Embargoed Until Delivery, 8.00am, 24 April 2009

The Law Commission’s Liquor Review

Address to New Zealand Police’s

“Alcohol related harm” breakfast

24 April 2009

Rt Hon Sir Geoffrey Palmer SC

President

Law Commission

“The Honest Lawyer”

Stoke, Nelson

8.00am

Introduction

The Law Commission was given a reference to conduct a root and branch reform of the law relating to the sale and supply of liquor in August 2008. We are fortunate to have available to us an Interdepartmental Committee of officials with an interest in the issues. We have been studying the subject intensively. In July of this year we will publish a discussion paper outlining the issues upon which we would want to receive submissions from the public. At the same time, there is a Bill in front of Parliament that raises important issues: the Sale and Supply of Liquor and Liquor Enforcement Bill. Submissions on that Bill will be heard in the Parliament soon.

I stress that nothing in this speech is Government policy. The Law Commission does not make Government policy. It makes recommendations.

There are two major thrusts to the Law Commission’s inquiry. The first is the contribution that excessive use of alcohol makes to the problem of law and order in New Zealand. Secondly, there are serious health and injury effects from alcohol consumption, as well as a list of other social harms.

The health issues were well summed up in a recent publication of the Australian Government, Australian Guidelines to Reduce Health Risks from Drinking Alcohol, a Study from the National Health and Medical Research Council in Australia.

The summary begins this way:

“Alcohol has a complex role in Australian society. Most Australians drink alcohol, generally for enjoyment, relaxation and sociability, and do so at levels that cause few adverse effects. However, a substantial proportion of people drink at levels that increase their risk of alcohol-related harm. For some, alcohol is a cause of significant ill-health and hardship. In many countries, including Australia, alcohol is responsible for a considerable burden of death, disease and injury. Alcohol-related harm to health is not limited to drinkers but also affects families, bystanders and the broader community.”

It is clear to me that much the same conclusion can be reached for New Zealand society.

People in New Zealand live in a free and democratic society. They are subject only to such limitations on their freedom as can be justified in that free and democratic society. They have the liberty to behave as they choose so long as their actions are not contrary to the law. The decisions that are made to restrict activity have to be justified by strong arguments that it is in the public interest that individuals and corporations do not exercise their freedom in particular ways. This is never an easy burden to meet.

Cultures differ markedly in their attitude to alcohol. New Zealand law has to come to grips with the attitude that New Zealand society itself exhibits. And there are some pretty ugly features to that out there currently. The law cannot bear all the responsibility. It is a matter of societal attitudes, education, parenting and a range of non-legislative government and community actions also. Many things go into the mix other than the law that regulates the sale of alcohol. These truths have to be remembered when fashioning proposals for reform.

Some recent research

I want in this short speech to try and outline some of the research that we have been examining and suggest, without commitment to what our ultimate recommendations will be, some directions in which it may be desirable to travel. Because we are under a tight timetable, the Law Commission will publish the public discussion paper on the policy options in July. We are contemplating in that paper indicating some preferred policy options compared with others in order to concentrate the public debate. In that respect I am launching a trial balloon on some of the issues today.

New Zealand is a country where it is often said there is too much regulation. Indeed, the number of regulations that are made by the Governor-General in Council each year far exceeds the number of statutes passed by Parliament. The number of principal acts passed in 2008 was 124, and the number of statutory regulations made was 472. To say there is too much undiscriminating regulation in New Zealand is correct. To say that there should be no regulation is wrong.

In New Zealand, as in other countries, we have long heavily regulated the sale of liquor. The reasons for this are obvious enough. Alcohol is no ordinary commodity. It is a drug. Alcohol would be classed as a Class B drug under the Misuse of Drugs Act 1975 if it were treated on its merits, according to many experts. Obviously, that is not going to happen, but the properties of alcohol are the reason why it must be closely regulated. Alcohol, like any other drug, can do harm. It is the minimisation of this harm that has to be the prime object of any new law, balanced with the need for any regulatory controls to be efficient and effective.

We have been working towards recommending a new Act perhaps called the Alcohol Harm Reduction Act. Its purpose will be critical. Something along the following lines could be considered:

“The object of this Act is to establish a system of control over the sale and supply of alcohol to the public with the aim of contributing to the minimisation of harm caused by the misuse of liquor and in particular the reduction of health harms that result from alcohol consumption, the prevention of crime and disorder associated with the use of alcohol and the protection of children and youth from alcohol related harms.”

One of the most demanding issues in analysing the consequences of harmful drug use in New Zealand is to estimate its social cost. Recently, a study jointly funded by the Ministry of Health and the Accident Compensation Corporation (the BERL Report) made some dramatic findings. [BERL Economics Report to Ministry of Health/ACC – Costs of Harmful Alcohol and Other Drug Use, March 2009 http://www.berl.co.nz/content/nzeconomy/general/1186/harmful-alcohol.aspx.] These were:

• The total social cost of harmful alcohol and drug misuse for the 2005/06 year was calculated at $6.881 billion.

