Health Committee - The Government's Alcohol StrategyWritten evidence from the Scotch Whisky Association (GAS 11)

Summary

The focus of the Government’s Alcohol Strategy should be on reducing irresponsible drinking and the number of people drinking excessively. Alcohol policy requires an appropriate balance between regulatory, self–regulatory and non–regulatory measures.

Industry is part of the solution to tackling alcohol-related harm. However, the importance of personal responsibility should be stressed in any strategy.

Alcohol products are marketed responsibly in the UK.

The Scotch Whisky Association opposes minimum unit pricing (MUP):

There is no strong evidence that MUP as a policy will reduce alcohol-related harm. It will not reduce the number of hazardous and harmful drinkers.

EU jurisprudence is clear, minimum pricing has invariably been ruled illegal. It is contrary to EU Single Market rules and international trade law.

Minimum pricing will damage the Scotch Whisky industry in the long term. If brought into law it will establish, for the first time, a barrier of trade on health grounds that will be used by other administrations against Scotch Whisky overseas.

Scotch Whisky is one of the UK’s leading export earners. Its reputation is built on strong brands. Plain packaging would not be in the interest of the balance of trade.

Introduction

1. The Scotch Whisky Association (SWA) is the trade association representing over 90% of the industry; members include distillers, blenders, and bottlers. The UK market is the industry’s 3rd largest market in terms of volume and is often viewed by Governments in key export markets as a guide to how they should regulate Scotch Whisky.

2. The SWA welcomes the opportunity to provide evidence to the Committee’s Inquiry and the opportunity to discuss our submission in more detail with the Committee.

3. Scotch Whisky accounts for nearly 25% of the UK’s total food and drink exports. Export figures for 2011 show that Scotch Whisky earns £134 every second for the UK balance of payments. The value of exports in 2011 £4.2 billion, an increase of 23% on 2010.

4. The industry employs 10,300 workers directly with another 35,000 jobs across the UK supported by the industry. The industry has invested some £1 billion in its production and manufacturing capacity over the last four years. Scotch Whisky sales in the UK contribute between £600 million to £700 million annually in excise duty.1 There are also significant additional tax receipts from VAT, National Insurance, and Corporation Tax.

5. The SWA recognises the need to address alcohol misuse. We are firmly committed to playing our part to reduce alcohol-related harm, promoting a culture where responsible alcohol consumption is the accepted norm and misuse is minimised.

6. We welcome the focus of the Strategy being on irresponsible drinking and reducing the number of people drinking to excess. Alcohol consumption in the UK has fallen by 13% since 2004.2 Weekly consumption has decreased from 14.3 units to 11.5 units. A decline has been seen for both men and women. There has also been decline in the number of men and women drinking above the weekly guidelines. Between 2005 and 2010 for men it fell from 31% to 26% and for women from 21% to 17%.3

Establishing who is responsible within Government for alcohol policy in general, policy coordination across Whitehall and the extent to which the Department of Health should take a leading role

7. Tackling alcohol misuse is an issue that cuts across many Government departments. Any alcohol strategy requires a cross-Government approach. Clear and effective co-ordination across all departments with regular reviews of progress against established outcomes is essential. What is important is that the outcomes of the strategy are delivered.

The role of the alcohol industry in addressing alcohol-related health problems, including the Responsibility Deal, Drinkaware and the role of the Portman Group

8. The alcohol industry is an important and equal stakeholder in tackling alcohol-related harm. We welcome recognition of the role of industry in the Government’s Alcohol Strategy. The SWA supports a partnership approach with Government and all stakeholders. We consider this to be the most effective way to reduce alcohol-related harm. Such an approach breaks down barriers between the various stakeholders, fosters co-operation and allows the different stakeholder groups to share their experiences and build on best practice.

9. Many SWA members are Responsibility Deal Partners, funding contributors to Drinkaware and members of the Portman Group or signatories to its Code of Practice.

10. Government sets alcohol policy; the Responsibility Deal is part of that policy and industry’s role, as well as other Responsibility Deal partners is implementation of that policy.

11. The SWA has been a Responsibility Deal partner from the launch of the Deal in March 2011. The Responsibility Deal provides the right framework to engage, co-ordinate and focus industry action. It is additional to other company national and local activity to promote responsible consumption.

