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

1. Summary

Scale of the problem (section 5 ^[1] )

1.1 The most recent monitoring report from NHS Health Scotland shows that Scotland continues to have high levels of alcohol-related harm as a result of consuming high levels of alcohol by global standards. In 2016, in Scotland:

• enough alcohol was bought for every adult to substantially exceed the low risk weekly drinking guideline (14 units) ^[2] : 10.5 litres (L) of pure alcohol were sold per adult in Scotland - equivalent to 20.2 units per adult per week;
• 17% more alcohol was bought, per adult, than in England and Wales (equivalent to 1.5L pure alcohol per adult).

1.2. The average consumption of alcohol in a population is directly linked to the amount of harm as evidenced in a number of systematic reviews. The more we drink, the greater the risk of harm ^[3,4,5] . As overall consumption has increased in Scotland, so have the resultant harms.

1.3. As seen in the graph, in 2016/17, the alcohol-related stay rate in general acute hospitals was 685 per 100,000 population - 4.4 times higher than in 1981/82.

Alcohol-related acute hospital stays, Scotland 1981/82–2016/17

1 This refers to the substantive section in the main body of the Business and Regulatory Impact
Assessment ( BRIA)
2 Giles L, Robinson M. Monitoring and Evaluating Scotland’s Alcohol Strategy: Monitoring Report
2017. Edinburgh: NHS Health Scotland; 2017.
3 Nostrom, T. (ed) (2002) Alcohol in Postwar Europe: consumption, drinking patterns, consequences
and policy responses in 15 European countries, Sweden: National Institute of Public Health
4 Babor, T. et al. (2003) Alcohol: No Ordinary Commodity, Oxford. Oxford University Press
5 Anderson, P. and Baumberg, B. (2006) Alcohol in Europe, London: Institute of Alcohol Studies

1.4. In terms of deaths due to alcohol (wholly alcohol-specific causes ^[6] ), although there has been a 26% decrease in mortality rates from 2006 to 2016, rates are far higher than they were in the 1990s and Scotland remains the country of the UK with the highest rate of wholly alcohol-specific deaths ^[7] .

1.5. Alcohol consumption is one of the 3 commonest causes of Chronic Liver Disease ( CLD) ^[8] . The proportion of mortality associated with alcoholic liver disease has increased from 37% in 1979 ^[9] to 82% in 2015.

1.6. There is a strong social gradient associated with alcohol-related harm. By far the greatest harm is experienced by those who live in the most deprived areas:

• in 2016/17 the rate of alcohol-related hospital stays was nearly 9 times higher in the 10% most deprived areas of Scotland compared with the 10% least deprived areas (as measured by the Scottish Index of Multiple Deprivation, SIMD) ^[10] ;
• alcohol-related mortality rates for those aged 45 – 74 years in 2015/16 were 9 times higher in the most deprived areas compared with the least ^[11] ;
• consistent with this, the rates for CLD were almost 6 times higher in the most deprived decile (34 per 100,000 population) compared to the least deprived decile (6 per 100,000).

1.7. Alcohol also contributes to a significant number of additional causes of death and illness: a recent report ^[12] estimated that 1 in 15 deaths in Scotland in 2015 was attributable to alcohol (6.5%); and that more than 1 in 4 of these was due to cancer.

1.8. In terms of other harms:

• in Scotland in 2015, two in five prisoners (41%) ^[13] and 60% of young offenders ^[14] reported being drunk at the time of their offence;
• an Institute of Alcohol Studies report ^[15] concluded that 37% of ambulance time and 25% of Emergency Department Consultants’ time (in the UK) was spent dealing with alcohol-related incidents;
• in 2014 a survey found over half (60%) of people in Scotland believe alcohol is the drug which causes most problems for Scotland as a whole, compared with 19% saying heroin ^[16] . This has increased from 46% in 2004 and 51% in 2007;
• harms are not solely experienced by the drinker – damage can and does occur to family and friends, communities, employers, and Scotland as a whole.

1.9. Alcohol misuse acts as a brake on Scotland’s social and economic growth, costing an estimated £2.5bn to £4.6bn in 2007, with a midpoint estimate of £3.6bn ^[17] . For the midpoint estimate, this includes around £870m in lost productivity, a cost of around £270m to the NHS and around £730m in crime costs.

Scotland’s Alcohol Strategy (section 4)

1.10. The Scottish Government’s alcohol strategy ^[18] sets out over 40 measures aimed at addressing alcohol-related harm, and is closely aligned with the World Health Organization’s Global strategy to reduce harmful use of alcohol ^[19] . The 4 key themes in the strategy are:

• reducing consumption,
• creating positive attitudes and choices,
• supporting families and communities; and
• providing effective support and treatment.