• Harmful alcohol use in 2005/06 cost New Zealand an estimated $5.296 billion. The types of costs included in this figure are the total crime costs due to harmful alcohol and drug use, estimated at $1.1 billion including costs to the victims of crime, the use of Police resources, court related costs and prison.

• Harmful other drug use was estimated to cost $1.585 billion.

• Using estimates from international research, the report suggests that up to 50 percent of social costs can be avoided.

• It is estimated that half of all alcohol is consumed in a harmful manner (as defined in the report).

• The research indicates that 28.4% (or $1,951 million) of the social costs of harmful alcohol and drug use result from injury.

The BERL Report raises important issues in the view of the Law Commission, to which I will return later.

The New Zealand Police have recently produced a National Alcohol Assessment which is of great interest. This is an effort to organise all the Police data around alcohol offending and victimisation. The Law Commission is very grateful to the Police executive and the Commissioner of Police for undertaking this work. It is of considerable value. What the data show are the extraordinary amount of Police time that is taken up by alcohol in one way or another. The number of breach of liquor ban offences increased from 5,050 in 2003/04 to 9,359 in 2007/08. The number of liquor infringement notices for youths under 18 increased from 2,397 in 2001/02 to 3,145 in 2007/08.

Furthermore, at least 31% of recorded offences were committed in circumstances where the offender had consumed alcohol prior to committing the offence. The Police are also required to act as nursemaid, in the absence of anyone else, to drunks. The recorded number of persons taken to a temporary shelter, or detained in Police custody for their own or other’s safety due to intoxication, and drunk persons transported home (or to a place of safety) increased by nearly a quarter between 1998/99 and 2007/08 – from 17,251 to 21,263.

On a typical day across New Zealand, approximately one third of all individuals apprehended by police will have consumed alcohol prior to their arrest; 57 individuals will be either driven home or detained in police custody due to their state of intoxication and 326 offences occur where police note that alcohol was involved in the offending. These offences will include 26 breaches of a council's liquor ban and 98 drink driving offences. Police, on this day, will also undertake 4,239 compulsory breath tests, 2,139 mobile breath tests and will visit 35 licensed premises to monitor compliance with the Sale of Liquor Act.

These are distressing figures, and in the view of the Law Commission the law has to be adjusted so that the Police are put under less pressure and are not required to waste so much resource on activities that are readily preventable.

Neither are licensed premises free from difficulties. Over half of all recorded Sale of Liquor Act offences over the past 10 years were for allowing intoxicated patrons to remain on licensed premises.

Alcohol contributes to a wide range of criminal offending. Obviously it is implicated in the drink driving offences committed each year. There were 35,000 recorded drink driving offences in 2007/08. Of particular concern is the sharp rise in the number of women convicted for drink driving. There were 3,827 in 2000, and 5,968 in 2007. But drink driving offences are only the tip of the iceberg. Alcohol is strongly implicated in offences for dishonesty, drugs and antisocial violence, and less so to property damage and sexual offending.

The violence-related offending is an area of concern for the Police. The number of recorded violent offences has been increasing in New Zealand despite an overall decrease in recorded crime across New Zealand. At least 33% of violence offences were committed when the alleged offender was identified as having consumed alcohol prior to offending in 2007/08. Of 62,000 violent offences in 2007/08, more than 20,000 involved alcohol.

For family violence, alcohol is often a factor according to the data.

About half the recorded homicides in recent years involved either a suspect or a victim being under the influence of alcohol at the time of the incident.

The Police have only been able to gather such data in recent years because they became convinced that alcohol was a factor in so much of their work that they began to statistically record it through the Alco-Link Programme.

We certainly have a problem with young people and alcohol. The most recent figures show that in 2007/08 Police issued 3,145 liquor infringement notices to youths under the age of 18 who had either purchased liquor or been found in restricted or supervised areas on licensed premises or been in possession of or consumed alcohol in a public place. Significant numbers of minors are still able to purchase liquor from licensed premises. Police have increased the number of controlled purchase operations they undertake, which seems to be making a difference, but still about one in five minors taking part in a controlled purchase operation are able to purchase liquor from licensed premises.

Some possible policy directions

One cannot read such studies as these last two that I have referred to without feeling some concern at the trends in society that are disclosed. There can be little doubt on the basis of the research that alcohol use results in significant harm for many New Zealanders. The statistics in New Zealand about the overall levels of consumption show that per capita (persons aged 15 years+) alcohol available for consumption has increased nearly 10% since 1998. International research shows that increases in per capita consumption of this magnitude lead to increases in alcohol related harm.

