Thursday, 16 August 2012

We are reminded by the OFT why minimum pricing for alcohol won't work...

Some while ago at the start of the minimum pricing for booze debate, I said it wouldn't work:

The most likely outcome of this surplus reducing investment is promotion targeted at drinkers currently buying alcohol at higher prices – either in pubs or for home consumption. The impact of this would be negative for the pub trade and counter to the expectations of those promoting minimum pricing.

Of course the nannying fussbuckets didn't believe me but now there's some support for this argument from - of all people - the Office of Fair Trading:


Its biggest concern is that shops will have an “incentive” to promote their cheapest ranges of drinks because they will benefit from higher margins on these products.
In evidence to MPs, the watchdog said supermarkets and the drinks industry would gain “additional profit for every unit of low-cost alcohol that they sell”. 

The OFT also looked in some detail at the wider impact of minimum pricing and concluded that there were other significant and negative potential effects - not least of which the domino effect (or 'slippery slope') that the nannying fussbuckets don't believe exists:

By legitimising intervention to control prices in a competitive market, it will be harder for the Government to resist calls for similar measures in other parts of the retail sector in future,” the OFT warned in evidence to the health select committee

So minimum pricing won't work and will encourage further interventions in free markets. And in doing this minimum pricing will - as we've said all along - make ordinary households poorer. It is just a tax on the poor.

....

3 comments:

Anonymous said...

It's not even a 'tax on the poor'. With a tax, there is some gain by the Treasury, which can then be spent in supporting the poor.
Minimum pricing puts almost all the extra charge into the pockets of the producers and retailers, none of which will be 'recycled' to help anyone but the mega-corporations they are.

Snowdon said...

There are many reasons to oppose minimum pricing, but the 'supermarkets will profit from a windfall' may not be one of them. And if supermarkets don't profit, they will have no incentive to sell more cheap alcohol. Eric Crampton has a nice explanation here:

http://offsettingbehaviour.blogspot.co.nz/2012/07/markets-hate-profits.html

The take-home message is that minimum pricing will result in competition for who can make the best cheap alcohol - which will use more resources and wipe out the cheapest alcohol as we now know it.

farmland investment said...

Even Monsieur Hollande has not got around to introducing something this daft yet in France!