Scotland’s 50p minimum unit pricing may fund black market

 

The Scottish parliament has agreed that the minimum price of a unit of alcohol should be 50p, which has bolstered support for further increases.

The justification for minimum unit pricing (MUP) is simple; with cheap alcohol, in some places as low as 16p per unit, comes alcoholism, damage to families, illness, violence, and death. Since the proposal, representatives from the industry have challenged it in the EU and UK on the basis of competition law. Other concerns include the potential for a slippery slope justifying unlimited further increases to minimum unit prices, damage to a UK-based industry, and the greater availability of illicit authentic and counterfeit goods from the black market.

The Wine and Spirit Trade Association said that there is a real concern that the implementation of a minimum unit price ‘provides a significant incentive to trade alcohol illicitly.’ Their argument is that MUP will create a price incentive to sell products that will be available at wholesale in Scotland, or from other parts of the UK where the regulations do not, at least currently, apply.

These products would then be sold via illicit channels for profit while undercutting retailers, driving down legitimate retailer margins in Scotland while the demand for alcohol from abusers and alcoholics could remain consistent. This would mean that the gap in supply of authentic lower-cost alcohol could be filled by counterfeit alcohols that ignore tax and safety rules entirely, potentially harming this target group in a manner similar or worse than low-cost alcohol. It could also benefit criminals while costing the Treasury through unpaid taxes, legal costs and increased demand for customs and police officers.

An example of this theory in action is Australia’s black market tobacco trade. Tobacco legislation in the country has aggressively forced prices up by 343% since 1996. The consequences of this have included both a reduction in general consumption and a booming black market; tobacco is now becoming as lucrative as cocaine in many parts of the country, at a fraction of the risk. The margins on evaded tax on illicit tobacco have attracted organized crime syndicates, with the potential profits in the millions of dollars range.

MUP will be introduced to Scotland later in 2018, and ministers have voted to set that price at 50p per unit. This will raise the price of a cheap four-pack of beer from £1 to £1.78, a three-litre bottle of cider from £3.59 to £11.22 and a bottle of wine from £3.09 to £4.98. Meanwhile, cheap 70cl bottles of vodka will increase from £9.97 to £13.11, and an £11 bottle of Scotch will rise to £14. The Royal Society of Edinburgh seemed to confirm ‘slippery slope’ suspicions when it said that the price should have been initially set at 60p and then raised to 70p to reflect a greater ambition to reduce the consumption of alcohol.