-alcohol beer and cider, relative to higher-strength beer and cider with a lower alcohol content, while purchases of the high-alcohol-content versions decreased.
- There is qualitative evidence that smaller container and multipack sizes were introduced in some drink categories.
- The evaluation found evidence that sales of larger sizes of containers and multipacks of alcohol products reduced after MUP was introduced. These decreases were particularly noticeable for sales of cider in containers of 1000ml or larger (-61.3%), and sales of multipacks with 12 or more items (-68.4%).
The evaluation noted that changes to products may have been limited by the relatively small size of the Scottish market for UK and multi-national firms.
While there is large uncertainty, with a minimum unit price of 65ppu an increase in real terms compared to 50ppu when MUP was introduced, there is an increase in the potential for retailers and products to de-list certain products if they no longer become competitive at their new price level.
Costs to local government and public bodies
Compliance with MUP has been high since its introduction. For instance, the PHS evaluation notes "there is strong quantitative evidence that sales of alcohol below £0.50 per unit largely disappeared following the implementation of MUP. There is qualitative evidence that retailer compliance with the legislation was high and had become standard practice".
It is expected that compliance remains high following the increase in the level of MUP and therefore would not expect any significant cost increases in enforcement.
Costs to central government
The Sheffield Model estimates the change in duty and tax revenue to the UK Government (Table 54).
| 50ppu in 2019 (60ppu in 2023 prices) | Removal of MUP | |||||
|---|---|---|---|---|---|---|
| Off-trade | On-trade | Total | Off-trade | On-trade | Total | |
| Absolute change in duty and VAT revenue | -£21.4m | -£4.4m | -£25.7m | -£59.2m | -£10.2m | -£69.3m |
| Relative change in duty and VAT revenue | -2.3% | -0.5% | -1.4% | -6.4% | -1.2% | -3.8% |
5.4 Summary of costs and benefits
This section has set out a number of the potential costs and benefits of a minimum unit price for alcohol at 65ppu. The results are presented in comparison to the impacts of when the policy was introduced at a cash price of 50ppu (modelling uses 2019 baseline) to give an overview of the potential impact of raising the level of MUP in cash terms specifically. Where possible the results are also presented in comparison of the scenario of removing MUP to give an estimate of the absolute impact of the policy.
It is challenging to quantify – i.e. put a precise monetary value on – the majority of the costs and benefits identified. Where efforts have been made to quantify the impacts, it should be noted that these are estimates and are often presented at the population or industry level. In practice, there will be large variations in how different individuals and businesses are impacted. These potential differences are discussed where possible but are inherently uncertain, including as a result of commercial sensitives across the industry limiting our understanding of how impacts are felt across the supply chain.
With MUP being a price based policy, the scale of these analytical challenges has been amplified by pace of inflation over the previous two years during the cost of living crisis. The modelling underpinning a number of the impacts of MUP from the University of Sheffield has necessarily had to be interpreted and presented in this impact assessment following adjustments for inflation. However, price changes across different goods and services have not been uniform, and their impacts have been felt differently across households. Results should therefore be considered in the context of increased uncertainty.
While acknowledging the uncertainties, it is clear that the economic and social benefits from the reduction in health harms are significant. In terms of the potential impact from MUP, this is demonstrated in the results from the PHS evaluation estimating the benefits in monetary terms of the estimated reduction in mortality and hospitalisations brough about by MUP. While accepting the limitations set out above, based on the evidence available following MUPs introduction it is challenging to foresee a situation in which the costs could outweigh these social benefits under our preferred price which is modelled to increase the reductions in alcohol related health harms even further.
This BRIA provides a comparison of the key modelled impacts across different MUP levels, relative to the control case of MUPs impact when 50ppu in 2019. Table 55 summarises the benefits and costs of the preferred option of 65ppu in current prices.
Table 55: Summary costs and benefits of 65ppu MUP
Benefits of increasing the MUP to 65ppu
Increasing MUP to 65ppu is an increase in real terms value of the minimum price compared to when it was first introduced. i.e. when taking into account inflation in the intervening period. We would therefore expect the public health benefits to be greater than when the policy was first introduced.
PHS evaluation includes estimates that around 150 deaths, and around 400 hospital admissions, wholly attributable to alcohol consumption, were averted each year due to MUP. The estimated reductions were greatest for men and in those living in the most deprived areas of Scotland.
PHS evaluation estimates that the introduction of MUP led to:
- The social value of wholly attributable deaths averted by MUP to be around £300m per year (ranging from approx £134m to £469m)
- The averted costs for admissions for causes wholly attributable to alcohol were estimated to be approximately £407,000 per year.
- 60 fewer all-cause deaths in the first year. The majority of these being in the most deprived groups.
- 774 fewer hospital admissions in the first year.
- 11,403 fewer harmful drinkers, and 15,742 fewer hazardous drinkers.
- The benefits, on average, are felt most greatly in the most deprived groups.
- Cumulative savings to the NHS of £5m over the next 5 years, undiscounted (assuming MUP was raised in line with inflation annually)
Costs of increasing the MUP to 65ppu
Increasing MUP to 65ppu is an increase in real terms value of the minimum price compared to when it was first introduced. i.e. when taking into account inflation in the intervening period. We would therefore expect the potential costs to larger compared to when the policy was first introduced.
Increase in overall share of off-trade products directly impacted by the Minimum Unit Price, compared to when the policy was introduced. (64% of sales in off-trade below 65ppu in 2022 by volume, compared to 45% of off-sales below 50ppu in 2017).
While we would not expect any major adverse impacts to the alcohol industry overall (with retailer revenues estimated to increase overall) , we would expect continued distributional impacts from MUP. For instance those producers who have a large share of products below 65ppu most negatively impacted. In the off-trade in 2022, vodka had the highest share (by volume) sold under 65ppu. Retail outlets who have a relatively high share of revenue from the cheapest alcohol products may see fall in revenues.
There will also be some direct implementation costs, such as updating computer systems and shelf labels, with the updated cost, although these are expected to be minor compared to when the policy was first introduced.
While spending on alcohol is estimated to fall on average (due to lower consumption), there remains the potential for price rises to result in increased financial hardship for those drinkers with a low response to price changes – for example those with alcohol dependencies.
In general, the higher the price of MUP the higher the potential of adverse unintended consequences to materialise – such as switching to illicit drugs and alcohol, crime to fund alcohol purchases, cross-border purchasing. There was limited evidence of these adverse impacts developing at 50ppu when the policy was introduced. However, there is uncertainty to which the extent that an increase to 65ppu would drive any such adverse consequences.
Contact
Email: MUP@gov.scot
There is a problem
Thanks for your feedback