MINIMUM UNIT PRICING - THE RESULTS!
07/09/2015
Like an interminable series of the X Factor the issue of minimum unit pricing (MUP) has dragged on and on. And I’m getting bored now!
Yesterday saw the publication of the opinion of the Advocate General of the European Court of Justice (ECJ) on the legality of MUP under EU law. This was billed as a definitive opinion on whether MUP could lawfully proceed or not. And it didn’t quite live up to the pre-publication hype. It was a wordy, 41 page judgment written in deep legal-speak and it took me quite some time to understand whether it was saying “yes MUP is legal” or “oh no, it’s not!”
On reflection I think it is pretty clear that the Advocate General was not a fan of Nicola Sturgeon’s pet project and that his opinion struck a potentially fatal blow to the whole ill-conceived measure. Amongst other things he found that fixing a minimum price for a unit of alcohol could only be justified if the Scottish Government could prove that alternative means of curbing excessive consumption, such as increasing taxation, would not deliver the same, or substantially the same benefits – but without restricting trade and the free movement of goods. He concluded it was “difficult to justify” minimum pricing as it appeared “less consistent and effective” than increasing taxes and “may even be perceived as being discriminatory.” Ouch! Take that!
But let’s take a step back and consider the legal issues: one of the fundamental principles of the EU is free movement of goods. Anything that impedes that is likely to be ruled unlawful. So, put yourself in the position of a Spanish wine maker. Your operation is efficient and your costs are low. You pass this onto the consumer and your wine is inexpensive to buy so you can sell lots of it. Up pops the Scottish Government and imposes a minimum unit price that makes your wine more expensive. The outcome is that you can no longer reap the competitive advantage that arises out of your efficiency, so your volumes will fall. Both sides in this case agreed that this amounted to a “quantitative restriction” – an impediment to free movement of goods – and therefore, on the face of it, illegal.
Ah, but there’s a get-out clause that says such restrictions may be lawful if they are necessary to protect public health. However, any such measure would have to pass the “proportionality test”. This means that the measure (MUP) must not be disproportionate to the desired goal (improving public health), and if there is an alternative measure that would protect public health and not impede or restrict the free movement of goods then you must choose that instead. And it was this point that greatly exercised the Advocate General when he pointed out that the Scottish Government had provided no evidence to show that taxation wasn’t at least as effective, if not more so, as a means of reducing excessive alcohol consumption.
Now the issue of “proportionality” did not fall from the sky; the Scottish Government wasn’t ambushed by this proposition. Both sides knew this would be the crux of the matter. So when Nicola Sturgeon commented yesterday that “the policy (MUP) can be implemented if it is shown to be the most effective public health measure available”; and that “it will be for the domestic courts to take the final decision” she sounds like a drowning person clinging to a life ring with a puncture in it, who nevertheless maintains “I’m still optimistic!”
Firstly, it was always going to be up to the domestic court and its judges to decide – but with the ruling of the ECJ ringing in their ears. Secondly, it’s not just about establishing that MUP is the most effective measure, it’s about explaining to the court’s satisfaction why you didn’t choose a measure that could achieve substantially the same objective, but without discriminating against efficient producers with low costs and low prices. The Scottish Government had ample notice that this would be the crucial test, but failed to provide any evidence with regard to why they were insisting that only MUP could achieve their objectives.
I think that one of the things the Advocate General picked up on is that the Scottish Government was confused about what the objectives of MUP actually are. Is it intended to deter heavy drinkers and reduce their consumption? Well, many heavy drinkers are quire well-heeled so it is unlikely that you could successfully argue that price rises would deter them. Was it to reduce alcohol consumption across the whole population? Well, clearly alcohol duty is a much better mechanism for doing that, and in any event why should ordinary, moderate drinkers be penalised in this way? Or could it just be that they want to reduce the alcohol consumption of poor people with a regressive sin tax?
I think the Advocate General’s opinion blows MUP out of the water. Get over it Nicola, and move on.
Paul Chase