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SUBMISSION COVER SHEET
Please complete and submit this form with your submission to:
Email:
[email protected]
Post:
Minimum (floor) price
Australian National Preventative Health Agency
GPO Box 462
Canberra ACT 2601
Phone: (02) 6289 2879
Organisation or individual (this will appear on our website)
Distilled Spirits Industry Council of Australia Inc (DSICA)
Contact person (the name of the person wishing to receive confirmation of submission and future updates)
Mr Gordon Broderick
Email address:
[email protected]
Phone:
(03) 9696 4466
Mobile (optional):
Physical address
1st Floor, 117 Ferrars Street
Suburb/City
South Melbourne
Postal address
PO Box 1098
Suburb/City
South Melbourne
State
Vic
Postcode
3205
State
Vic
Postcode
3205
Please note:
• For submissions made by individuals, all personal details other than your name and the State or Territory in which
you reside will be removed from your submission before it is published on the ANPHA website.
• If possible, it is preferable that all submissions are provided as public documents; however, ANPHA can accept
confidential submissions if requested (for example: submissions containing sensitive information of a personal or
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sending any material and mark the submission as confidential.
• Submissions will be placed on the ANPHA website shortly after receipt, unless ANPHA has been previously informed
about material supplied in confidence. Submissions will remain on the ANPHA website indefinitely.
Distilled Spirits Industry
Council of Australia Inc.
Submission to the
Australian National
Preventative
Health Agency
Exploring the Public Interest Case for
a Minimum (Floor) Price for Alcohol
Draft Report
December 2012
Contact
Phone
Fax
Email
Web
Mr Gordon Broderick
Executive Director
03 9696 4466
03 9696 6648
[email protected]
www.dsica.com.au
“Free The Spirit”
Who is DSICA?
The Distilled Spirits Industry Council of Australia Inc (DSICA) is the peak body representing the
interests of distilled spirit manufacturers and importers in Australia. DSICA was formed in 1982,
and the current member companies are:
•
Bacardi Lion Pty Ltd;
•
Beam Global Australia Pty Ltd;
•
Brown-Forman Australia;
•
Bundaberg Distilling Company Pty Ltd;
•
Diageo Australia Limited;
•
Mast-Jägermeister AG;
•
Moët-Hennessy Australia Pty Ltd;
•
Rémy Cointreau International Pte Ltd;
•
Suntory (Australia) Pty Ltd; and
•
William Grant & Sons International Ltd.
DSICA’s goals are:
•
to create an informed political and social environment that recognises the benefits of
moderate alcohol intake and to provide opportunities for balanced community discussion on
alcohol issues; and
•
to ensure public alcohol policies are soundly and objectively formed, that they include
alcohol industry input, that they are based on the latest national and international scientific
research and that they do not unfairly disadvantage the spirits sector.
DSICA’s members are committed to:
•
responsible marketing and promotion of distilled spirits;
•
supporting social programs aimed at reducing the harm associated with the excessive or
inappropriate consumption of alcohol;
•
supporting the current co-regulatory regime for alcohol advertising; and
•
making a significant contribution to Australian industry through primary production,
manufacturing, distribution and sales activities.
i
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
Contents
Who is DSICA?
i
Executive summary
iii
1
Structure and purpose of this submission
6
2
DSICA’s position on minimum floor pricing
8
3
Alcohol consumption in Australia
3.1
3.2
3.3
3.4
Australia’s per capita consumption of alcohol
The Australian liquor industry
Cost of alcohol-related harms
Population approaches versus targeted approaches for addressing harmful
consumption of alcohol
10
10
11
13
16
4
Minimum (floor) pricing
20
4.1
4.2
4.2.1
20
21
4.2.2
4.3
4.4
Canada
Scotland
Findings from the European Commission on the legality of minimum
pricing
Additional findings concerning the Sheffield Alcohol Policy Model
England and Wales
Conclusion
22
23
25
26
5
Conclusion
28
A
References
30
DSICA Submission to the Australian National Preventative Health Agency
ii
“Free The Spirit”
Executive summary
As the peak body representing the interests of Australian distilled spirit manufacturers and
importers, DSICA is committed to supporting strategies that can be shown to reduce the
uptake of alcohol use by underage Australians, and also reduce the levels of harmful drinking
amongst adult Australians. To this end, there is a need to seek evidence-based, targeted
measures which reduce the levels of excessive alcohol consumption in Australia and do not
unfairly burden or penalise the majority of Australian consumers who drink in moderation.
Recognising this, DSICA does not believe that a minimum (floor) price for alcohol is either an
appropriate or an evidence-based approach to meet the Australian National Preventative Health
Agency’s (ANPHA’s) objectives to ‘discourage harmful consumption and promote safer
consumption (emphasis added).1 ANPHA accurately identified this in the Draft Report Exploring
the Public Interest Case for a Minimum (Floor) Price on Alcohol (the Draft Report), noting that:
Because Australia’s alcohol distribution and retail systems are fully
private…a regulated minimum price increase (as distinct from a
tax)…significantly reduces the available public benefits which could
be used to further reduce or treat alcohol harm or be redistributed by
government for other purposes…a minimum (floor) price for alcohol
should not be introduced nationally at this time.2
DSICA strongly supports ANPHA’s recommendation and notes that it recognises the latest
international evidence relating to the (lack of) demonstrated effectiveness of minimum (floor)
pricing. This is, in large part, due to:
•
the unique regulatory environments in which minimum (floor) pricing regimes operate
internationally, limiting the appropriateness of any conclusions or findings which may be
applied in the Australian context; and
•
the lack of support for findings drawn from the University of Sheffield’s School of Health
and Related Research’s alcohol policy model, which have been critiqued by Duffy and
Snowdon due to the application of false and misleading assumptions concerning alcohol
consumption and drinking behaviours.3
DSICA further notes that any proposal to introduce a minimum (floor) price on the grounds of
high levels of risky and high-risk drinking behaviours is unfounded. Research demonstrates that
Australia does not have a high level of per capita alcohol consumption compared with
comparable Organisation for Economic Co-Operation and Development (OECD) countries.
Levels of risky and high-risk drinking amongst young people, and several adult age group
cohorts have, in fact, generally been trending downwards over the last decade, on both a shortterm and a long-term basis. Any perception of an increasing ‘epidemic’ of high-risk drinking
amongst young people, or all adult age groups, is not supported by the best available evidence.
The case for the introduction of a minimum price to reverse increasing levels of alcohol-related
harm amongst young people, and other age groups, cannot be made.
To this end, it is noted that the overwhelming majority of consumers drink in moderation,
creating no problems for themselves or society as a whole. Reports indicating that the cost of
alcohol-related harms are anywhere in the vicinity of $15.3 to $36 billion are poorly researched,
1
Australian National Preventative Health Agency, Exploring the Public Interest Case for a Minimum (Floor) Price for Alcohol: Issues
Paper (Australian Government, 2012) [1].
2
Australian National Preventative Health Agency, Exploring the Public Interest case for a Minimum (Floor) Price for Alcohol: Draft Report
(Australian Government, 2012) 9.
3
John Duffy and Christopher Snowdon, The Minimal Evidence for Minimum Pricing: The fatal flaws in the Sheffield Alcohol Policy Model
(Adam Smith Institute 2012) 5.
3
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
with independent economic analysis confirming that they are not reliable tools to be used in
evidence-based policymaking. DSICA strongly opposes any research which relies on the cost of
illness and cost of harm methodologies used by Collins and Lapsley and Laslett et. al.,4 as
these research findings fail to demonstrate any evidence of best practice, internationally
recognised approaches to economic cost/benefit analyses.
