Sir, – Your editorial of February 8th blames lobbying for the slow progress through the Oireachtas of the Public Health (Alchohol) Bill.
The Bill’s many absurdities and contradictions explain better the slow progress of its passage through parliamentary scrutiny.
The concept of demerit goods, including alcohol, is not new in economics. The Bill’s treatment of demerit is fatally flawed because it increases the incomes of those who produce this demerit good. It is absurd to seek to reduce consumption of a demerit good by increasing the incomes of those who supply it.
Members of the Oireachtas have known since December 15, 2015, that the minimum pricing impacts of the Bill will increase the income of alcohol retailers by €78.3 million a year. (The Oireachtas Library and Research Service Digest on Public Health (Alcohol) Bill 2015, page 32).
My opposition to be Bill in 2015 emphasised that price increases intended to curtail alcohol consumption should accrue to the exchequer, as with excise taxes, and should not benefit alcohol retailers.
The Oireachtas was correct to question why the revenue from increasing the price of a demerit good was not available to the exchequer to increase the supply of merit goods such as health services, education and environment.
Your editorial states that “when vested interests move to protect their profits, public health takes second place”. This is precisely what the Bill does. Hiding alcohol at the back of the shop was a mere sideshow once alcohol retailers had the bonus of €78.3 million extra annual profits for minimal outlay.
The contest is now how this €78.3 million will be shared between the various elements of the alcohol supply chain.
Minimum pricing in this Bill is not based on the social cost of demerit goods because it exempts high-price purchases. We were regularly assured by proponents of the Bill that it would not affect the price of drink consumed in hotels and private clubs. If you can afford to buy higher priced alcohol, the demerit of alcohol in the Bill mysteriously disappears. Cheap alcohol is a demerit good. Dear alcohol is not a demerit good under minimum pricing.
Efficient retailing and distribution have resulted in lower prices in supermarkets than in other outlets. The Bill defines efficient retailing as a demerit good to be subject to minimum pricing but high-cost inefficient retailing is exempt. In internationally traded goods minimum pricing reduces the share of the selling price to the primary producer in order to benefit the retailer.
Since Ireland is committed to free trade as a small open economy we may come to regret this distortion of international trade. If Ruritania were to impose minimum pricing on, say, Irish butter (on health grounds, of course) its retailers would benefit and the share of Irish dairy producers in the selling price would fall.
World Health Organisation data indicate that alcohol consumption in Ireland fell by 24 per cent from 14.4 litres per head in 2003/2005 to 10.9 in 2015, the average for the 28 EU member states. Excise taxes worked. The data also show 26 countries worldwide with higher alcohol consumption than Ireland.
Instead of bungled interventions in retailing, the Irish health sector should address its poor budgeting, long waiting lists, the trolley population in the corridors and overall costs which are excessive by international standards. – Yours, etc,
Dr SEAN BARRETT,
Department of Economics,
Trinity College Dublin,
Dublin 2.