Tuesday 31 January 2023

Minimum pricing had a negligible impact on the booze industry

Public Health Scotland has produced the latest part of its minimum pricing evaluation.

To appreciate the full chutzpah of this tweet, you need to know that Colin Angus is a stalwart of the Sheffield University team responsible for the dire modelling that persuaded the Scottish government to go ahead with minimum pricing. (Not that they needed much persuading - they were committed to the policy before there was any evidence for it.)
It's a bit rich for Angus to have a pop at people for making inaccurate predictions about this policy. You only need to scroll to the bottom of the BBC article to be reminded of how bad his own track record is. 

I'm not sure which 'opponents' he's referring to. Perhaps the Scotch Whisky Association? Among economists, the only question was whether minimum pricing would make more profits for the drinks industry. Economic theory suggested that they wouldn't, but it was always a possibility since people are not fully rational and competition is not always perfect.

In the IEA monograph Flaws and Ceilings (2015), I predicted that minimum pricing would increase revenues but have little overall effect on profits.

Drinkers who prefer to purchase budget brands with low production costs will have to buy mid-range brands which have higher production costs. The impact on industry profits is negligible; it is consumers who are denied their first choice preference who lose out.

This seems to have been borne out by today's report which combines sales data with interviews with industry 'stakeholders' and finds that there have been some winners and losers, but no clear trend for the industry in either a negative or positive direction.

Overall effects on retailer profits were felt to be small with increased margins compensating for decreased volumes, with the effects depending on the mix of alcoholic drinks sold pre-MUP.

This should not be surprising since the impact of overall sales volumes has been pretty marginal. A Public Health Scotland report published last November found that per-unit alcohol sales only fell by 1.1% in the first three years of minimum pricing. Scottish consumers are spending more money on drink and consuming nearly as much as they did before. Some heavier drinkers are consuming more.

I can't remember what the Sheffield mob predicted would happen to industry profits after minimum pricing. I don't think they modelled it, but if Colin Angus wants to take it as a win that the booze industry has done fine out of the policy, we should let him. He hasn't had many wins in his career as a soothsayer.

There's only a few months to go before minimum pricing has its fifth birthday and the sunset clause kicks in. After that, the Scottish government has twelve months to prove that it has worked. Objectively, it will be unable to do that because the evidence clearly indicates that it has been a flop, but this is politics so I'm sure they will find a way. I wouldn't be surprised if activist-academics pull a dodgy counterfactual out of their hat at the last minute and claim success, as has just happened with the sugar tax. In fact, I'd put money on it.

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