1.11. In recent years the Scottish Government has:

• invested £689m since 2008 in tackling alcohol and drug misuse, with the bulk of this funding (£628m) going directly to NHS Health Boards for use in line with local priorities identified by Alcohol and Drug Partnerships ( ADPs);
• introduced legislation which contains measures such as banning quantity discounts and restricting alcohol promotions in off-sales ^[20] premises;
• through NHS Scotland, delivered over 753,000 alcohol brief interventions ( ABIs) to individuals who are drinking at a level that is endangering their health, to help them cut down;
• published refreshed advice for parents and carers;
• improved substance misuse education in schools through Curriculum for Excellence and improved identification of, and support for, children affected by parental substance misuse ( CAPSM);
• continued to work with industry partners on joint initiatives to promote responsible drinking such as increasing the availability of 125ml wine measures in the on-trade; and encouraged safer drinking environments through initiatives such as Best Bar None;
• committed £92 million to CashBack (since 2008) and other community initiatives, funding community activities and facilities largely for young people;
• increased awareness and improved diagnosis and support for Foetal Alcohol Spectrum Disorder ( FASD) which is the leading known preventable cause of permanent learning disability worldwide. It is caused by maternal use of alcohol during pregnancy;
• reduced the drink driving limit from December 2014 to 50mg of alcohol per 100ml of blood (was previously 80mg);
• tackled alcohol-related violence through initiatives such as Mentors in Violence Prevention programme and Medics Against Violence.

1.12. These actions have built on the tightening of licensing arrangements and the introduction of restrictions in the off-trade. These measures are not being taken in isolation. This comprehensive alcohol strategy is underpinned by wider policy initiatives across health, education, justice and the economy, which seek to address the underlying causes of poor health and social disadvantage.

Alcohol Affordability (section 5)

1.13. Despite these actions, and an economic downturn, Scotland’s consumption and harm remain at unacceptably high levels. The key component missing from Scotland’s alcohol strategy has been an intervention to address the affordability of alcohol, especially alcohol that is cheap relative to its strength. There is strong evidence from a breadth of international studies that levels of alcohol consumption in the population are closely linked to the retail price of alcohol.

Evidence tells us, as alcohol becomes more affordable, consumption increases; as consumption increases, harm increases.

1.14. In the UK, alcohol was around 60% more affordable in 2015 than in 1980, with changes varying by sector and drink types. Since 2000, the average price per unit in the on-trade has increased by 88% whilst the increase in the off-trade is 36%. In 2016, 51% of alcohol sold in the off-trade in Scotland was sold at less than 50p per unit.

Price distribution (%) of off-trade sales in Scotland, 2016, by pure alcohol

1.15. It is possible in Scotland today to exceed the lower risk weekly guideline of 14 units for around £2.50. This is roughly the same as the cost of a cup of coffee from a high street chain.

Why minimum pricing? (sections 5 and 7)

1.16. The sale of alcohol products at retail level in Scotland is subject to a premises (or occasional) licence. Minimum pricing will be a mandatory condition of a premises (or occasional) licence and so, for those holding a premises (or occasional) licence, alcohol will not be permitted to be sold below 50p per unit.

1.17. Scotland’s minimum pricing policy aims to reduce alcohol consumption and, in particular, targets a reduction in consumption of alcohol which is cheap relative to its strength. Minimum pricing achieves this aim because it is both a whole population approach and a targeted intervention – it applies to the whole population, but hazardous and harmful drinkers ^[21] 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.

1.18. Hazardous and harmful drinkers drink proportionately more of the alcohol which is cheap relative to its strength. Those who drink more heavily tend to spend less per unit on their alcohol.

Mean prices paid per unit by beverage type and drinker group

1.19. The measure is able to target this type of product because the minimum price is determined by, and is directly proportionate to, the number of units of pure alcohol in an alcoholic product. Furthermore, it is not possible to absorb the effect of minimum pricing, as might be done with tax, as it results in a mandatory price floor. Minimum pricing per unit is simple to understand, measure and enforce.

1.20. Minimum price will apply equally to both domestic and imported products. It does not discriminate. It may mean that low costs of production are not able to be reflected in retail prices. The minimum price depends on the number of units of alcohol, regardless of the type of alcohol product or the place/country of production. It applies to all holders of a premises (or occasional) licence to retail alcohol in Scotland.

