Friday, 11 August 2017

Alcohol policy reform: addressing the underlying economic incentives



In the previous post on the recent Australian Law Reform Commission Discussion Paper, I pointed to the failure of the Discussion Paper to canvass options to address the taxation of alcohol, notwithstanding the underlying incentives to consume some forms of alcohol over others, and the potential to constrain overall consumption of alcohol through use of price based incentives which might be imposed through increased taxation of alcohol.

More generally, the ALRC had in my view ignored the economic costs of high rates of imprisonment which were in turn a product of high rates of alcohol abuse by the minority of Indigenous people who drink.

I was pleased therefore to come across the recently released report from the Foundation for Alcohol Research and Education (FARE): ‘The Price is Right: Setting a Minimum Unit Price on Alcohol in the Northern Territory’ (link here).

The core argument is summed up in the first paragraph:
Relative to wages, the cost of alcohol has reduced considerably in the Northern Territory (NT) over the past 20 years. Lower prices and the resulting increase in demand has contributed to unacceptable levels of harm in the community. With rates arguably among the highest in the world, the harm caused by alcohol is more prominent in the NT than in any other Australian jurisdiction. While the Commonwealth Government remains uncommitted to reforming a defective alcohol tax system, which has driven the proliferation of cheap alcohol, it is incumbent on the NT government to explore options to stem alcohol’s harm. A minimum unit price, which would set a price per unit below which alcohol cannot be sold, is one such measure.

This report is short, succinct, well researched, outlines the harm caused by alcohol abuse, explores options for utilising the tax system to address the issue, and is admirably focussed on arguing for a practical and achievable policy change which will drive myriad benefits across the NT if implemented.

I strongly recommend readers to have a look at it. You will almost certainly learn something new.

I want to note just two points in relation to the report.

The first is that the report notes in passing the failure of the Commonwealth to reform the ‘defective alcohol tax system’. It doesn’t explore the reasons for this reluctance. Those who wish to understand the reasons for this reluctance would do well to look into the resources allocated towards advocacy, lobbying and political donations by the alcohol industry in Australia. Taxpayers are the losers. Rent-seeking is alive and well in Canberra, including by the alcohol industry, with terrible consequences for those affected by alcoholism, and insidious implications for our democracy (link here).

Second, nowhere does the report explicitly mention Indigenous people. This is clearly deliberate insofar as the report is arguing for a mainstream policy intervention which will impact all alcohol consumers. Yet the exceptional status of the NT as subject to the most disproportionate alcohol harm in the nation (see Figure One in the report) is due in very large measure to the high proportion of Indigenous people in the NT, and the high levels of alcohol abuse amongst those Indigenous people who drink.

Taking these two points together provides a clear example of how mainstream policy (or more accurately lack of policy) can operate to disadvantage Indigenous Australians economically, socially, health wise, and ultimately in terms of high mortality rates.

Of course, alcohol abuse is not solely an Indigenous issue. Nevertheless, the high levels of harm identified in the NT are also likely to be present in areas with high concentrations of Indigenous people in other jurisdictions. While the Northern Territory Government appears to have a greater incentive to adopt the policy approach advocated by FARE, other jurisdictions also face increasing costs in their health systems, their justice systems, their social housing systems, their welfare systems, and their child protections systems. These costs are all linked either directly or indirectly to alcohol and other substance abuse.


And of course, the highest costs fall on those directly affected by alcohol abuse, either as a drinker or as a family member of a drinker. The impact in terms of constrained and reduced life opportunities is enormous, and demands action. It is time for some national leadership.