Thursday, 16 August 2012

Minimum reservations

It’s reported that the Office of Fair Trading has expressed reservations about the potential unintended consequences of the Government’s policy of minimum alcohol pricing. By increasing producers’ and retailers’ margins, it will make alcohol sales more lucrative and thus actually provide more of an incentive to promote alcoholic drinks – something I have pointed out before. It will also set a precedent for the extension of the principle to other sectors, so we will have the perverse situation of the authorities shedding crocodile tears about poverty while at the same time making a substantial proportion of poor people’s real-world shopping baskets dearer.

Of course, the EU competition authorities are still to pronounce on the legality of the scheme – there’s still a long way to go on this one.

2 comments:

  1. A question: Will any “extra” added on to cheaper alcohol to bring it up to "minimum" price levels go to the manufacturers, the retailers or the Government?

    ReplyDelete
  2. A mixture of the three - it's hard to tell in exactly what proportion. The government will get a bit through extra VAT. Don't forget that many retail price promotions are largely funded by manufacturers, not retailers cutting their margins.

    Another point is that, to some extent, the cheap bottom-end products will simply cease to be sold rather than having their prices increased.

    ReplyDelete

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