Finally, DSICA acknowledges that in the intervening period between preparation of the Draft
Report and this submission, there have been marked developments in relation to the minimum
(floor) pricing debate in Scotland, England and Wales. Most notably, the European Commission
(EC) has found that a proposed Minimum Unit Price (MUP) constitutes a ‘disproportionate’
response to Scotland’s aim of reducing alcohol consumption levels, and instead considers the
application of excise duties to be a more appropriate and suitable option which will not result in
adverse effects on competition and trade.5 The Scottish experience signals a strong warning to
Australian policymakers considering the introduction of a minimum (floor) price – and reiterates
both ANPHA and DSICA’s view that a minimum floor price is not an appropriate measure to
reduce alcohol-related harms in Australia.
DSICA remains committed to supporting evidence-based interventions aimed at reducing the
harm associated with the excessive or inappropriate consumption of alcohol, however does not
contend that the introduction of a single minimum (floor) price – as seen (or proposed) in
Canada, Scotland, England and Wales is an appropriate or effective measure to reduce alcoholrelated harms. The Australia’s future tax system report (the Henry Review) identified the
provision of a wholly volumetric alcohol taxation regime with a single rate for all alcohol
beverages as a best-practice approach to alcohol taxation (as it creates a link between the
amount of excise taxation paid and the product’s alcohol content), but did not recommend the
introduction of a minimum (floor) price.6
DSICA’s long-term vision for alcohol taxation in Australia is in accordance with that described in
the Henry Review. To achieve this vision, reform of the ad valorem Wine Equalisation Tax
(WET) towards a volumetric regime is urgently required, and would effectively create a
minimum (floor) price for all alcohol beverages in Australia. DSICA contends that such an
approach is highly preferential to the introduction of a statutory pricing mechanism and is to be
strongly supported.
4
See David Collins and Helen Lapsley, The costs of tobacco, alcohol and illicit drug abuse to Australian society in 2004/05 (Australian
Government, 2008) and Anne-Marie Laslett et. al., The Range and Magnitude of Alcohol’s Harm to Others (Alcohol Education and
Rehabilitation Foundation, 2010).
5
Communication from the Commission – SG(2012) D/52513; Directive 98/34/EC; Notification 2012/0394/UK.
6
Ken Henry et. al., Australia’s future tax system: Report to the Treasurer (Part Two – Detailed Analysis) (Australian Government, 2009)
442.
DSICA Submission to the Australian National Preventative Health Agency
4
“Free The Spirit”
5
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
1
Structure and purpose of this submission
DSICA lodged a substantive and detailed response to the ANPHA Issues Paper Exploring the
Public Interest Case for a Minimum (Floor) Price on Alcohol (the Issues Paper) in August 2012.
Each of the points made and issues discussed in that submission remain representative of
DSICA’s views on minimum (floor) pricing and preferred, alternative methods to discourage
harmful alcohol consumption and promote safer consumption behaviours.
This submission responds to a number of key issues raised in the latter Draft Report and seeks
to provide further evidence and clarification in relation to:
•
Australia’s comparative per capita consumption of alcohol;
•
contribution of the Australian liquor industry to total taxation revenue collections;
•
the cost of alcohol-related harms;
•
population wide versus targeted interventions; and
•
latest developments and research relating to the effectiveness of minimum (floor) pricing
measures in Canada, Scotland, England and Wales.
This submission is not designed to supersede DSICA’s earlier submission in respect of the
Issues Paper, but rather supplement it and provide evidence-based insights to clarify a number
of points made in the Draft Report.
DSICA Submission to the Australian National Preventative Health Agency
6
“Free The Spirit”
7
DSICA Submission to the Australian National Preventative Health Agency
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2
DSICA’s position on minimum floor pricing
DSICA congratulates ANPHA on its collaborative approach taken in preparing the Draft Report
and for the thorough, evidence-based and well-researched manner in which its findings are
presented. DSICA strongly supports ANPHA’s findings that:
Because Australia’s alcohol distribution and retail systems are fully
private…a regulated minimum price increase (as distinct from a
tax)…significantly reduces the available public benefits which could
be used to further reduce or treat alcohol harm or be redistributed by
government for other purposes…a minimum (floor) price for alcohol
should not be introduced nationally at this time;7 and
…the current WET as an ad valorem tax does not target alcohol
content effectively. Preferential treatment of wine, particularly at the
lower value end, favours production of cheaper wines and such an
arrangement may well be contributing to social and health
harms…based on public health considerations…the current operation
of the Wine Equalisation Tax is of concern and requires reappraisal.8
DSICA contends that these findings are sound and reflective of the complexities in Australia’s
alcohol taxation regime which fails to achieve either desirable or optimal health, social policy or
government revenue outcomes. A key failing of the Australian alcohol taxation system, as
identified in the Draft Report, is the WET. Rather than introducing a minimum (floor) price, there
is a need to reform the WET to a volumetric taxation regime which creates a correlation
between the amount of tax paid and the product’s alcohol content to encourage responsible
consumption decisions.
Like ANPHA, DSICA does not consider the introduction of a minimum (floor) price to be an
effective means of reducing harmful consumption behaviours. DSICA’s earlier submission to
ANPHA detailed a number of reasons as to why a minimum (floor) price is not an appropriate
population-based measure to discourage harmful alcohol consumption and promote safer
consumption, including the fact that it will:
•
adversely affect sensible, moderate drinkers;
•
adversely affect low income individuals and households;
•
be inconsistent with Australia’s international trade obligations;
•
lead to windfall profits in the retail supply chain; and
•
produce a wide range of unintended consequences, including potential violation(s) of
international trade obligations and additional costs to businesses.
Further to this, there is no basis for a public interest case for introducing a minimum (floor)
price in Australia due to the:
•
lack of a detailed analysis of the current situation with respect to drinking patterns and
harms;
•
lack of an in-depth analysis of the relative merit of differing strategies for addressing harms;
77
8
Australian National Preventative Health Agency, above n 2, 9.
Ibid.
DSICA Submission to the Australian National Preventative Health Agency
8
“Free The Spirit”
•
absence of compelling research evidence that identifies the harms that will be best
addressed through the fiscal mechanism being promoted;
•
lack of any compelling evidence that the preferred approach actually reduces harms in other
countries of direct relevance to Australia;
•
absence of any evidence that the preferred approach is effective, robust, exportable and
will not lead to unintended consequences;
•
lack of any detailed advice that such an approach is not inconsistent with Australia’s
international trade obligations;
•
failure to commit to the development of, and provide public access to, a comprehensive
econometric model of the alcohol market in Australia to forecast the likely impact of such
an approach; and
•
lack of any credible comparative analysis of the potential merits of alternative models, such
as the phased volumetric WET reform approach proposed by DSICA in its earlier response.
DSICA acknowledges that a minimum price was not supported by the Henry Review, which
instead recommended a single volumetric tax for all alcohol products.9 DSICA strongly supports
this recommendation, and contends that the introduction of a wholly volumetric alcohol taxation
regime, initially through reform of the ad valorem WET, would create an effective minimum
(floor) price for all alcohol beverages, therefore removing the need to introduce a statutory
minimum pricing mechanism. Such an approach is DSICA’s preferred alternative to a minimum
floor price, and may be pursued using DSICA’s detailed reform proposal outlined in Appendix B
to its earlier submission.
Key point
The existing Australian alcohol taxation regime is incoherent, riddled with anomalies and fails to
achieve desirable economic, health and social policy outcomes. DSICA strongly supports
ANPHA’s recommendation that a minimum (floor) price is not an appropriate measure for
introduction into the Australian alcohol taxation system, and contends that it will be ineffective
in reducing the incidence of harmful consumption behaviours. DSICA strongly supports the
introduction of a wholly volumetric alcohol taxation regime, initially through reform of the ad
valorem WET. A wholly volumetric alcohol taxation regime would create an effective minimum
(floor) price for all alcohol beverages, therefore removing the need to introduce a statutory
minimum pricing mechanism.
9
Henry, above n 6, 442.
9
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
3
Alcohol consumption in Australia
DSICA contends that there is a need to understand the dynamics of the Australian alcohol
market and long-term trends in alcohol consumption to develop sound, evidence-based policies.
