The Dim-Post

August 26, 2011

Unforseen consequence of the day

Filed under: economics,Politics — danylmc @ 4:24 pm

Via Stuff:

Prime Minister John Key has defended the Government’s decision not to include a minimum price in the alcohol reform legislation.

The Alcohol Reform Bill, which was reported back from select committee yesterday, allows for the collection of data needed to set a minimum price but does not go as far as saying one will be brought in.

The Law Commission identified price as a factor in the problem of binge drinking and recommended this investigation into minimum pricing, with an interim 50% increase in excise tax.

The results from the various modelling exercises all show strong support for the
introduction of a minimum price regime. When “minimum prices” were set below
or at the low end of the purchasing price points they had little impact on reducing
harmful outcomes. But as the level set for a minimum price increases, alcohol-related
hospital deaths and admissions fall, as do alcohol-related crimes.

Young and heavy drinkers prefer lower
cost products, so policies such as minimum pricing (and, less directly, excise tax
increases) which preferentially target low cost alcohol and in particular cheap
or discounted takeaway liquor will affect harmful drinkers proportionately more
than moderate drinkers.

It also mentions ‘loss-leading’ wherein retailers – ie the supermarket duopoly – sell alcohol at below cost to attract customers and increase the prices of products like fruit, vegetables and dairy to offset the loss.

So if we don’t have policies that address this practise, what happens after the election when this government rolls out their benefit card? It seems likely that the only outlets that will update their sales software for the benefit of a few thousand customers will be the supermarkets – so we’ll have policy settings in which the poorest people in the entire country are locked into buying their groceries from outlets that charge a premium to offset the sale of their alcohol – which the beneficiaries won’t be able to buy. So . . . under-age beneficiaries will be subsiding low cost alcohol for the rest of the community?

Surely I’ve made some logical error here?

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26 Comments »

  1. No, that’s a feature of any National government – the poorest subsidise the richest.

    But it’s non-discriminatory, *everyone* subsideses the richest. Just more so under National than under Labour.

    Comment by moz — August 26, 2011 @ 4:36 pm

  2. In Australia (and I assume NZ), the supermarkets have also upped the price on essentials to subsidise the cut-price petrol deals they offer. Which is kind of handy, it makes them less likely to wipe out the small shops that don’t do this. I buy most of my F&V from the local greengrocer.

    But upping grocery prices to make alcohol cheaper is exactly backwards. I would much rather have expensive parking, petrol and alcohol (and cigarettes) to make groceries cheaper. But those are things that seem to be hard to sell to morons, where “cheap petrol” apparently gets them all excited. Why can’t we have “2% off your grocery bill if you buy more than $50 worth of petrol” instead of the other way round?

    Comment by moz — August 26, 2011 @ 4:47 pm

  3. “It also mentions ‘loss-leading’ wherein retailers – ie the supermarket duopoly – sell alcohol at below cost to attract customers and increase the prices of products like fruit, vegetables and dairy to offset the loss.”

    Where does it say that? It talks about loss leading and deep discounts in the context of buying bulk volumes at low cost, and the highly competitive environment for alcohol, but does not mention anything about fruit and vegetable prices rising to comensate AFAICS.

    So if your premise is false your conclusion may also be. That could be considered a logical error.

    Comment by insider — August 26, 2011 @ 4:57 pm

  4. …what happens after the election when this government rolls out their benefit card?

    Your logic is basically fine, but this is not a foregone conclusions. Even if National wins there is no guarrantee that they will actually implement the benefit card and no guarrantee that they will implement in the vaugue form suggested. I’m betting that if they do anything at all, it will be implemented to cover a wider range of beneficiaries.

    Which will still be the poor subsidising the OH purchases of the wealthy, just a slightly bigger pool of poor.

    Comment by Richard — August 26, 2011 @ 5:19 pm

  5. > under-age beneficiaries will be subsiding low cost alcohol for the rest of the community

    I have got to say, that as someone who is not an under-age beneficiary, this sounds like a fantastic idea!

    A.

    Comment by Antoine — August 26, 2011 @ 5:21 pm

  6. … or to put insider’s comment another way: Supermarkets loss lead on items like alcohol, in order to entice you into the store and buy all that other shit you just need to get (A dollar off Ernest Adams raspberry slice? Choice!) and can’t be bothered making a separate trip for.