It is an axiomatic principle of welfare economics that the costs engendered by an activity should be internalised to that activity. That way the allocation of resources is greatly improved because the consumers do not buy the product at a subsidised cost but at a cost that reflects the externalities the use of the product causes. This is the very reason we have the current excise tax on alcohol to prevent harm. But the gap between the current tax take of $795 million for excise tax and the estimated alcohol costs in the BERL study - $5.296 billion, is substantial.

Application of this principle to alcohol is not altogether a straightforward matter. But we have sufficient evidence, it seems to me, to consider whether some of the costs isolated in the BERL Report should be internalised to the liquor industry. I doubt that such a proposition will be met by great enthusiasm. But it does seem to me that the taxpayer should not be asked to shoulder as much of the burden as is currently being met from public funds.

It is often argued that increasing the excise tax rate to cover the costs or externalities imposed on society from harmful drinking will penalise everyone. However, most drinkers consume only modest amounts, and because excise is levied on the amount of alcohol, it means that those who drink the most, pay the most tax.

For example, 50% of New Zealand drinkers consume 93% of all alcohol and pay on average $530 each in excise tax per annum (based on the excise revenue figures from 2007/08). Or conversely, half of New Zealand drinkers pay less than $40 each per year in excise tax because they consume only 7% of the alcohol drunk in New Zealand. This contrasts to the top 10% of New Zealand drinkers who consume nearly half of all the alcohol drunk, and who we estimate pay just over $1,300 on average each year in excise tax. One caveat, however, is that the data on how much the heaviest drinkers consume is getting quite old, as it is from a 1995 health survey. But I think it helps paint the picture that those who drink the most, impose the greatest costs on society, and consequently, pay the most.

It does seem that the case for increasing the price of alcohol to ensure drinkers contribute more to the costs imposed on society is persuasive. This can be done relatively simply by increasing the excise tax, although it will not have a uniform effect upon retail prices. New Zealand has a well designed excise tax, however there is a strong case for adjusting it to encourage the drinking of low alcohol beer in preference to stronger beer. Currently products with absolute alcohol by volume of less than 1.15% are not taxed. Perhaps this figure should be raised to 2 or 2.5%.

The research both in New Zealand and overseas does suggest an increase of the purchase age would be in order. Whether this is to 19 or 20 is an issue but the case in favour of an increase seems strong. There may also be some justification for there being a lower on-licence premises purchase age of 18, and a higher off-licence purchase age on the basis that in on-licence premises the liquor will be consumed in a supervised environment. What about a minimum drinking age? I let that question hang there.

There is similarly a strong case, in my view, for limiting the hours that off-licences are open. The tendency towards 24 hour trading is not helping any of the problems that we have with alcohol and the hours need to be looked at closely for both on and off-licences. I do not understand why bars need to be open to 6am on a Sunday morning.

We have heard concern about liquor advertising and the contribution it makes to consumption and alcohol related harm. There may be a need to regulate alcohol promotions at the point of sale. The question of price advertising for alcohol products may also need attention. But the issue of advertising generally is more subtle. If the advertising is about market share it may not be a problem. If it is about increasing the amount of consumption then the case for regulation is stronger. There may also be a case for regulating the advertising of alcohol more generally, or at least for Parliament giving the Executive the power to do so. Unexercised powers tend to be efficient regulators. But the New Zealand model of regulating through the Advertising Standards Authority has a lot going for it if it is doing the job effectively.

The published research favours a lower blood alcohol level for driving than New Zealand law has. There is a strong case backed by research for bringing down blood alcohol levels from 80mg per 100ml for all adult drivers down to 50mg per 100ml. For the under 20 year olds it should be lowered to zero regardless of licence status. These are matters upon which we will take submissions.

There are also a number of important practical measures that may need to be undertaken in order to improve the licensing system itself. There are many important issues of detail to be considered, such as licence criteria and conditions, the types of premises in respect of which off-licences may be granted, and what type of goods are an appropriate complement to the sale of liquor.

The density of liquor outlets is considered to be a problem in some areas. The current grounds upon which a licence can be refused need to be broadened, perhaps so that the decision-maker can take into account other factors that it considers are consistent with the reduction of alcohol-related harm. The Liquor Licensing Authority has done a good job, but it could do better if it had greater powers. I am beginning to favour an increased role for the Liquor Licensing Authority in monitoring and reporting on what it finds and also permitting it to take some carefully calibrated proactive steps of its own accord where these are thought to be necessary.

Conclusion

It is clear to the Law Commission at this stage of its review of the regulatory framework for the sale and supply of liquor that we will be recommending significant change. Just how significant will depend in part on the submissions we receive in response to our discussion paper and the nature of the public debate that will follow the release of our discussion paper. I have given some indications of our tentative thinking in order to let people know the trends in our thinking. But this is not indicative of Government policy, and the project has a long way to go yet.

ENDS

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