DSICA is supportive of the breadth of research ANPHA has drawn upon in preparing the Draft
Report, however seeks to clarify and enhance the evidence base used in relation to matters
concerning:
•
Australia’s per capita consumption of alcohol;
•
the Australian liquor industry;
•
the cost of alcohol-related harms; and
•
population approaches versus targeted approaches for addressing harmful consumption of
alcohol.
Each of these issues are discussed in turn.
3.1
Australia’s per capita consumption of alcohol
The Draft Report states that:
In 2010-11, Australia’s apparent per capita consumption of pure
alcohol was 10 litres. While this represents a decrease compared to
previous years, Australia’s annual per capita consumption is still
considered high by world standards.10
Although there is a common perception that Australia is a nation of heavy drinkers compared
with other countries, adult per capita consumption of alcohol in comparable developed
countries is higher than in Australia. A comparison between the OECD countries for which per
capita consumption data is available (see Figure 3-1) reveals that Australia ranked only 12th out
of a total of 29 countries in 2009,11 strongly suggesting that Australia’s per capita consumption
is not particularly high.
10
Australian National Preventative Health Agency, above n 2, [1].
Organisation for Economic Co-Operation and Development, Non-Medical Determinants of Health: Alcohol Consumption (Organisation
for Economic Co-Operation and Development, 2009). Note that the 2009 OECD data has been revised throughout the year as new
information has been made available.
11
DSICA Submission to the Australian National Preventative Health Agency
10
“Free The Spirit”
Figure 3-1: Australia’s comparative alcohol consumption (2009)
AUSTRALIA DOES NOT HAVE A HIGH LEVEL OF PER CAPITA ALCOHOL CONSUMPTION COMPARED
WITH OTHER OECD COUNTRIES
Ranking
Country
LPAs per capita
Ranking
Country
1
Luxembourg
15.3
11
Slovenia
10.5
2
France
12.3
12
Australia
10.3
3
Austria
12.2
4
Czech Republic
12.1
13
(equal ranking)
United Kingdom
Poland
10.2
5
Estonia
11.9
6
Germany
11.7
15
(equal ranking)
Switzerland
Denmark
10.1
7
Hungary
11.5
17
Finland
10.0
8
Spain
11.4
18
Netherlands
9.4
9
Ireland
11.3
19
New Zealand
9.3
10
Slovak Republic
10.7
20
Korea
8.9
LPAs per capita
Statistics taken from the 2009 Non-Medical Determinants of Health: Alcohol Consumption dataseries (revised data accessed on 5 December 2012). Note that
statistics relating to alcohol consumption collected by the OECD and DSICA differ, however only OECD statistics have been used in this comparison to ensure
consistency across all countries. Only the top 20 alcohol consuming OECD members are shown
Copyright DSICA 2012
Source: OECD
DSICA also notes that the Draft Report refers to World Health Organization (WHO) data. A
review of WHO’s Global Status Report on Alcohol and Health 2011 (the WHO Report) ranks
Australia as 44th out of 188 countries in terms of per capita alcohol consumption.12 While
DSICA appreciates the broad coverage of the WHO Report, it is acknowledged that that there
are cultural and religious factors which may result in significantly lower levels of per capita
alcohol consumption in other countries (when compared to Australia). As such, DSICA cautions
readers about such large international comparisons due to cultural and religious factors in some
other countries and believes it is appropriate to compare Australia’s consumption only against
similar Western countries – as in the OECD comparisons above which demonstrate that
Australia’s annual per capita consumption is not high by world standards.
Key point
International evidence demonstrates that Australia ranks only 12th out of a total of 29 developed
countries for which per capita alcohol consumption data is available. Results from broadreaching data analysis, such as that undertaken by WHO, should be viewed with caution due to
cultural and religious factors in some other countries which make reliable comparative analysis
difficult.
3.2
The Australian liquor industry
The Draft Report states that:
Specific taxes on alcohol raised $3,853 million in tax in 2009-10, 1.3
per cent of total revenue.13
DSICA understands that this reference is taken from the recently-released report The liquor
industry (the Report) by The Australia Institute.14 DSICA contends that this figure is particularly
misleading, as it only accounts for the excise duty levied on domestically produced beer, spirits
12
World Health Organization, Global Status Report on Alcohol and Health 2011 (World Health Organisation, 2011) 273-7.
Australian National Preventative Health Agency, above n 2, [4].
14
David Richardson, The liquor industry (Technical Brief No. 14) (The Australia Institute, 2012).
13
11
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
and Ready-to-Drink products (RTDs), along with the WET. The Report should not be used to
inform alcohol policy development activities.
In fact, the Australian alcohol industry contributes significantly more taxation revenue than the
$3,853 million figure quoted which and omits a number of other alcohol beverage taxation
revenue sources, including the excise-equivalent customs duty applied to imported beer, spirits
and RTDs, the ad valorem customs duty applied to imported spirits, RTDs and wine, and Goods
and Services Tax (GST) revenue derived through the sale of alcohol beverages. Taking these
revenue sources into account, DSICA estimates that the total tax revenue (including GST) from
alcohol beverages in 2009-10 was approximately $6,952 million, 80 per cent higher than the
figure quoted in The liquor industry report. Indeed, DSICA’s latest estimates indicate that the
Australian alcohol industry will contribute $7,718 million in taxation revenue in 2012-13, as
outlined in Figure 3-2 below.
Figure 3-2: DSICA estimates of Commonwealth revenue from alcohol taxation (2012-13)
DSICA REVENUE ESTIMATES 2012-13 ($ MILLIONS)
Customs Duty*
Beer low-strength
-
68
-
68
38
106
1.38%
Beer mid-strength
-
275
-
275
90
365
4.73%
Beer full-strength
264
1,781
-
2,045
472
2,517
32.61%
Total Beer
264
2,124
-
2,388
600
2,988
38.72%
RTDs and Flavoured Cider
-+
920
-
920
330
1,250
16.20%
Brandy
26
25
-
51
7
58
0.76%
Spirits
1,597
214
-
1,811
306
2,117
27.43%
Total Spirits, Brandy, RTDs
and Flavoured Cider
1,623
1,159
-
2,782
644
3,426
44.39%
12
-
731
743
481
1,224
15.86%
Wine
Traditional Cider
Total Wine and Traditional
Cider
TOTAL
Excise Duty
WET
Total Non-GST
Revenue
Product Category
GST Revenue
Total
%
-
-
44
44
36
80
1.04%
12
-
775
786
518
1,304
16.90%
1,898
3,283
775
5,956
1,762
7,718
100.00%
* Customs duty includes both the five per cent ad valorem customs tariff applied to imported spirits, RTDs, wine and traditional and flavoured cider, and exciseequivalent customs duty applied to imported spirits , beer and flavoured cider.
+ It has been assumed that ‘imported’ RTDs are imported in the form of bulk spirits then bottled as RTDs in Australia, therefore customs duty on imported RTDs
has been included in the ‘spirits’ category. No estimate has been made of the very small customs duty amount paid by the imported flavoured cider market.
Copyright DSICA 2012
Source: DSICA Pre-Budget Submission 2012-13
DSICA contends that there is a need to undertake policy development activities which are
based on the most comprehensive, thorough research available. Given this, attention must be
paid to the fact that the Australian alcohol industry contributes significantly more in alcohol
taxation revenue than the $3,853 million figure identified.
Key point
The liquor industry report grossly underestimates contribution the Australian alcohol industry
makes to government revenue and should not be used in the development of evidence-based
alcohol policies. Estimates suggest that the Australian alcohol industry contributed $6,952
million in taxation revenue in 2009-10 – some 80 per cent more than the figure suggested by
the Australia Institute.