    Fresh fruit and vege: only a small part of this loss-recovery.

    Comment by Phil — August 26, 2011 @ 5:24 pm

  7. So . . . under-age beneficiaries will be subsiding low cost alcohol for the rest of the community?

    Surely I’ve made some logical error here?

    Yes. The under-age beneficiaries don’t have money of their own, and if they do, they don’t have to spend it at a supermarket. Rather, those who pay tax are subsidising their own alcohol by means of under-age beneficiaries.

    Comment by Graeme Edgeler — August 26, 2011 @ 5:55 pm

  8. “Rather, those who pay tax are subsidising their own alcohol by means of under-age beneficiaries.”

    So if people paid more tax, and under-age beneficiaries were given more fancy supermarket vouchers, the subsidies on alcohol would be even larger. Is the National Party about to announce an increase in tax rates, with the sweetener of cheaper booze for all taxpayers?

    Comment by Nick — August 26, 2011 @ 6:22 pm

  9. Not being able to buy booze isn’t much of an obstacle to drinking it. How many people here have made the equivalent of 56 stubbies (23 litres) of beer for about $15?

    I have…and if you decant it with care it’s a fine drop. Made in your laundry or garage….no tax, no ID required.

    Kiwi young people determined to drink should be embarrassed they have so little initiative and curiosity that they haven’t owrked out how to brew up enough beer for a sodden year for under $100….

    I don’t drink much. Maybe two beers a month. But I wouldn’t let ID or pricing put me off if I was determined to get pissed. Fruit, sugar and turbo yeast…and you’ve got a brew in a bucket in a day or two. Not nice stuff, particularly, but sweet enough and not short of alcohol.

    Comment by Steve (@nza1) — August 26, 2011 @ 6:29 pm

  10. Moz said: ‘why can’t we have “2% off your grocery bill if you buy more than $50 worth of petrol”’

    I think this would actually have the same effect – a saving for those who buy lots of both groceries and petrol. Somebody who doesn’t drive much still wouldn’t get it.

    Comment by Kahikatea — August 26, 2011 @ 6:32 pm

  11. Why blame the duopoly for cheap booze.. I can buy reasonable quality Pinot Gris ,Chardonney etc for $6.99 at the Indian run supermarkets, thats better than the big boys.

    Something else I’ve noticed.. some people a buying a bottle of wine where before they bought a dozen of beer. I’m biased, but that seems a better trend.

    JC

    Comment by JC — August 26, 2011 @ 8:19 pm

  12. So Toby will be of some use after all? Excellent.

    Comment by gn — August 26, 2011 @ 8:31 pm

  13. “How many people here have made the equivalent of 56 stubbies (23 litres) of beer for about $15? ”

    I bought Coopers brand brewing sucrose (only) at New World a few months ago and got carded! Apparently computer says no. Told the old dragon that anyone under 18 who gets through ncea and is still smart enough to turn sucrose into alcohol, deserves to be able to do so.

    Comment by gn — August 26, 2011 @ 8:38 pm

  14. Your logic is basically fine, but this is not a foregone conclusions. Even if National wins there is no guarrantee that they will actually implement the benefit card and no guarrantee that they will implement in the vaugue form suggested. I’m betting that if they do anything at all, it will be implemented to cover a wider range of beneficiaries.

    @Richard

    This is in fact baked in the cake. I work for a company that has applied successfully to be a”provider” with the new card based system. Which we have been told works like a stored value card over the existing eftpos system. It also has to be rolled out to the larger beneficiary population. This has been on the go from WINZ for a few months and from the paper work will cancel all other payment methods in the near future.

    Personally I think it’s a good idea and looks to be done reasonably well. It will allow say a beneficiary to pay a power bill at the post office and go next door and buy groceries. Saving lots of bank fees and double handling. It will have a few down sides but all in all I think it’s a good idea.

    I also think that this is an initiative from the department not the politicians, but the roll out is a soft one on a small sample to iron out bugs. Also some politics involved, but the way it has been not rushed and carefully done tells me it’s been planned for ages. I would say the eftpos companies would be deeply involved supplying card equipment and training. Not cheap and not quick.

    Comment by Andy (the other one) — August 26, 2011 @ 8:56 pm

  15. Didn’t the new legislation ban convenience stores from serving alcohol as well? Even less competition for the supermarket duopoly.

