Will the SNP’s alcohol pricing policy have an unhealthy effect on the drinks industry?

NICOLA Sturgeon was in a determined mood as she entered the specialist alcohol unit at Glasgow’s Gartnavel Royal Hospital, intent on seeing through her plans to tackle Scotland’s binge-drinking culture.

The health minister could afford a degree of certitude within the confines of Kershaw, a purpose-built unit designed to patch back together lives torn apart by addiction. As intended, the setting reinforced her hold over the moral high ground, as did the timely release of fresh figures on the high correlation between alcohol and crime in this country.

Her mission is to revive the controversial minimum pricing bill that failed to gain the approval of parliament last year.

“I hope that this time around MSPs will do the right thing and back this policy that has the support of doctors, nurses, the police and growing numbers of the general population,” Sturgeon proclaimed on Monday. “I will not shirk from leading the way in addressing this challenge. It is time for Scotland to win its battle with the booze.”

The announcement came as no surprise, as Sturgeon’s Scottish National Party had repeatedly affirmed it would re-launch this flagship policy after taking an outright majority at Holyrood in the May elections. No longer encumbered by pitfalls of coalition government, the SNP looks set to get its bill through this time around.

Leaders in the whisky industry, however, are warning that decisions designed to address domestic issues could throw their booming export trade into reverse. They say minimum pricing is certainly misguided, and most probably illegal.

“We do not believe this is going to be effective in tackling alcohol harm,” says Campbell Evans, director of government and consumer affairs at the Scotch Whisky Association. “Even the Sheffield study commissioned by the government showed that minimum pricing would have no impact on that minority of harmful drinkers.

“Secondly, we believe it would be illegal, but our biggest concern is that it would allow trade barriers to be erected in foreign markets where most Scotch whisky is sold.”

Evans cites the example of South Korea, where the European Union won a case in 1999 with the World Trade Organisation to force level taxation of imported spirits and local brew Soju. Since then, South Korea has made “a number” of attempts to put a health tax on products with an alcohol content of 30 per cent or more – against an average in the mid-20s for Soju – but has been thwarted by trade regulations.

“The important point is the principle of establishing a precedent,” Evans says. “If Scotland were to bypass free trade rules on the basis of public health considerations, then other countries could argue the same, no matter how spurious their claims.”

Latest figures show that overseas sales of Scottish whisky jumped 22 per cent in the first six months of this year to £1.8 billion, accounting for more than 20 per cent of all the nation’s exports. As such, the country’s amber nectar is proving a major contributor towards the government’s target of increasing exports by 50 per cent by 2017. However, some in the drinks industry believe there is more at play than simply meeting economic – or even health and safety – targets. While deputy leader Sturgeon battles to repair Scotland’s “unhealthy relationship” with drink, many suggest her commander is using this as a beachhead in an altogether different war.

“In my view, in a year’s time or 18 months’ time, when they start talking seriously about the referendum on independence, Alex Salmond will use this as another example of why we should separate from the UK,” says one industry executive.

“It is all part of building up an armoury of bullet points that they can use to get people to support them in what they want to do.”

Some, such as the Scotch Whisky Association, believe it would be more sensible to create a floor price for alcohol by revising duty rates and VAT. However, these are powers currently reserved to Westminster.

Having watched as Scottish Labour enacted the UK’s first public smoking ban – a plan originally mooted by the SNP – one wry observer says the Nationalists are now keen to put their own mark on history. “They want to be able to say to the world that they were the first. And, if it doesn’t get through, then the SNP can point to the fact that they didn’t have the powers they needed to do it properly.”

The Nationalists insist they have been advised that minimum pricing will not be struck down by EU law. The Scottish Grocers Federation – which represents about 1,700 independent convenience shops across the country – is calling for proof of that to be made public before what could be a drawn-out court wrangle.

“The government’s legal advisers say minimum pricing is legally competent, but we would like to see evidence of that,” says chief executive John Drummond. “After all, even the UK government has said it is probably illegal.”

Patrick Browne, head of the Scottish arm of the British Beer & Pub Association, says it is difficult to predict what impact the measures will have across the wider industry until the government decides at what level to set its minimum price. Last time around, the floor of 45p per unit of alcohol would have increased the cost of basic vodka by £3.50 to £11.85 per bottle, and tripled the price of a bottle of strong cider to £3.75.

This will drive some consumers into shopping south of the Border, either by physically travelling south or through online orders dispatched from warehouses elsewhere. Problem is, no one knows to what extent this would take place.

“Given the numbers we are talking about, there will be a compelling incentive to look at internet sales,” Browne says.

Major supermarkets have been using this tactic since 1 October, when the ban on multi-buy alcohol discounts came into force. Others have sidestepped it in different ways, such as Majestic Wine’s decision to reduce its single-bottle price in Scotland to the equivalent of multi-buy offers elsewhere in the UK.

Looking into the remains of purely Scottish-based transactions, another unknown is who exactly would benefit from the higher prices to be charged. As the government will not collect this through either VAT or duty, the cash will flow elsewhere into the industry.

Some claim that retailers will see an uplift, but shopkeepers say this would not be the case if brewers and distillers decided to charge more in the wake of new regulations.

The only certainty at this point, it seems, is the mounting sense of frustration over a new law which some say will not meet its stated objectives. Drummond would like to see more resources targeted to education programmes such as the successful Fife Alcohol Partnership Project, rather than further regulatory binds on retailers.

“Nobody would deny there is a serious issue with alcohol, but you have got to ask whether this is the best way to deal with the problem,” he says.

“If price is the reason for these problems, why do we not see the same things happening in England and the rest of the UK, where the pricing structure is exactly the same as it was in Scotland before 1 October?”