The claim

“BIS thinks MUP (minimum unit pricing) is very likely to be deemed illegal under EU competition and trade law…I note that the Attorney General has written saying that whilst MUP may not be illegal it ‘carries a significant degree of legal risk’ and that any litigation related to MUP would be ‘complex and costly’”

David Willetts MP, Department for Business Innovation and Skills (BIS), in a letter to David Cameron, March 2012

Cathy Newman checks it out

A couple of days after the budget, with rows raging about the “granny tax” and George Osborne’s decision to help the super-rich by cutting the 50p rate, the PM had what seemed like a smart idea.

Number 10 decided to bring forward plans to increase the price of cheap alcohol, to tackle binge drinking and what David Cameron called “the mayhem on our streets”.

According to Mr Cameron cheap booze is causing a “scourge of violence” – a million violent crimes and more than a million hospital admissions each year. Setting a minimum unit price (MUP) would, he promised, provide “a big part of the answer”.

But I’ve found out that just four days before he made his announcement, he’d been warned by one of his own ministers that the policy could well be illegal. Was the PM right to go ahead or should he have listened to his colleague?

The analysis

Since 1980 alcohol has become 44 per cent more affordable.  Over the same period, the proportion of household expenditure spent on alcohol has fallen from 10 per cent to 5 per cent.

Concerns over the impact of cheap booze have seen the government ban the sale of alcohol below cost price, and now it wants to set a minimum price per unit of alcohol – despite evidence that consumption overall, including binge drinking, has been falling for more than five years now.

As leader of the opposition in 2009 Mr Cameron wasn’t keen on this. He said: “It seems to me that what we should do is what we suggested before the last budget, which is to try to target the problem drinkers and the problem drinks.”

However, in March the PM unveiled the government’s alcohol strategy stating that legislation for a minimum unit price will be introduced “as soon as possible”. Though there’s nothing on the table yet, there’ll be a consultation and the assumption is that the MUP (minimum unit price) will be set at 40p.

Aren’t the Scots doing it?

None of the EU members has set an MPU yet, but the Scottish government is currently attempting to bring one in and says it “believes that the introduction of a minimum price for alcohol based on a minimum price per unit of alcohol is capable of complying with European law”.

So if the Scottish government says it can do it, surely Westminster can too?

Not so, says the economic secretary to the Treasury, Chloe Smith. Ms Smith told MPs in December: “(She) asked why this government believes that that would be incompatible with EU law, when the Scottish government does not. If I may quote the specific point: we believe that it could be incompatible with article 34 of the treaty of the functioning of the European Union…That is the position.”

Article 34 of the EU Treaty is concerned with the free movement of goods – it specifically prohibits quantitative restrictions.

How could it breach EU law?

There are no European Union rules that would prohibit member states from setting minimum retail prices for alcohol – but controversy surrounds whether an MUP is compatible with EU free trade legislation.

The EU forbids its members from adopting strategies that restrict the free movement of goods, according to the lawyers Winckworth Sherwood.  A minimum price on booze could potentially do just that, and therefore could be legally challenged if it was considered anti-competitive.

“It is argued that that a minimum price of alcohol impedes the free trade of alcohol between member states,” Robert Botkai, partner at Winckworth Sherwood said.

European Commission sources confirmed to FactCheck that if a member of the EU was to set an MUP, it must not breach EU law, which covers the free movement of goods, ensures that there’s no discrimination between imported and domestic goods, or anti-competitive behaviour.

The Commission does this in part by setting a minimum tax rate for different types alcohol across the EU, which it thinks is better than minimum pricing – because a minimum tax rate puts all the products on the market on an equal footing.

Ultimately, Mr Botkai said: “Clarification on the compatibility of minimum pricing with EU law, as well as the breadth of the public health defence, will only be achieved once the issue has been referred to the EU.”

In Scotland, the Bill hasn’t yet been passed but in February the government claimed that the EC had given a “very clear message” the proposal would be legal. This was later disputed by the Commission, which said: “We will have to check if Scotland’s proposals are compatible with EU law. At this stage we don’t know”.

Meanwhile, the Scotch Whisky Assocation argued that setting a minimum price on whisky would create a barrier to trade, which could cost Scotch whisky exports more than £3.4bn a year.

It also rejects the Scottish government’s argument that minimum pricing will fix alcohol related harm.

The public health defence is also used by Mr Cameron, but does it stand up?

The Commission recognises that hiking the price of alcohol could  reduce alcohol-related harm, but argues its not the only way to reduce alcoholic related health issues. Plus, the EU already has a strategy in place to support member states in cutting alcohol abuse.

All of which makes it tricky for Mr Cameron, because no one has quite figured out the health benefits yet.

A government-funded report by the University of Sheffield in 2008 suggested that a minimum price of 45 pence per unit could cut hospital admissions by 1,600 a year initially, rising to 6,630 after ten years.

However, the Home Office noted in 2010 that this had led the whole debate to be “limited to findings from one small scale study”.

The Home Office added: “On balance the evidence shows that increases in alcohol prices are linked to decreases in harms related to alcohol consumption. However, alcohol price is only one factor affecting levels of alcohol consumption with individual, cultural, situational and social factors also influential”.

Back in 2009, France, Ireland and Austria’s attempts to bring in a minimum price for tobacco were found legitimate on a health basis but were ultimately thrown out by the European Court on the basis that introducing a minimum price would breach competition laws.

Cathy Newman’s verdict

Now the drinks industry is limbering up for a legal challenge, David Cameron might begin to wish he’d paid a bit more attention to the written warning from his minister.

He could try and use the health benefits as a defence, but the evidence is limited.

Number 10 hoped that, after all the fuss over the budget, raising the price of alcohol would win the government some Brownie points over middle England. But now it’s beginning to look like yet another policy introduced in haste which the PM may come to repent at leisure.

To download page one of David Willetts’ letter, click here
To download page two of David Willetts’ letter, click here
To download page three of David Willetts’ letter, click here

The analysis by Emma Thelwell

More on this story: FactCheck Q&A – the truth about boozed-up Britain