1.21 The policy objective of protecting and improving public health would not be achieved through increasing alcohol duty and taxation for a number of reasons:

• broad taxation increases do not have a targeted effect on the consumption of those most at risk (i.e. hazardous and harmful drinkers) because those that drink the most consume a disproportionate amount of cheaper products;
• substantially more alcohol is consumed in the off-trade than in the on-trade and the price of a unit of alcohol is far less in the off-trade, so a measure that predominantly affects the off-trade is likely to be more effective at tackling alcohol harms (duty affects both on and off-trade);
• an increase in existing duty would impact on all products and all prices, so would have a proportionately greater effect on moderate drinkers than a minimum unit price;
• increases in taxation do not necessarily result in a proportionate, or indeed any, rise in price as increases are not always passed on to the consumer – cross-subsidisation of products can occur, particularly in supermarket multiples;
• a tax increase based on price would disproportionately affect consumers because the prices of high price, relatively low strength products would increase disproportionately to that of the prices of low price, relatively high strength products;
• a scheme of taxation that was levied directly proportionate to the number of units of alcohol per litre, is not compatible with the current system of excise duty under the relevant EU Directives; and
• even if it was possible to formulate a scheme of taxation proportionate to the number of units of alcohol in a product, and to prohibit sales at less than cost plus tax, absorption could not be prevented. This is because cost is susceptible to variation, manipulation and cross-subsidisation, and so the declared cost price might bear little relationship to the actual cost. Taxation would have to be set at a level similar to a minimum price per unit of alcohol in order to achieve the same reduction in harms. This would result in a tax rate across all alcohol products at a considerably higher rate than is currently in place;
• the level of tax increase estimated by the Sheffield Model which would be required to achieve a similar impact on alcohol-related health harms as minimum pricing, would be at an unprecedented level (relative to annual increase in UK duty).

1.22. Minimum pricing has the advantage over taxation in that moderate drinkers (who disproportionately come from low income groups) will be largely or completely unaffected, by virtue of the fact that they drink very little and do not tend to purchase the type of products that will be affected by minimum pricing.

1.23. There are also likely to be significant reductions in health, criminal justice and productivity costs brought about by minimum pricing. The greatest health benefits are estimated to be seen amongst hazardous and harmful drinkers as they disproportionately consume the alcohol most affected and experience most harm.

Minimum pricing, therefore, effectively targets those individuals whose drinking puts them most at risk of harm.

1.24. A form of minimum alcohol pricing has been used in some Canadian provinces since the 1920s and is now in place to some degree in all 10 provinces. Research findings from Canada provide empirical evidence of the effectiveness of minimum pricing in reducing consumption ^[22] , alcohol-related morbidity ^[23] and mortality, where a 10% increase in average minimum price for all alcoholic beverages was associated with a 32% reduction in wholly alcohol attributable deaths ^[24] . More recent studies have found that increases in minimum alcohol prices produce greater impacts on alcohol-related hospitalisations in areas of low income (where the rates of harm are known to be greater ^[25] ) and may contribute to reductions in certain types of crime: in this study ^[26] , alcohol-related traffic and violent crimes carried out by men.

Consultation ^[27] (section 6)

1.25 Following the favourable outcome from the legal challenge, a consultation on the Scottish Ministers’ proposed minimum unit price of 50p was undertaken from 1 December 2017 to 26 January 2018. Out of the total number of responses of 130, 70 responded to the proposed price directly. Of these 70 (48 organisations; 22 individuals), 52 (74.3%) indicated that they are in favour of the 50p minimum unit price. Sixty-four of the 70 respondents (91.4%) who commented on the proposed price are either in favour of a 50p per unit minimum price or a higher minimum unit price. Taking account of a range of factors, including the responses to the consultation, the Scottish Government concludes that a minimum price of 50p per unit provides a proportionate response to tackling alcohol misuse, as it strikes a reasonable balance between public health and social benefits and intervention in the market. Scottish Ministers have confirmed that a minimum price of 50p per unit is what they will propose to the Scottish Parliament be introduced from 1 May 2018.

1.26. Several meetings with key stakeholders took place to discuss issues related to the implementation of minimum pricing both during and following the consultation period. These included retailers, wholesalers, producers, trade bodies, Licensing Standards Officers, Police Scotland.

Anticipated benefits (sections 7 & 8)

1.27. The Scottish Government is introducing minimum pricing for the public health, criminal justice and productivity benefits it will bring for the people of Scotland. After careful consideration, the Scottish Government considers that the proposed minimum price of 50p per unit provides a proportionate response to tackling alcohol-related harm, as it strikes a reasonable balance between public health and social benefits and intervention in the market.

1.28. As this is a novel intervention, modelling was undertaken by the University of Sheffield to estimate the level of benefits. This is a sophisticated 2 stage model: the first stage, econometric and the second, epidemiological. The model estimates that a 50p minimum price per unit will lead to a reduction in consumption and consequent harms. The reduction in consumption is seen disproportionately in those who drink the most – as illustrated below.