DSICA Submission to the Australian National Preventative Health Agency
12
“Free The Spirit”
3.3
Cost of alcohol-related harms
The Draft Report states that:
The total social costs of harmful alcohol consumption to the Australian
community are estimated to be $15.3 billion annually.15
In addition, the Draft Report contains further discussion in relation to the varying estimates of
social costs of alcohol misuse in Australia, which range from $3.8 billion to $36 billion
annually.16
DSICA understands that the reference to the $15.3 billion figure has been derived from the
Collins and Laspey monograph The costs of tobacco, alcohol and illicit drug abuse to Australian
society in 2004/05,17 while the reference to the $36 billion figure has been taken from the
report by Laslett et. al, The range and magnitude of alcohol’s harm to others.18 DSICA strongly
opposes the methodologies used by Collins and Lapsley to estimate the social costs of alcohol
consumption to the Australian community and Laslett et. al. to estimate the costs of alcohol
harm to others as they grossly overestimate the true costs of alcohol misuse. As outlined in
Figure 3-3 and Figure 3-4, DSICA’s view is supported by independent economic analysis and
review undertaken by:
•
Access Economics;
•
Dr Eric Crampton of the University of Canterbury; and
•
Professor Klaus Mäkelä, former Secretary of the Finnish Foundation for Alcohol Studies.
In essence, the methodologies used by Collins and Lapsley and Laslett et. al. are seriously
flawed, with a significant degree of double-counting of individual cost components resulting in
gross over-estimation of the true social costs associated with alcohol misuse and the costs of
alcohol’s harm to others. They are not reflective of internationally accepted methodologies used
to calculate social cost estimates and should not be used in public policy development.
Figure 3-3: Key flaws identified in the report The costs of tobacco, alcohol and illicit drug abuse to Australian Society in 2004/05
Researcher/
agency
Key flaws and conclusions
Access
Economics
Key flaws
•
The report uses a ‘demographic approach’ to cost estimation, an uncommon
methodology that means the authors have attempted to estimate the impact of
alcohol abuse retrospectively. The reason for undertaking a retrospective rather than
forward-looking approach is unclear, as is the policy usefulness of such an approach,
and is likely to yield a much higher cost estimate than the human capital approach.19
•
‘Alcohol abuse’ is never clearly defined in the report, and definitions implicit in
different cost elements vary throughout.20
•
There is no mention in the report of the very large private benefits of responsible
alcohol consumption in terms of utility value (choice, enjoyment). It is a major flaw to
exclude private costs from total social costs and private benefits from total social
15
Australian National Preventative Health Agency, above n 2, [12].
Ibid [15].
David Collins and Helen Lapsley, The costs of tobacco, alcohol and illicit drug abuse to Australian society in 2004/05 (Australian
Government, 2008).
18
Anne-Marie Laslett et. al., The Range and Magnitude of Alcohol’s Harm to Others (Alcohol Education and Rehabilitation Foundation,
2010).
19
Access Economics, Collins and Lapsley report review: social costs (Access Economics 2008) i.
20
Ibid.
16
17
13
DSICA Submission to the Australian National Preventative Health Agency
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Researcher/
agency
Key flaws and conclusions
benefits, and it is incorrect to claim that costs borne by individuals are irrelevant to
public decision-making.21
•
The revenue estimation shows that taxation raise from alcohol abuse exceeds its cost
to Government, so it is budget positive and abusers pay their way by some $1.4
billion (2004-05 prices) per annum. Alcohol taxes thus more than pay for the social
costs of alcohol abuse, by a considerable margin, each year.22
Conclusion
‘There is apparent upward bias in most of the cost estimates and uncertainty is not dealt
with due to grossly inadequate sensitivity analysis. Using a best possible approach would
exclude one cost item, making the overall cost of alcohol abuse at least 18 per cent lower.
The other findings of the report should be viewed with substantial scepticism.’23
Dr Eric
Crampton,
University
of
Canterbury
Key flaws
•
Collins and Lapsley use survey methods to assign the proportion of crime attributable
to alcohol which are inadequate for addressing alcohol’s causal role in crime.24
•
The public health method used in identifying and calculating the costs imposed on
others diverges with methodologies used in regarded economic methods and
literature. In particular, the social cost estimation method used in public health
literature results in a cost-inflating bias as social costs and private costs are conflated,
and many cost categories are double-counted.25
•
The application of per capita Gross Domestic Product (GDP) as a measure of foregone
production arising from absenteeism and premature mortality is considerably larger
than the preferred method which uses foregone wages plus employer hiring costs
(which constitute an upper bound on gross productivity losses consequent to
premature mortality) results in a much larger aggregate wage bill and three significant
issues:
where the death is incurred by the drinker, costs are properly considered internal
rather than external – only increased employer search costs are plausibly external
costs (and therefore able to be included in the calculation);26
using per capita GDP rather than wages are a measure of forgone output requires
strong assumptions about worker irreplaceability and capital-labour
complementarity. Indeed, this method has been rejected by WHO;27 and
the latter inclusion of intangible costs of loss of life in conjunction with per capita
GDP as a measure of forgone production constitutes double-counting.28
Conclusion
Only $3.8 billion of the reported $15.3 billion cost can be considered potentially external, a
figure which is close to aggregate alcohol excise taxation revenue.29
Professor
Klaus
Mäkelä,
former
Secretary
Key flaws
•
Collins and Lapsley argue that resources spent on hazardous drinking should be
classified as social costs, since abusive consumers are not fully informed of the
effects of alcohol on health. However, a number of studies indicate that users are
more knowledgeable than non-users.30
21
Ibid ii.
Ibid.
Ibid iv.
24
Eric Crampton, Matt Burgess and Brad Taylor, ‘What’s in a cost? Comparing economic and public health measures of alcohol’s social
costs’ (2012) 125 New Zealand Medical Journal 1, 2.
25
Ibid 1.
26
Ibid 5.
27
Ibid.
28
Ibid.
29
Ibid 1.
30
Klaus Mäkela, ‘Cost-of-alcohol studies as a research programme’ (2012) 29 Nordic Studies on Alcohol and Drugs 321, 322.
22
23
DSICA Submission to the Australian National Preventative Health Agency
14
“Free The Spirit”
Researcher/
agency
of the
Finnish
Foundation
for Alcohol
Studies
Key flaws and conclusions
The cost calculations treat the value of stolen property as a loss, however this is
misleading from the societal perspective advocated by the cost-of-alcohol literature as
it overlooks the revenue of the thief.31
Conclusion
‘Even the most sophisticated cost-of-alcohol calculations include entries based on
misleading assumptions or logical mistakes. Traditional measures of alcohol problems
offer a better picture of the effects of policy measures than cost-of-alcohol estimates’.32
•
Figure 3-4: Key flaws identified in the report The range and magnitude of alcohol’s harm to others
Researcher/
agency
Key flaws and conclusions
Access
Economics
Key flaws
•
There was an ‘overestimation of the magnitude and impact of alcohol’s harm to
others within survey responses due to a number of biases’.33
•
Incorrect methods were used to develop attributable fractions, meaning that all
cost components are many times overstated.34
•
‘Incorrect methods (were) used to estimate the costs associated with the impact
of others’ drinking, such as intangible costs of others’ drinking on health and
wellbeing, of harms experienced and of harms from strangers’.35
•
Flawed methods used by Collins and Lapsley in undertaking earlier studies (which
were heavily relied on in the Report) to estimate the cost of alcohol abuse in
Australia are out-of-line with best practice cost of illness studies, and are likely to
overestimate the true cost.36
Conclusion
The costs presented in the Report ‘appear to be grossly overestimated, and therefore
the reported $36 billion total costs represents a poor estimate of the real cost of
alcohol’s harm to others. Consequently, the total cost and individual cost components
should not be used to inform policy decisions regarding the consumption of alcohol’.37
As recognised in the critiques above and by the United Kingdom research group Findings, cost
studies are generally limited to quantifying the adverse consequences of drinking, and include
benefits (if at all) only in terms of health. While in some instances studies may be limited to
these considerations alone, if the study purports to assess total costs to a society, then there is
no rationale for excluding other non-health related benefits including the pleasures/value
derived through taste, food value, enjoyment of an altered state of consciousness and greater
expressiveness, as well as social rewards such as the pleasure given to dinner guests, the
solidarity of round-buying and broader social cohesion.38
In addition to these concerns relating to the omission of benefits derived from responsible
consumption decisions, the estimates of costs imposed on society by drinking are often grossly
inflated because (among other things), they assume that hazardous drinking must be irrational
consumption, that crime benefits no one, that drinking has no social, psychological or indirect
business benefits, and that productivity losses are not counter-balanced by benefits
31
Ibid 324.