    Comment by Paul Rowe — August 26, 2011 @ 11:10 pm

  16. Practice. And it’s nothing new, redirections or the equivalent of setting up automatic payments for those who find it a chore. Nanny State in extremis of course, which is why Labour couldn’t possibly implement it, but of prime benefit to landlords and power companies. Which again, of course, is why NACT just lurrves it, come 2011. Nothing to do with groceries – let them eat lamington and remember that bugger-all will starve if we give them nothing tomorrow. Beer and wool cups are simply today’s bread and circuses, and anway focus on what matters:

    We’ve stopped bennies spending your hard-earned taxpayer money on piss and fags. Tick.

    Comment by ak — August 27, 2011 @ 12:21 am

  17. “Personally I think it’s a good idea and looks to be done reasonably well. It will allow say a beneficiary to pay a power bill at the post office and go next door and buy groceries. Saving lots of bank fees and double handling.”

    I’m not a beneficiary, but I feel like I can already do this. Except instead of going to the post office I pay my power bill online, and instead of being forced to go to the supermarket I get to go to the farmer’s market. I mean, isn’t the system you’re describing, basically, money? So wouldn’t the cards, actually, increase fees and double handling?

    Comment by Tui — August 27, 2011 @ 2:42 am

  18. Remind me, what is the problem with binge drinking again?

    Comment by Hugh — August 27, 2011 @ 3:45 am

  19. Memory loss…

    Comment by Sam — August 27, 2011 @ 9:26 pm

  20. The short answer is ban all alcohol sales everywhere.

    Problem solved.

    Heh.

    Comment by peterlepaysan — August 27, 2011 @ 10:24 pm

  21. “Remind me, what is the problem with binge drinking again?”

    Highly visible drunk people providing convenient targets for reformers, who don’t actually fund the alcohol industry, so nobody minds draconian measures against them. If only binge drinkers would go away we’d have to accept that the statistics around the damage caused to the country by alcohol abuse are caused by something more complicated than those damn yoof.

    Comment by Tui — August 28, 2011 @ 8:52 pm

  22. @21

    Seems to be the consistent method Key’s populism. Be seen to be doing something as quickly as possible and make sure that that gets the headlines. What comes after and which has a real effect can put down to conspiracy, incompetence or sloth depending on one’s outlook.

    Comment by Rhinocrates — August 28, 2011 @ 9:05 pm

  23. Bah, italics fail. Move along. I’m enjoying my Scotch anyway.

    Comment by Rhinocrates — August 28, 2011 @ 9:06 pm

  24. Highly visible drunk people providing convenient targets for reformers, who don’t actually fund the alcohol industry, so nobody minds draconian measures against them. If only binge drinkers would go away we’d have to accept that the statistics around the damage caused to the country by alcohol abuse are caused by something more complicated than those damn yoof.Bah, italics fail. Move along. I’m enjoying my Scotch anyway.

    Comment by nike official site — August 28, 2011 @ 9:23 pm

  25. I’m not sure the public really understands what minimum pricing would mean. Take this quote from Anthony Hubbard’s column in the SST: “Alcoholwatch, the organisation of health professionals which has led the charge against the government, says all it needs to do is set a price such as $2 for a standard drink.” That means that you couldn’t buy an alcopop at the offie for under $2, which sounds fair enough, right?

    But it doesn’t mean that all of the other prices stay the same. The minimum price for a bottle of wine would become $14-16 as they contain anywhere from 7.1-8.3 standard drinks (depending on alcohol content of 12-14%). Now if your Marque Vue or Bernadino starts costing $14 instead of half that, then you can bet that the makers of the $15-$20 bottles of wine that I buy would want to differentiate their product by increasing their price by another $10 beyond the cheap fizzy stuff. But then maybe I’m exactly the kind of problem drinker in-denial that folks like Alcoholwatch are trying to save from myself.

    Oh, and all the margin between the current retail price and the minimum price goes to the industry.

    Comment by Augie — August 29, 2011 @ 9:47 am

  26. We need beer to be exempted from excise taxation. That will make it cheaper, the pubs will be more profitable, the proprietors will pay more tax and hire more staff, the country will be better off.

    All other alcohol, raise the excise tax a bit more. Not too much because some of us like to alternate beer with vodka or rum, but just a bit to make it look good.

    Comment by Gryte — August 31, 2011 @ 11:03 am


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