Choosing the hard way on tobacco and alcohol

LAST week it was revealed that Health Minister Nicola Roxon asked for plans to be drawn up for a national minimum price for alcohol.

LAST week it was revealed that Health Minister Nicola Roxon asked the National Preventative Health Agency to draw up plans for a national minimum price for alcohol as part of its strategic plan.

The story was released to coincide with Julia Gillard's visit to Alice Springs, where many have called for a minimum price to end the sale of cheap wine.

Somebody should have told the Aboriginal Affairs minister, Jenny Macklin, who expressed doubts about the proposal. It turned into another case of the government appearing disorganised and disunited on a policy issue.

That appearance is becoming increasingly concerning to business as it faces up to the prospect of two more years of governmental uncertainty across an ever broadening sweep of policy areas.

And things aren't made any easier for business by the knowledge that if Labor doesn't win the next election - as looks increasingly likely - laws passed this term will be repealed in the next. The mining tax and the carbon tax are at the top of Tony Abbott's agenda. Uncertainty abounds.

Roxon has been one of this government's more activist ministers, negotiating with the states to drive hospital reform while also being responsible for carriage of the plain packaging regulations for tobacco products.

She isn't afraid of the nanny state taking hold in this country. That is a perfectly acceptable ideological world view (albeit not one I subscribe to). However, on the twin issues of cigarettes and alcohol, I question the method being used to achieve it. Rather than directly banning cigarettes or certain forms of alcohol, for example, the minister is using trademark limitations and regulatory arrangements to achieve what she sees as an ultimate social good.

A lawyer by training (the university medallist at Monash, no less), Roxon understands the law. But understanding it can be different to abiding by its intent. Business is rightly concerned. A minimum price for alcohol? Australians are used to a minimum wage, but intervention to set minimum pricing hardly fits with the Western liberal democratic ethos.

The problem with direct government intervention of this kind is the unintended consequences. Pull a lever here, and something unrelated goes totally wrong in places you would never expect.

There is a strong possibility this move contravenes national competition law, which was one of the main reasons a similar proposal was defeated in Scotland.

Then there are the raw political realities to consider. Just like price rises for cigarettes, increasing the cost of cheap alcohol hurts Labor's blue-collar base at a time when Labor is struggling to reconnect with that base as it moves to price carbon and affect people's cost of living. Gillard hasn't been able to connect with the mainstream since becoming PM, and being part of a government jacking up cigarette and alcohol prices - especially at the lower end of the market - won't make connecting with the mainstream any easier.

What's really bizarre about Roxon's announcement is that the government already had a firm policy proposal, set out in the Henry Review, that could achieve exactly the same outcome without the myriad practical difficulties. Wine is taxed according to how much the end product costs the consumer - the cheaper the wine, the less tax is payable. This has driven the extremely cheap prices of cask wine. Other alcohol categories such as beer and spirits are taxed on the volume of alcohol they contain. Over time, Henry proposed shifting wine to the same system as beer and spirits.

When Labor was busily cherrypicking revenue measures from the Henry Review such as the mining tax, it should have stopped and considered this reform.

This simple move would make the alcohol tax regime easier to administer, it would be supported by much of the alcohol industry (which Roxon's changes are not), it would eliminate the tax subsidy that has led to the huge growth of cheap cask wine and it would, in all probability, lead to a useful bit of extra revenue for a government chasing a budget surplus this side of the next election.

Maybe this government just prefers doing things the hard way.