The Minimum Pricing Puzzle

Minimum pricing. Two words which have reverberated around the licensed trade and the mainstream media for 4 years now and more. Matters came to a head this week when Sturgeon and co announced that the minimum price would be 50p.

The actual mechanics of minimum pricing are at least as interesting, certainly for a licensing chap like me, as the big headline stuff – like how many lives will be saved and possible challenges on EU competition grounds. I have elected to restrain myself from discussing those issues here, (and even from a sociological riposte of the Sheffield modelling) and instead wish to look at practical implications, as these have been overlooked to a greater extent.

The Pricing Puzzle
So what exactly is minimum pricing? Minimum pricing is a proposed mandatory condition to be attached to all premises licences in Scotland under the Licensing (Scotland) Act 2005. This will sit alongside other conditions such as the ban on irresponsible promotions, paying the annual licence fee and so on.

But there are premises which sell alcohol but will not be required to observe the minimum price – that is, premises which do not hold a licence. Certain premises are exempt, although alcohol sales are made. Wholesalers, for one. Wholesale premises do not require a licence unless they sell to the public. In other words, sales to trade from wholesales can be as cheap as you like.

Another example is airside pubs and bars. Premises on the other side of the security checks at certain airports are exempt from the need to hold a licence. Minimum pricing therefore does not affect them – no licence, no licence condition. I doubt, however, that such premises sell drink cheap enough to be affected. At 50p a unit a pint of typical lager at 2 units would have to be sold for – wait for it – at least £1. This type of exemption can also apply to ports or ‘wharfside’ bars. The list of exempted premises also includes ferry vessels and trains, and finally armed forces premises. There are some off sales premises on MOD land, for armed forces personnel and families, and these would be free to sell take home booze as cheap as they like.

The condition only applies to premises in Scotland so businesses with despatch premises elsewhere can simply ignore minimum pricing. I doubt that the saving available is large enough to see fleets of white vans invading Carlisle. However online operations with warehouses just over the border could, if they wished, offer pricing under the minimum.

The Price is Right
So the minimum price starts at 50p. But of course this could be raised once the provisions are in place so next year it could be 75p and so on. (*Update 16 May 2012 – In a letter to Duncan McNeil MSP, the Convenor of the Health & Sport Committee, Nicola Sturgeon says: “The minimum price per unit would remain at 50p for at least two years following implementation in order to allow the market to react and settle. Thereafter I would propose a policy review would be carried out on a regular basis in order to ensure the minimum price remains proportionate. My intention is that the policy review will be carried out biennially“)

On sales cries to balance out the extra profits ingathered by off trade retailers through minimum pricing by imposing an additional ‘social responsibility’ levy may be unwise given the draft levy (which is currently in the legislative long grass) would apply to all licensed premises, and would even catch other business licences such as street traders and late night catering premises such as chip shops.

One final point – enforcement. As a mandatory licence condition it will be up to local licensing standards officers to check every product to ensure it ‘meets the minimum’. This could be a task and a half. How often will products need to be checked? Every week? Council calculators at the ready!



About Stephen McGowan

Leading Scottish licensing solicitor at TLT LLP.
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