Drinks industry must resist David Cameron's meddling on prices
20.05.12
George Osborne spoke, rightly, about the need for consistency if businesses
are to thrive in the UK. The Chancellor said he was heartily tired of
policymakers constantly moving the business goal posts. Sadly, the goal-post
movers still appear to be in the ascendency.
Minimum pricing is anti-competitive, risks breaching single-market rules laid
down to allow the UK to thrive in a globalised world and will not achieve
what it proposes, namely a reduction in harmful drinking.
When it comes to drink, the market is price inelastic. That is, everyday
consumers of alcohol – i.e. not those problem drinkers the Government is
supposedly targeting with these plans – are sensitive to cost.
That maintains market discipline, as companies are loathe to put up prices to
increase profit levels for fear of losing sales and market share. Minimum
pricing would distort this, exaggerating market success of certain beverages
and the market failure of others.
Source: Telegraph.co.uk