Ibid 339.
Access Economics, Review of ‘The range and magnitude of alcohol’s harm to others’ (Access Economics, 2010) i.
34
Ibid ii.
35
Ibid.
36
Ibid.
37
Ibid i.
38
Findings, Cost-of-alcohol studies as a research programme (20 October 2012)
<http://findings.org.uk/count/downloads/download.php?file=Makela_K_2.txt>.
32
33
15
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“Free the Spirit”
elsewhere.39 Such assumptions are based heavily on value judgments which are generally
imbedded in cost studies, rather than explicitly stated – clouding any sense of objectivity which
may be attributable to such studies.40
It is on this basis, and as demonstrated in Figure 3-3 and Figure 3-4 above, DSICA contends
that current cost of harm studies are an inappropriate and inaccurate basis on which to develop
evidence-based policy decisions. Traditional measures of alcohol problems, including
longitudinal consumption and demographic data offer greater, more robust insight into the
extent and nature of alcohol-related harms in society and the impact of specific interventions.
Key point
The cost of harm studies undertaken by Collins and Lapsley and Laslett et. al. significantly
overestimate the costs of alcohol misuse to society. Inappropriate methodologies, assumptions
and upward bias in estimates used in the reports negate the achievement of any robust,
evidence-based findings in the reports, rendering them futile in informing public alcohol
policies.
3.4
Population approaches versus targeted approaches for
addressing harmful consumption of alcohol
The Draft Report states that:
…evidence suggests that regulatory and fiscal policies (those
focusing on economic and physical availability such as restricting the
days and hours of sale, restricting outlet density and taxation), drinkdriving countermeasures and policies that target the whole population
are more effective than those targeting high-risk groups.
Nevertheless, there was significant disagreement among the
submissions regarding both the effectiveness of, and the preference
for, whole of population versus targeted approaches to reducing
harmful consumption.41
DSICA acknowledges that there is considerable debate regarding the most appropriate policy
approach to take with respect to reducing the harms associated with alcohol misuse, however
does not accept the proposition that whole of population policies are proven to be more
effective than targeted policies, in reducing levels of alcohol-related harm.
The International Center for Alcohol Policies in its Guide to Creating Integrative Alcohol Policies
makes the following comments with respect to both approaches:
Control measures are aimed at restricting access to and availability of
alcohol through a range of measures applied to the population as a
whole. The goal of these control measures is to reduce the overall per
capita consumption in an effort to reduce the incidence of harm.
39
Ibid.
Ibid.
41
Australian National Preventative Health Agency, above n 2, [22].
40
DSICA Submission to the Australian National Preventative Health Agency
16
“Free The Spirit”
The ‘control of consumption’ approach relies on the notion of a
defined and linear relationship between the level of alcohol
consumption across a population and the level of harm.42
Advocates for population-based measures have long argued that reducing overall consumption
across all alcohol consumers will impact on the levels of alcohol-related harm. Governments
have increasingly adopted control policy measures, alcohol consumption has fallen, and yet
there appears to be no impact on the levels of excessive drinking amongst certain subsets of
the community. In particular, population measures are broad and non-specific and as a result
they:
•
cannot differentiate between those who drink responsibly and those who abuse alcohol;
•
are insensitive to variations and cultural difference in the role of alcohol in society;
•
require legislation and structural change for their implementation;
•
rely on enforcement to be effective;
•
are not tailored to the reality of drinking; and
•
are inflexible to change and shifting societal needs.
Conversely, the aim of targeted interventions is to reduce misuse and the harms that flow from
that, not to necessarily reduce overall consumption. Targeted interventions seek to reduce the
potential for harm by specifically and selectively focusing on problematic drinking patterns
amongst those individuals, settings and behaviors where risk of harm from drinking is
increased. In this regard, targeted measures:
•
specifically address harm where it occurs;
•
can be tailored to individual, societal, and cultural differences;
•
do not require structural change or legislation for implementation;
•
make best use of resources that are available;
•
avoid most unintended outcomes by virtue of their specificity;
and
•
are responsive to the immediacy of community needs.
DSICA believes that the intention behind targeted approaches is to focus attention on those
alcohol-related issues causing the greatest concern within
the community. The strategy behind
targeted approaches does not have as its endpoint a reduction in the overall consumption of
alcohol within the community. However, what it does seek is to reduce the level of harmful
drinking and its impacts on individuals and communities. DSICA’s position is supported by
findings from the International Center for Alcohol Policies, which notes that:
The targeted interventions approach relies on the principles of harm
reduction. It is a pragmatic one, recognizing that risks are inherent in
many behaviors, but that it is nevertheless possible to reduce and
manage many of them. The approach also acknowledges that it is
possible to preserve the ability and right of individuals to enjoy
drinking, while at the same time reducing the potential for problems.
42
2.
International Center for Alcohol Policies, Guide to Creating Integrative Alcohol Policies, (International Center for Alcohol Policies, 2008)
17
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
DSICA contends that an integrated, comprehensive approach to alcohol policy development
must strike a balance between targeted education, early intervention and selective
enforcement strategies. Indeed, individuals must be equipped with the skills they need to make
informed consumption decisions and communities must focus on addressing settings and
patterns which increase the occurrence of alcohol-related harms. To this end, DSICA believes
that evidence-based harm reduction and targeted interventions must include the following
considerations observed in the International Center for Alcohol Polices’ Blue Book: Practical
guides for alcohol policy and prevention approaches:
•
the provision of balanced information on both benefits and harms;
•
a sound evidence base founded on the best available scientific data;
•
an approach that is palatable and easy for the public to understand;
•
a focus on issues that correspond to actual, familiar and representative drinking behaviors;
•
the recognition that alcohol consumption is an integral part of many societies and may be
associated with both positive and negative outcomes;
•
an approach that addresses the potential for harm in a non-judgmental way;
•
strengthening individual responsibility at the same time as enforcing external controls;
•
involvement of individuals and their communities in all aspects and levels of policy; and
•
development, and consistency with other approaches and measures that are being used.43
A significant benefit of targeted approaches is that they do not rely exclusively on governments
for their implementation, but require a whole of community response. DSICA would argue that
there is considerable scope for communities of interest to formulate a collective approach to
reducing harms associated with alcohol misuse.
A new research study published in the prestigious journal Alcohol and Alcoholism in July 2012
raises a broad question with respect to the efficacy of control policy measures in reducing
alcohol abuse/binge drinking amongst young people. The study reaches the following
conclusion that:
Among all the 40 countries in the present analysis, a non-significant
trend was observed, whereby higher prices, higher drinking age and
stronger alcohol controls were associated with a lower weekly
drinking frequency, but a potentially higher frequency of binge
drinking. It is important that future research explores the causal
relationships between alcohol policy measures and alcohol
consumption patterns to determine whether strict policies do in fact
have any beneficial effect on drinking patterns, or lead to rebellion and
an increased prevalence of binge drinking.44
This research finding is particularly important in the Australian context, as we need to ensure
that the policy directions we take are appropriately targeted to address binge drinking amongst
young people, and address at-risk adult groups. Indeed, such an approach is in accordance with
WHO’s Global strategy to reduce the harmful use of alcohol, which, as the strategy suggests,
43
International Center for Alcohol Policies, The ICAP Blue Book: Practical Guides for Alcohol Policy and Prevention Approaches
(International Center for Alcohol Policies, 2011) A.1.