The evidence base for, and economic impact of, introducing a fixed price per unit of alcohol of 40p, including the impacts on moderate and harmful drinkers; evidence/arguments for setting a different unit price; the legal complexities of introducing fixed pricing

12. The SWA is opposed to minimum unit pricing (MUP). We are unconvinced it will effectively tackle alcohol misuse. Minimum pricing will fundamentally damage the Scotch Whisky industry at home and abroad with negative consequences for the wider economy. The industry believes minimum pricing to be the most serious threat to its future international competitiveness.

13. The ECJ has invariably ruled that minimum pricing is illegal. It will also cause a number of negative unintended consequences.

Effectiveness

14. The case for minimum pricing relies heavily on the commissioned “Sheffield” modelling. The Scottish Government commissioned Sheffield modelling has been updated twice. At each up-date the effectiveness of MUP was diminished.

15. The latest Sheffield report4 commissioned showed those drinking most heavily would have to spend less than the price of one pint of beer a week more if MUP was introduced. These drinkers are the least likely to change their drinking patterns and behaviour.

16. The Sheffield report has three categories of drinker—moderate, hazardous and harmful. The report assesses moderate consumers as drinking on average 6 units per week. This does not reflect government weekly drinking guidelines, which are 21 units for men, 14 units for women. All drinkers within a category are assumed to hold the same characteristics. No assessment is made for age, gender, ethnicity, social grouping or different drinking patterns. It is assumed that all hazardous and harmful drinkers buy on price alone, which is clearly not the case.

17. There is no strong evidence as to the effectiveness of minimum pricing as a policy to reduce alcohol-related harm5. Claims that it is a targeted measure having greatest impact on problem drinkers with limited impact on moderate drinkers have been rejected by an Institute for Fiscal Studies6 report finding that MUP will hit responsible drinkers and, in particular, those on lower incomes at a time when household budgets are already under extreme pressure.

18. Although the Sheffield modelling work shows precise numbers on a range of potential impacts, nowhere does it state the reduction in the actual number of hazardous and harmful drinkers that would be achieved. In fact the proportion of hazardous and harmful drinkers would appear to remain unchanged.

19. The Sheffield modelling work suggested there would be a reduction in harms as a result of consumption within one year of MUP being introduced. Consumption has been decreasing in the UK since 2004, but we have seen an increase in alcohol-related hospital admissions and little change in alcohol-related deaths in England. The model therefore does not appear to reflect the real world.

20. In relation to binge drinking in younger people 18–24 year olds, Sheffield researchers in evidence to the Scottish Parliament confirmed MUP will have less impact on this group and the model does not address binge drinking.7

21. Tackling alcohol misuse will take concerted effort over many years. It should be based on a multi-component approach, involving all relevant stakeholders targeting those drinking heavily and inappropriately. Targeting hazardous and harmful drinkers offers the greatest opportunity to reduce harm. Reducing the number of hazardous and harmful drinkers will reduce per capita consumption; we have no issue with that outcome. Reducing consumption without significantly reducing the number of heavy drinkers, while undermining a major industry and its contribution to the economy, is a policy option that undermines the national economic interest.

Legality

22. Concerns over the legality of introducing a minimum pricing regime have never been addressed, despite the clear jurisprudence of the European Court of Justice.

23. From responses provided in Parliament the UK Government clearly has legal advice questioning the legality of MUP. Evidence given by Anne Milton, Public Health Minister, to the Commons Science and Technology Committee stated that the UK Government has legal advice which indicates that MUP is “probably illegal”. Chloe Smith, Chief Economic Secretary to the Treasury stated in debate on 14 December 2011 in relation to minimum unit pricing “we believe that it could be incompatible with article 34 of the treaty of the functioning of the European Union”.

24. A legal opinion on minimum pricing8 for the Swiss Government also clearly states that minimum pricing would breach its EU/EEA obligations and that a health exemption would not be likely to succeed.

25. Even campaigners for minimum pricing have written they are not convinced of the legality.9

26. The Scottish Government has said it expects a legal challenge to its minimum pricing plans. It has been reticent to open up its Bill to scrutiny by notifying it to the European Commission.