Relative change in alcohol consumption per drinker per year for a 50p minimum unit price

1.29 The model estimates:

• an overall fall in consumption of 3.5%, with hazardous drinkers reducing their intake by 2.5% and harmful drinkers by 7% (seen in figure);
• around 60 fewer deaths in the first year after implementation, rising to over 100 fewer deaths per annum in year 10 and a full effect of a reduction of over 120 deaths per year ^[28] (this represents a fall in deaths of over 7%);
• 1,300 fewer hospital admissions in year 1, rising to over 2,000 per annum in year 10 onwards (the equivalent of a fall per annum in alcohol-related admissions of just under 7%);

1.30. It is clear that these impacts are seen most acutely in those who drink the most.

Policy impact on deaths per 100,000 drinkers per year (full effect) for a 50p minimum unit price: absolute change ^[29]

1.31. Earlier iterations of the modelling also estimated a reduction in crime and in the number of days lost to alcohol related absence from work. There may also be a reduction in unemployment amongst those who drink most heavily.

Impact on the market (sections 5 & 8, and Annex A)

1.32. Scottish consumers benefit from a wide range of alcohol products available to them. These are sourced both domestically and across a number of countries worldwide and cover a range of prices. The legislation sets a minimum price based on the unit content of the product and applies to all products equally, and does not discriminate between domestic or imported products. Of those alcohol products which were priced below the proposed minimum unit price in 2016, 40% were spirits (the majority of which are produced in the UK); 18% were wines (which are generally imported); 29% were beer and ales (which vary in their country of origin but with very significant UK production); and 10% were ciders (which are generally domestically produced).

1.33. The legislation does not lay down requirements in relation to the characteristics of alcoholic products; it simply refers to those characteristics (strength and volume) to calculate how many units of alcohol are in a product and then multiplies that by the price per unit, to determine the minimum price of the product when sold at retail level.

1.34. The formula for the calculation is set out in the legislation and is transparent and straightforward to use. This means that both domestic and importing producers remain free to determine the characteristics of alcohol products. Products already on the market will need to comply with minimum pricing, but the legislation does not require the producer to change the characteristics of those products, but nor does it prevent such change if the producer prefers.

1.35. There should be minimal negative impact on innovation for both existing products and the introduction of new products into the market. There may even be an incentive for the market to innovate, with one possible effect of minimum pricing being the production of lower strength alcoholic products. These could be sold at a relatively lower price, because they contain fewer units of alcohol per litre. This would be consistent with the Scottish Government’s aim of drinkers consuming less alcohol, whilst leaving the market free to determine the characteristics of products. New, high-strength products would have to be sold at or above the minimum price, but this would not prevent them from being introduced.

Monitoring and evaluation (section 9)

1.36. This is an innovative and largely untested policy, albeit one based on a wealth of international evidence on the relationship between price, consumption and harm. The legislation therefore includes a provision requiring the Scottish Ministers to evaluate the effect of minimum pricing 5 years after implementation and report to the Scottish Parliament. The Act also provides that minimum pricing will cease to have effect after 6 years unless the Scottish Parliament agrees an order for it to continue.

1.37. NHS Health Scotland, under the MESAS ^[30] programme, has been tasked with leading the evaluation of minimum pricing ^[31] and producing the review report required by the Scottish Parliament. A portfolio of studies has been developed with which to assess the impact of minimum pricing. This includes research to identify any possible displacement/substitution effects; assessing the impact on the alcohol industry; and whether the policy leads to unintended consequences (for example, an increase in cross-border trade or a rise in the use of illicit substances).

Conclusion

1.38. Societal problems require societal solutions. There is clear evidence of the harm caused by the misuse of alcohol. In response to a recent survey, the vast majority (96%) of Scots saw ‘alcohol abuse’ as a problem. Minimum pricing has the strong support of the public health community in Scotland, the police, faith groups, children’s charities, and significant parts of the alcohol industry. Within the Scottish Parliament, the legislation was voted through unopposed.

1.39. The Welsh Assembly is now also seeking to introduce minimum unit pricing for alcohol. Northern Ireland and the Republic of Ireland have also given consideration to the policy. Minimum pricing alone will not address Scotland’s damaging relationship with alcohol but it is a vital part of a wider strategic approach.

1.40. Lord Mance in delivering the decision of the Supreme Court concluded:

Para 63: …“That minimum pricing will involve a market distortion, including of EU trade and competition, is accepted. However, I find it impossible, even if it is appropriate to undertake the exercise at all in this context, to conclude that this can or should be regarded as outweighing the health benefits which are intended by minimum pricing.”