44
Conor Gilligan, Emmanuel Kuntsche and Gerhard Gmel, ‘Adolescent Drinking Patterns Across Countries: Associations with Alcohol
Policies’ (2012) 0(0) Alcohol and Alcoholism 1, 5.
DSICA Submission to the Australian National Preventative Health Agency
18
“Free The Spirit”
seeks to target harmful alcohol use – particularly the behaviours and population groups known
to partake in hazardous drinking practices – not alcohol use at the broader, population-wide
level.45
In acknowledging the significant evidence favouring targeted harm reduction measures, DSICA
contends that the introduction of a population-wide measure such as a minimum floor price is
unlikely to be effective in reducing alcohol consumption of ‘at risk’ individuals and communities.
While some population-based measures to restrict alcohol consumption are appropriate,
specific, targeted measures are required to reduce the incidence of harmful and hazardous
drinking.
Key point
Available evidences strongly indicates that targeted measures – in conjunction with appropriate
population-based strategies – provide significant opportunities for reducing the incidence of
harmful alcohol consumption in Australia. Population-based approaches such as minimum
(floor) pricing are significantly less effective at changing the behaviours of at-risk groups.
45
World Health Organization, Global strategy to reduce the harmful use of alcohol (World Health Organization, 2010) 5.
19
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
4
Minimum (floor) pricing
Since publication of the Issues Paper and Draft Report, there have been marked developments
in international jurisdictions either with minimum (floor) pricing measures in operation, or
contemplating the introduction of such measures. This section discusses the recent
developments seen in Canada, Scotland, England and Wales and draws on the latest evidence
relating to the purported effectiveness of minimum (floor) pricing and key issues associated
with such measures.
4.1
Canada
The Draft Report states that:
In summary, the Canadian studies recommend careful consideration
of minimum pricing as part of a comprehensive strategy to reduce
alcohol-related harm.46
DSICA strongly cautions against the use of research findings concerning the application of
Social Reference Pricing (SRP) in Canadian jurisdictions in the Australian context. In particular,
the Canadian approach to alcohol regulation differs considerably from that seen in Australia, and
the latest research findings available do not conclusively demonstrate the effectiveness of SRP
in reducing alcohol-related harm.
As stated in its earlier submission, DSICA noted that the Canadian alcohol distribution and
regulatory environment is markedly different to that seen in Australia as:
•
in Canada, minimum prices differ between and within different types of alcohol beverages
and there is not a single price per unit of alcohol;
•
increases in minimum prices in Canada are not simultaneous, which may potentially allow
substitution behaviour and ‘trading down’;
•
in Canada, alcohol is sold in liquor stores and not in supermarkets, which may limit the
broader impact of the alcohol industry’s response;
•
all alcohol distribution is state controlled in Canada;
•
some provinces in Canada prohibit products perceived to be especially harmful (e.g. Alberta
has banned beer products over 11 per cent alcohol by volume [abv]);
•
in Canada, some end-of-line below-SRP selling is permitted; and
•
the revenue from SRP in Canada goes to the provincial government.47
In addition to these social and regulatory policy distinctions, the latest evidence concerning the
application of SRP in Canada is inconclusive in relation to the effectiveness of SRP in reducing
alcohol consumption by heavy drinkers and young drinkers. In particular, research undertaken
by the Canadian Centre on Substance Abuse:
•
notes that a combination of population-wide strategies and targeted strategies are required
to address all sources of alcohol-related harm;48 and
46
Australian National Preventative Health Agency, above n 2, [59].
Health and Sport Committee, Scottish Parliament, 2nd Report, 2012 (Session 4): Stage 1 Report on the Alcohol (Minimum Pricing)
(Scotland) Bill (2012) [24].
48
Gerald Thomas, Price Policies to Reduce Alcohol-Related Harm in Canada (Canadian Centre on Substance Abuse, 2012), 4l.
47
DSICA Submission to the Australian National Preventative Health Agency
20
“Free The Spirit”
•
views minimum pricing as one intervention available to address alcohol-related harm – not
in isolation from other strategies, most notably the provision of specific taxes based on
alcohol content.49
In addition to these findings, DSICA further contends that the applicability and relevance of
available Canadian studies to the Australian minimum floor pricing debate must be viewed with
caution. The most recent study concerning SRP in Saskatchewan is limited in both its
robustness and transferability as it:
•
is based consumption data for only two years following the new SRP policy and prices
(which were introduced in April 2010), and thus does not consider the long-term effects of
SRP – a significant limitation as behavioural change is not necessarily instantaneous;50 and
•
acknowledges that the government maintains a monopoly over many liquor store sales –
thus making the impact of SRP on retail sales prices in off-premise venues (which account
for at least 63 per cent of total consumption in the province) predictable, whilst the impact
on on-premise sales is difficult to quantify.51
In summary, the Canadian experience does not provide a solid evidence base on which to
pursue Australian policy development activities. Indeed, the Canadian Centre on Substance
Abuse acknowledges that ‘direct evidence showing conclusively that minimum pricing reduces
risky drinking at the population level does not exist’ – a sound warning for Australian authorities
seeking to develop evidence-based policies grounded on the best available international and
national research.52
Key point
There is a lack of long-term empirical evidence relating to the impact of SRP on alcohol-related
harms, and risky and high-risk drinking behaviours. Given this evidence vacuum, and the
significant differences between the Canadian and Australian alcohol policy contexts, the
Canadian experience is not an appropriate example upon which to base Australian policy
development.
4.2
Scotland
The Draft Report states that:
On 22 October 2012 it was reported that implementation of a
minimum price was going on hold pending the outcome of legal
challenges.53
Since publication of the Draft Report, there have been significant developments concerning the
introduction of a MUP for alcohol beverages in Scotland. In particular, communication from the
EC has confirmed that the proposed legislation concerning the introduction of a MUP in
Scotland (as it currently stands) is incompatible with the Treaty on the Functioning of the
European Union (TFEU). In addition to this, further evidence concerning to the modelling
projections contained in the Sheffield Alcohol Policy Model casts doubt on the veracity of
49
Ibid 2.
Tim Stockwell, Jinhui Zhao and Norman Giesbrecht, ‘The Raising of Minimum Alcohol Prices in Saskatchewan, Canada: Impacts on
Consumption and Implications for Public Health’ American Journal of Public Health (published online ahead of print, 18 October 2012).
51
Ibid e6.
52
Thomas, Zhao and Giesbrecht, above n 48, 7.
53
Australian National Preventative Health Agency, above n 2, [62].
50
21
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
findings and purported benefits a MUP will have on alcohol-related harms and risky and highrisk drinking behaviours. Each of these considerations are discussed in turn below, and further
highlight the difficulties and lack of international support for minimum pricing.
4.2.1
Findings from the European Commission on the legality of minimum
pricing
Upon passing of the Alcohol (Minimum Pricing) (Scotland) Bill 2011 (UK) (NB subsequently the
Alcohol (Minimum Pricing) Scotland Act 2012 (UK)) (the draft legislation) on 24 May 2012, a
number of countries raised objections to the draft legislation in light of the United Kingdom’s
commitments under European trade rules.54 Following these objections, the EC issued a legal
directive in November 2012 outlining the draft legislation’s incompatibility with the United
Kingdom’s obligations under the TFEU Art 34. In particular, the EC found that:
•
although the MUP is designed to apply to both imported and domestically produced goods
equally, it is capable of having an adverse effect on imported goods and is therefore
considered as a measure imposing a quantitative restriction as it prevents the lower cost
price (and base) of imported goods being reflected in their final selling price;
•
the introduction of a MUP may have negative side effects and lead to further market
distortions. In particular, a MUP will create greater incentives for retailers and supermarkets
to sell more alcohol beverages as a result of the fact that they will make higher margins on
the products affected by the policy. This will give retailers incentives to allocate increased
resources to the sale of products affected by the MUP compared with what could be
expected to be the case if, for example, similar average retail price increases were cause by
an across-the-board increase in excise duty;
•
increasing existing excise duties is a more appropriate and suitable option to achieve the
goal of reducing alcohol consumption without resulting in any adverse effects on
competition, and is less trade restrictive;
•
there are other additional measures the Scottish Government may adopt, including
measures specifically targeted at particular areas where there are known to be higher levels
of alcohol-related harm – such measures are likely to be more effective than measures
aimed at the total population; and
•
on this basis, the draft legislation may create obstacles to the free movement of goods
within the internal (European Union [EU]) market contrary to the TFEU Art 34, and appears
to be a disproportionate response under the TFEU Art 36.55
Given these findings, the Scottish Government has been ‘invited to abstain from adopting the
draft legislation at issue’, and is required to inform the EC of the action it intends to take as a
result of this opinion by 27 December 2012.56 Should the Scottish Government implement the
draft legislation unamended, and without following this process, a letter of formal notice may
be issued by the EC under the TFEU Art 258.
