Populist streak waters down NZ alcohol policy

As the New Zealand government continues to grapple with the vexing issue of alcohol regulation, it should keep an open mind and resist popular and cheap but ultimately ineffective solutions to alcohol-related problems.

The push for more regulation has been rolling along since 2008 when the then Labour government asked the Law Commission to investigate a new regulatory framework for liquor. The government is now coming to terms with its recommendations and attempting to fashion its response to an issue that has now become spectacularly difficult.

The commission returned reports to government that recommended a second best approach to liquor policymaking: blunt legislation instead of cultural change. The commission made it sound all so simple, arguing that alcohol has high social costs caused by people drinking too much and not paying enough tax. Fortunately, it then argued that this could be fixed through substantial tax hikes and society-wide restrictions on where, when and at what price alcohol can be sold.

However, this has been proven not to work particularly well in New Zealand. Although such measures might reduce aggregate consumption of alcohol, and therefore some aggregate harm, this is an abstract measure. They don’t address the problems at the pointy end of alcohol consumption, which is the concern of most of society at large – the problems caused by binge drinking. Increasing price and reducing availability primarily works at the margins, on moderate drinkers, not at the pointy end where it counts.

And this is without mentioning that the ‘social cost’ figures used in most government reports on the issue are rubbery and inaccurate, and grossly overstate the cost to the taxpayer of alcohol-related problems.

For example, counting private costs as public or ‘social costs’ – even though such costs do not fall on the public purse – is widespread in government commissioned estimates.

As a result of public pressure and lobbying, government is expected to increase the tax that already covers the cost of alcohol-related problems and to implement policies proven not to work.

Substance abuse is a problem in all societies including New Zealand, but the liquor liberalisation of the past two decades has largely been a success. Let’s hope the government ignores poor policy advice, improves regulation where it can, and continues to support a liberal sale of liquor regime.

Luke Malpass is a New Zealand Policy Analyst with the Centre. His report Alcohol Policy and the Politics of Moral Panic, with a contribution from Dr Eric Crampton, was released this week. Click here to watch Luke discussing the report.