A blow to the Scottish Government’s quest for a minimum alcohol price?

By Daniel Kenealy

An Advocate-General (AG) of the Court of Justice of the European Union (CJEU) yesterday issued an opinion on the proposal by the Scottish Government to introduce a minimum price per unit (MPU) for alcohol. The entire opinion can be read here.The key point made by the AG is that the Scottish Government’s policy may risk breaching the EU’s rules on free trade. More specifically, the AG has said that MPU can only be introduced if the Scottish Government can demonstrate that no alternative public policy measure can achieve their stated public health goals.

Background –

The Scottish Government passed legislation for MPU back in 2012 on the grounds that it would help tackle serious public health problems in Scotland stemming from alcohol consumption. It would introduce a minimum price of 50p for a unit of alcohol. The policy decision was backed by some hefty analysis and evidence.

A legal challenge was brought forward, spearheaded by the Scotch Whisky Association arguing that the law would be contrary to EU law as a restriction on the free movement of goods. The Scottish Government countered that it was justifiable on public health grounds. Originally heard the Court of Session in Edinburgh, where Lord Doherty rejected the SWA’s case. On appeal, the case was transferred to the CJEU because it raises significant questions of European law. Other EU member states – including France, Italy, and Bulgaria – have raised concerns about Scotland’s MPU proposals.

The case is a fascinating example of public policy working at multiple levels of government. The Scottish policy community has come together to advance an evidence-based policy (as detailed in this excellent peer-reviewed article). A rival group of stakeholders with conflicting interests have appealed to law at another level of governnace (the supranational/European) and build up support across the continent from alcohol producers/exporters in other EU member states. And there is a suggestion that the Scottish Government pursue an alternative measure, namely higher taxation of alcohol, that they are not empowered to pursue because authority lies at a third level of government (the national/UK).

In response to the decision by the AG, the First Minister remained confident that MPU could be introduced. She remarked:

We welcome this opinion, in which the advocate general confirms that minimum unit pricing is not precluded by EU law, but sets out tests that the national court has to apply … Importantly, this initial opinion indicates it will be for the domestic courts to take a final decision on minimum unit pricing. The advocate general finds that the policy can be implemented if it is shown to be the most effective public health measure available. As such, the legal process is ongoing and we await a final response from the European Court of Justice, before the case returns to the Scottish courts.

The Scottish Conservatives stopped short of welcoming the ruling, but their spokesman Jackson Carlaw didn’t go to great lengths to avoid an approving tone. Compare that to Patrick Harvie, co-convener of the Scottish Green Party:

The stymying of minimum pricing by a lobby group representing big drinks multinationals mirrors the tactics of the tobacco industry when it tried to stop life-saving legislation. Today’s statement from the European Court is disappointing and we must hope that wiser heads prevail when the final judgement is issued.

The opinion –

The AG said that the policy of minimum pricing “meets the objective of combating alcohol abuse in a consistent and systematic manner … The question that arises is whether the objective of protecting public health pursued by the Scottish authorities could not be attained in a less restrictive and equally effective manner by a fiscal measure.”

He goes on: “In other words, would a higher tax on alcoholic beverages enable the same objective to be attained as rules imposing a minimum price, while being less restrictive of trade? … [It] is for those responsible for the drafting of those rules to show that increased taxation is not capable of meeting that targeted objective”.

Crucially, he concludes: “Having regard to the principle of proportionality, it is difficult to justify the rules at issue, which appear to me to be less consistent and effective than an ‘increased taxation’ measure and may even be perceived as being discriminatory.”

In essence what the AG is saying is that the MPU proposal is not the optimal way of attaining the Scottish Government’s desired policy outcome. He suggests that MPU might be discriminatory to certain types of alcohol producer, and certain brands, and could act as a barrier to trade (for example, if one of your market entry tactics is to sell cheaply to attract a customer base, MPU might take that option away). Clearly, the AG prefers the idea of a general increase in taxation on alcohol.

But the Scottish Government lacks the power to tax alcohol. Various devolution commissions – Calman, Holtham, Smith – have considered whether alcohol and tobacco duties (or so-called ‘sin taxes’) should be devolved. All such commissions have generally come down on the side of ‘No’, usually grounded in a fear of bootlegging in the event of differential prices emerging in different parts of the UK.

The CJEU is unlikely to be persuaded by an argument that, because the Scottish Government lacks the power to tax alcohol, that MPU thus becomes proportionate. Thankfully, the Scottish Government doesn’t need to rely exclusively, or even at all, on that argument.

The government’s argument must be that simply hiking taxes on all alcohol cannot achieve the same policy outcomes as MPU, because MPU allows the government to target high-strength, low-cost products (i.e. those that cause the most harm from a public health perspective). The evidence is there to support that argument. And the debate has not yet been fully explored. When the case was heard at the Court of Session issues around the policy impact of MPU versus higher taxation, and issues around the trade restricting effects of MPU versus higher taxation, were not debated as exhaustively as they might have been. Nor are they intricately explored in the AG’s opinion published yesterday.

As Lord Doherty himself said (para. 66 of the Court of Session decision): “If the alternative measures would not be just as effective as minimum pricing in achieving the legitimate aims, minimum pricing would be necessary and proportionate.” He has, in essence, spelled out of the government’s task.

What happens next? –

The Court of Justice of the European Union will now consider the case and that means this issue will rumble on for at least another six months, at which point it will return to the Court in Edinburgh.

If the CJEU follows the AG’s opinion – and, as commentators over the past 24 hours have pointed out, they usually do – then MPU in Scotland has probably reached a dead end. That would leave the Scottish Government in a position where they’d have to find some less trade-restrictive policy measure to achieve their desired policy outcome. The problem is that it remains unclear what that alternative might be.

I would expect, further down the line, the SNP to use this as another example of how a less-than-comprehensive package of devolved powers hinders the development of an autonomous and distinct public policy in Scotland. That is, after all, grist to their macro-argument that only with greater autonomy, and indeed independence, can Scotland do as it wishes. Hopefully, between now and the CJEU’s hearing of the case, they will prioritise public policy over politics because it remains possible that they could persuade the CJEU that their current policy proposal is appropriate, proportional, and less trade-restrictive than an across-the-board increase in alcohol duties.

__________

Daniel Kenealy is a Lecturer in Public Policy at the University of Edinburgh Academy of Government and co-editor of The European Union: How Does it Work?

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