DSICA acknowledges that unlike Scotland (as represented by the United Kingdom Government
in the European Union), Australia is not part of a similar trading bloc. However, it is noted that
Australia is a World Trade Organization (WTO) member, and therefore subject to the General
54
Countries raising objections to the legislation included Bulgaria, France, Italy, Portugal and Spain. See ‘Health Secretary “firmly”
believes minimum pricing meets European law’ STV News (online), <http://news.stv.tv/politics/193010-health-secretary-firmly-believesminimum-pricing-meets-european-law/>, 2 October 2012.
55
Communication from the Commission – SG(2012) D/52513; Directive 98/34/EC; Notification 2012/0394/UK.
56
Ibid.
DSICA Submission to the Australian National Preventative Health Agency
22
“Free The Spirit”
Agreement on Tariffs and Trade 1994 (GATT 1994) which imposes similar restrictions on the
application of quantitative restrictions under Art XI:1 as follows:
No prohibitions or restrictions other than duties, taxes or other
charges, whether made effective through quotas, import or export
licences or other measures, shall be instituted or maintained by any
contracting party on the importation of any product of the territory of
any other contracting party or on the exportation or sale for export of
any product destined for the territory of any other contracting party.57
The GATT Art XX provides for exceptions to the application of Art XI:1, such as where a
measure is:
•
necessary to protect public morals; or
•
necessary to protect human, animal or plant life or health.58
However, not only are these exceptions qualified by a necessity requirement, they must also
not be applied in a manner which would constitute a means of arbitrary or unjustifiable
discrimination or a disguised restriction on international trade.59 And, most importantly – in the
case of a measure which may be ‘necessary to protect human, animal or plant life or health’,
there must be no other reasonably available alternatives.60 As demonstrated above, and found
by the EC (albeit in the context of the TFEU), the application of excise duties is a more
appropriate and suitable alternative to the introduction of a minimum (floor) price. These factors
strongly suggest that if a minimum (floor) price were introduced in Australia, it would be in
violation of the GATT 1994 Art XI:1, and would not be subject to exemptions afforded under Art
XX.
Key point
The EC directive of November 2012 confirms that the draft minimum pricing legislation in
Scotland is incompatible with the TFEU, and the application of excise duties is a more
appropriate and suitable option to achieve the goal of reducing alcohol consumption without
resulting in any adverse effects on competition, and is less trade restrictive. Although not
directly applicable to the Australian context, as a WTO member Australia is subject to the GATT
1994 which imposes similar prohibitions on trade restrictions – these would arguably be
violated if a minimum (floor) price were introduced.
4.2.2
Additional findings concerning the Sheffield Alcohol Policy Model
A considerable amount of evidence supporting the introduction of a MUP in Scotland has been
taken from economic modelling undertaken by the School of Health and Related Research at
the University of Sheffield (referred to as the Sheffield Alcohol Policy Model). DSICA’s earlier
submission noted a number of criticisms of the Sheffield Alcohol Policy Model, particularly in
relation to the (lack of) effectiveness of a MUP in targeting heavy or harmful drinkers. Since
preparation of DSICA’s earlier submission, and release of the Draft Report, further criticisms of
57
General Agreement on Tariffs and Trade 1994 Art XI:1.
Ibid Art XX(a)-(b).
59
Ibid Art XX.
60
See Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products
(WT/DS135/ABR) (12 March 2001) [169]-[170].
58
23
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“Free the Spirit”
both the assumptions used in the Sheffield Alcohol Policy Model and the findings drawn from it
have emerged, including:
•
the application of a false assumption that heavy drinkers are made likely to reduce their
consumption of alcohol as a result of a price rise, which is based on controversial beliefs
about the relationship between per capita alcohol consumption and rates of alcohol-related
harm;61
•
an overestimation of the putative health benefits to be derived from minimum pricing;62
•
an overestimation of the reduction in overall alcohol consumption that it likely to take place
following the introduction of a MUP;63
•
a lack of consideration of other policy impacts arising from the introduction of a MUP,
including the possibility that the introduction of a MUP will fuel the market for illegally
produced alcohol and the effects of secondary poverty created by people on low incomes
spending a greater share of their wage on alcohol products;64 and
•
application of on-trade price data and price elasticities from England, which are not
inherently transferrable nor applicable to the Scottish market.65
These incorrect assumptions and oversights led Duffy and Snowdon to conclude:
No degree of statistical confidence can be placed in the values
produced. The models relating health consequences to consumption
cannot be considered reliable as they are based almost entirely on
assumptions with no direct individual level data relating consumption
and consequences. They are not fit for the purpose of estimating
rates of consequences, far less changes in these following policy
changes (emphasis added).66
These recent research findings, along with those outlined in DSICA’s earlier submission, clearly
demonstrate the lack of a robust evidence base demonstrating the effectiveness of minimum
pricing. These findings, along with the international trade concerns highlighted in section 4.2.1
strongly support DSICA’s contention that the Scottish experience cannot be relied upon by
policymakers as a sound case study upon which to base the introduction of a minimum (floor)
price in Australia.
Key point
Further critiques of the Sheffield Alcohol Policy Model reinforce DSICA’s view that it does not
provide a sound evidence base on which to inform public policy debate concerning the
introduction of a minimum (floor) price in Australia.
61
Duffy and Snowdon, above n 3, 5.
Ibid 11.
63
Ibid.
64
Ibid 12.
65
Ibid 20.
66
Ibid 23.
62
DSICA Submission to the Australian National Preventative Health Agency
24
“Free The Spirit”
4.3
England and Wales
Since publication of the Draft report, there have been significant developments pertaining to
the possible introduction of a MUP in England and Wales. As foreshadowed in DSICA’s earlier
submission and the Draft Report, the UK Home Office has undertaken further work in relation
to the Coalition Government’s earlier publication The Government’s Alcohol Strategy. Most
notably, on 28 November 2012, the UK Home Office released the paper A consultation on
delivering the Government’s policies to cut alcohol fuelled crime and anti-social behaviour
which seeks views on a number of measures outlined in the Strategy. Of note to DSICA is the
consultation process concerning the proposed introduction of a MUP of 45 pence per unit of
alcohol (approximately AUD 0.69) and affiliated Impact Statement concerning minimum unit
pricing,67 and the issues it raises in relation to:
•
the need for a holistic, integrated approach to addressing alcohol-related harms;
•
the fact that the introduction of a MUP in England and Wales is, to a significant degree,
driven by the need to increase the price of wine and cider products, which are not subject
to volumetric excise duty; and
•
concerns regarding the unintended consequences arising from the MUP measure.
