Alcohol and the Scottish economy
By Aveek Bhattacharya, The Social Market Foundation.
In this blog, Aveek Bhattacharya discusses the findings of his latest report Getting in the spirit? Alcohol and the Scottish economy.
On the face of it, the dilemma facing the Scottish Government as it weighs restrictions on alcohol marketing seems clear enough. Saving lives versus supporting the economy. Health versus wealth. Yet that is not, in fact, the trade off the Scottish Government must make. The mooted policies are unlikely to have much of an effect on the Scottish economy, and might even be good for it.
For now, the decision before the Scottish Government is whether to ban or restrict alcohol companies from sponsoring sports and other events, advertising in the media and in public spaces and regulate the content of such marketing. Such measures are difficult to evaluate, but there is some evidence to suggest that they can be effective. For example, a complete ban on alcohol advertising in Norway in 1975 is estimated to have reduced alcohol sales by around 7%.
The Scottish Government has made significant progress in curbing alcohol harm in recent years. At the turn of the century, the country’s alcohol-specific death rate was three times that of England’s. Today, it is ‘only’ 60% higher. But with harmful drinking spiking again in the pandemic, it is understandable that the Government is being urged to do more.
Alcohol producers and marketers don’t like the plan, unsurprisingly, framing it as an assault on one of Scotland’s most potent symbols and significant economic success stories: the whisky industry. Hiding behind whisky is a familiar tactic. It was the Scotch Whisky Association which led the legal challenge to the Scottish Government’s minimum unit pricing policy, though hardly any of its members’ products are sold cheaply enough to be affected by the measure.
The prominence and deference given to scotch whisky in the policy has some economic rationale behind it. Spirits – primarily whisky – help Scotland pay its way in the world, generating nearly £5 billion in exports. That’s around 15% of all Scottish exports outside the UK.
But that’s just the point. Scotch whisky is, by and large, a drink produced in Scotland for other people to drink. 99% of all whisky production ends up outside the country. Scots drink considerably more wine and beer than whisky. It isn’t even the nation’s spirit of choice: that would be vodka. It is hard to see how the whisky industry will be much affected by marketing restrictions in Scotland when its domestic market accounts for such a tiny share of its business.
It is the other part of the Scottish alcohol economy – the domestic market – that is more vulnerable to the proposed regulations. It generates less income than whisky, £3.6 billion, but employs a lot more people (and consequently pays them quite a bit less). Two-thirds of the 60,000 jobs dependent on the alcohol industry in Scotland are in hospitality (pubs, bars, restaurants) and retail. Average earnings are near or below the national living wage, with many of those working in the sector under 23, and so eligible for lower legal minimum wages.
If alcohol consumption falls substantially, these sectors could be affected. But it is important to remember that if people choose to spend less on alcohol, they are likely to spend more on other goods and service. The alcohol industry’s losses will at least partly be offset by other sectors’ gains. In some cases, it might be the same businesses making the pivot – as we have seen with pubs shifting towards selling food. The overall effect of these shifts in spending on the economy is likely to be modest.
At the same time, lower alcohol consumption brings economic benefits. The cost to the Scottish economy of alcohol-related sickness, unemployment and the loss of workers through premature death is estimated to be £1.2 billion. If effective, the marketing restrictions offer a chance not just to avert human tragedies, but to claw some of that economic value back.
The actual threat to Scotland’s economic interests would be if other countries chose to follow its lead and implement policies to reduce their own drinking, shrinking some of those lucrative whisky export markets. Scottish consumers who don’t spend their money on alcohol will generally spend on other Scottish goods and services. The same isn’t true of foreign consumers who stop buying whisky. Alcohol industry lobbyists will doubtless try to play up the risk of such policy contagion, but such arguments are pretty speculative, and, frankly, probably overstate Scotland’s influence in the world.
Marketers are good at spinning romantic yarns, playing up the traditional image of Scotland as a country of tartan, heather and, yes, whisky. But good public policy needs to be founded in realism – recognising the Scotland that actually exists, a place of vodka drinkers and chronic public health problems. Changing that won’t hurt the economy, but it might save some lives.
SHAAP Blogposts are published with the permission of the authors. The views expressed are solely the authors' own and do not necessarily represent the views of Scottish Health Action on Alcohol Problems (SHAAP).