27. Minimum pricing is a barrier to the free movement of goods. It is likely to breach the EU Treaty (Article 34), and World Trade Organisation rules (GATT Art.III). These rules have allowed the Scotch Whisky industry to challenge protectionism in global markets with a resultant increase in exports underpinning future industry success. Scotch Whisky accounts for around 25% of UK food and drink exports. If Government action undermined EU and WTO rules, the precedent set would be used by third countries to protect their local alcohol industry. The knock-on effect would be hugely damaging for Scotch Whisky and the wider economy.

28. The precedent of a home grown trade barrier would adversely affect exports of premium brands. Attempts to open up new markets would be stalled. Stopping attempts by Chile to re-introduce non-WTO compatible discrimination against Scotch Whisky would be much more difficult. At home, value brands and supermarket own label products favoured by those on lower incomes would see immediate price rises. Companies specialising in this sector fear a significant loss of business, leading to job losses and closures.

29. All price fixing measures distort the market. We believe MUP will significantly distort the UK market. Any additional profits that may result from any increase in prices due to MUP will be retained by retailers, and not passed back to producers. We note the strategy recognises the net benefit that will accrue to retailers and state the Government will work with them to provide better value to customers in other areas. There is no explanation as to how or if this could work.

Unintended consequences

30. There is no consideration of the impact of minimum pricing on cross border sales, illicit supply, organised crime and fraud in the Sheffield Report.

31. Markets with over stringent control policies see a greater incidence of fraud, illicit sales, cross-border shopping and increased use Internet sales all of which could see the Government’s strategy outcomes being undermined.

Alternative

32. The SWA supports the introduction of a ban on sales below tax based duty plus VAT. This measure if linked to duty reform where alcohol is taxed at the same rate across all drinks, according to alcohol content would be equitable and transparent. Taxing all drinks at the same rate according to alcohol content would underpin the message that it is the amount of alcohol consumed rather than the type of drink chosen that matters. This would introduce a legal “floor price” mechanism and, unlike MUP, would generate revenue for the Exchequer. The Institute of Fiscal Studies reaches the same conclusion in its report published in 2011.10 Estimates of the benefit of tax equivalence for the Government are that it would generate an additional £1 billion in alcohol tax receipts.

The effects of marketing on alcohol consumption, in particular in relation to children and young people

33. The figures on underage drinking are showing promising trends. The proportion of pupils who drank alcohol in the last week fell from 26% in 2001 to 13% in 2010. Also, the proportion of 11–15 year olds who had never drank alcohol increased from 39% in 2003 to 55% in 2010.11

34. Alcohol marketing in the UK is comprehensively controlled. The current legislative framework, along with effective self–regulation ensures that alcohol marketing does not target young people under the legal purchase age.

35. The SWA Code of Practice for the Responsible Marketing and Promotion of Scotch Whisky is supported be an independent complaints panel. The Code includes a range of sanctions, which include fines and removing a company ultimately from membership.

36. The scientific literature on the influence of advertising on alcohol consumption is extensive and mostly contradictory. Econometric and cross-sectional studies have failed to show a clear causal relationship between marketing and expenditure and any indicator of harmful drinking. Where an association has been found in a small number of longitudinal studies12 it is very weak and does not make a compelling case that advertising causes harmful drinking.

37. Many countries that impose the most severe restrictions or advertising bans on advertising and marketing continue to have problematic drinking patterns.13 Studies have shown the principal influences shaping drinking patterns in young people are parents, family and peers.14 Recent research from Drinkaware has indicated that parents are the largest providers of alcohol to children.

International evidence of the most effective interventions for reducing consumption of alcohol and evidence of any successful programmes to reduce harmful drinking

38. The Committee raises a number of issues. We would make the following points:

The Government’s Alcohol Strategy is consistent with the approach endorsed by the World Health Organisation global strategy; the focus should be on reducing the harmful use of alcohol, not consumption per se.

There is a broad range of evidence-based targeted measures for tackling alcohol–related harm and reducing harmful drinking. Not all these measure require a regulatory approach: alcohol brief interventions, multi-component community based programmes, social norms and parenting support programmes, such as, strengthening families. Education and information campaigns are an essential part of any alcohol strategy, a point recognised by all stakeholders.

Plain packaging is rightly not included in the strategy. There is no evidence such a measure would have any impact on reducing harmful drinking. A move to plain packaging is contrary to UK economic interests. Scotch Whisky is one of the UK’s leading export industries, an iconic brand built on quality and tradition. Its success has been achieved by strong international brands. Undermining these brands would harm the UK economy and balance of trade.

May 2012