DSICA acknowledges that in the United Kingdom context, the introduction of a MUP is being
considered as one of several options to ‘tackle the drink fuelled antisocial behaviour and crime
blighting [its] communities’.68 Unlike the Australian debate (which is largely focused on the
introduction of a minimum [floor] price alone, rather than the application of other interventions),
in the United Kingdom, minimum unit pricing ‘is taken on top of, not instead of, other regulatory
and non-regulatory measures to achieve the necessary impact’.69 While DSICA does not
support the introduction of a MUP in England or Wales (or Australia), it does support the
consideration of holistic, integrated responses to addressing risky and high risk drinking
behaviours and alcohol-related harms, and contends that a similar approach should be adopted
in Australia.
DSICA further notes that the Impact Assessment highlights key factors driving the possible
introduction of a MUP in England and Wales, which are substantially different to those in
Australia, arguably rendering the United Kingdom experience inapplicable to the Australian
context. To this end, the Impact Assessment notes that a MUP is a preferable approach to
alcohol (excise) duty changes as ‘alcohol duties alone could not bring about a system of
minimum pricing as EU rules prevent wine and cider duties being directly linked to their alcohol
content’.70 Indeed, the EC Council Directive 92/83/EEC requires all EU members to impose
unitary (i.e. per litre of fluid, not alcohol content) excise duty rates to wine, cider and other
fermented beverage products (excluding beer).71 Such an excise duty regime severs the link
between the amount of excise taxation paid and the alcohol content of the product, inhibiting
responsible consumption choices. However, Australia is not subject to similar directives. As
noted, replacement of the ad valorem WET with a volumetric taxation regime for wine products
(which include traditional cider) would result in a wholly volumetric excise duty system for all
alcohol beverages in Australia, creating an effective minimum (floor) price – hence overcoming
the need to introduce a statutory minimum pricing regime. Given this, one of the key driving
67
UK Home Office, A consultation on delivering the Government’s policies to cut alcohol fuelled crime and anti-social behaviour (UK
Home Office, 2012) [5.5]; UK Home Office, A Minimum Unit Price for Alcohol: Impact Assessment (UK Government, 2012).
68
UK Home Office, A consultation on delivering the Government’s policies to cut alcohol fuelled crime and anti-social behaviour (UK
Home Office, 2012) 4.
69
UK Home Office, A Minimum Unit Price for Alcohol: Impact Assessment (UK Government, 2012) 1.
70
Ibid 3.
71
Council Directive 92/83/EEC of 19 October 1992 Art 9 and Art 13.
25
DSICA Submission to the Australian National Preventative Health Agency
“Free the Spirit”
factors behind the introduction of a MUP in the England and Wales is neither analogous nor
applicable to the Australian context.
Finally, the Impact Assessment also reiterates a number of DSICA’s concerns relating to the
introduction of a minimum (floor) price, namely:
•
limitations of the Sheffield Alcohol Policy Model and subsequent conclusions relating to the
purported effectiveness of a MUP which can be drawn from it;72
•
the fact that a MUP has not yet been implemented in any other analogous country,
rendering potential consumer responses uncertain;73
•
potential ‘second round’ effects of a MUP that may result in shifts in strategy by retailers
and producers, including increased incentives for producers to produce lower-strength
alcohol products which retail at a lower price, and increases in price for products not
affected by a MUP in order to maintain a price differential for brand identity purposes;74 and
•
the fact that setting a MUP at a ‘significant’ level could lead to increased levels of
smuggling, illicit production and ‘bootlegging of alcohol,75 creating market distortions and
further inhibiting responsible consumption decisions.
DSICA contends that such concerns must be appropriate canvassed and addressed in any
alcohol policy development matters concerning the introduction of a minimum (floor) price –
particularly as they may lead to unintended (negative) consequences which could mitigate any
purported benefits of such a measure.
DSICA acknowledges that as the UK Home Office’s consultation process progresses it is highly
likely that further evidence relating to the purported benefits and consequences of a MUP will
emerge for review and comment. Such evidence and research findings must be viewed with
considerable caution due to the different policy imperatives behind the introduction of a MUP in
England and Wales and a minimum (floor) price in Australia. As noted earlier, the UK is subject
to EU trade restrictions which prohibit the application of volumetric taxation to certain beverage
categories – thus preventing an effective MUP being introduced through other taxation
measures. Australia is not bound by such requirements – and reform of the ad valorem WET to
a volumetric taxation regime would provide an effective minimum (floor) price.
Key point
The experience in England and Wales highlights the difficulties in identifying robust evidence
bases upon which to develop arguments in support of minimum (floor) pricing and confirms
that the different trade and regulatory environments observed in Australia and the United
Kingdom limit the degree to which comparative analysis can be undertaken and similar
approaches to addressing hazardous drinking behaviours may be adopted.
4.4
Conclusion
As stated in DSICA’s earlier submission, a review of available information relating to minimum
(floor) pricing and other similar interventions throughout the world does not reveal any
conclusive evidence demonstrating the effectiveness of such a measure in reducing risky and
72
UK Home Office, above n 69, 8.
Ibid 10.
74
Ibid 15.
75
Ibid 22. Note that what would constitute a ‘significant’ MUP has not been defined in the Impact Assessment.
73
DSICA Submission to the Australian National Preventative Health Agency
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high-risk drinking behaviours or alcohol-related harms. Indeed, any available evidence is to be
viewed with caution due to the lack of long-term data, contested assumptions regarding price
elasticities and the varying regulatory and policy environments concerning alcohol taxation,
distribution and sales in operation throughout the world. In light of this, DSICA contends that
available international experience relating to the effectiveness of minimum (floor) pricing is
limited, and does not provide a robust evidence base on which to pursue Australian alcohol
policy development activities.
27
DSICA Submission to the Australian National Preventative Health Agency
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5
Conclusion
DSICA’s earlier submission and foregoing analysis strongly suggest that the introduction of a
minimum (floor) price is not an appropriate policy intervention to achieve ANPHA’s stated
objectives of discouraging harmful consumption and promoting safer consumption. In
particular:
•
Australian per capita alcohol consumption is stable – and comparatively low by international
standards;
•
while the current Australian alcohol taxation regime fails to achieve desired economic,
health and social policy objectives, a minimum (floor) price will not redress these concerns
effectively;
•
there is a lack of empirical evidence demonstrating the effectiveness of minimum pricing
internationally. The application of findings from the Canadian SRP model to the Australian
context is precarious due to the significant differences between the Canadian alcohol
regulation model and the Australian experience;
•
assumptions on which much evidence regarding the effectiveness of a minimum (floor)
price in Scotland, England and Wales are highly flawed, and fail to consider second-round
impacts of a minimum (floor) pricing regime which may mitigate, if not entirely offset, any
purported benefits; and
•
the EC has indicated that the introduction of a MUP in Scotland is likely to be inconsistent
with the United Kingdom’s international trade obligations – arguably in a similar manner to
Australia’s obligations under the GATT 1994.
These factors considered, it is apparent that a minimum (floor) price would not provide an
evidence-based, holistic approach to addressing risky and high-risk consumption behaviours,
but would instead be a blunt, population-wide instrument which unfairly penalises the majority
of Australian drinkers who consume alcohol in a responsible manner.
DSICA remains committed to supporting evidence-based approaches to reducing the harm
associated with the excessive or inappropriate consumption of alcohol. The introduction of a
wholly volumetric alcohol taxation regime, initially through reform of the ad valorem WET, is in
line with international best practice approaches to alcohol taxation. Such a regime would deliver
desired health, social policy and revenue outcomes, and create an effective minimum (floor)
price for all alcohol beverages therefore removing the need to introduce a statutory minimum
pricing mechanism.
DSICA Submission to the Australian National Preventative Health Agency
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DSICA Submission to the Australian National Preventative Health Agency
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A
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membership
“Free The Spirit”
Distilled Spirits Industry Council of Australia Inc.
1st Floor 117 Ferrars Street South Melbourne Victoria Australia 3205
Telephone +61 3 9696 4466 Fax +61 3 9696 6648
All Correspondence: PO Box 1098 South Melbourne Victoria Australia 3205
Website: www.dsica.com.au E-mail: [email protected]
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