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Alcohol duty
Jun. 2nd, 2010 11:13 amThere is a debate on alcohol pricing in the UK, based on the notion that high levels of drunkenness are fuelled by cheap alcohol.
NICE and other experts are proposing a minimum price per unit (10 ml) of alcohol (numbers such as 40p and 50p are bandied around). The government doesn't like that, possibly because the powerful supermarket lobby wants to keep selling cheap booze (starting at somewhere around 15p per unit at the moment). The supermarkets favour a rule of "not below cost price", which would allow them to keep selling cheap booze - the big supermarkets have tremendous purchasing power and generally dictate their cost prices to their suppliers - while preventing off-licenses and convenience stores from doing the same. It seems unlikely to me that "not below cost price" would have much effect on "happy hour" in pubs and bars - often connected, at least in the public mind, with alcohol problems - because the wholesale cost of drinks is only a small part of the cost burden in on-licensed premises.
At present, government controls on the price of alcohol are in the form of a duty - a tax paid by the importer or manufacturer. Current duty on spirits and beer is based on alcohol content (23.8 pence per unit of alcohol on spirits, 17.32 pence per unit in beer). Duty on cider, perry, and wine is calculated using a complex banding system. For instance, still wine between 5.5 and 15% alcohol is subject to duty of 225 pence per litre[*], which works out at 15p per unit for the strongest wines and about 18-19p for a typical wine. The lowest duty per unit of alcohol, by far, is on still cider at just under 7.5% alcohol, which incurs 4.8p per unit.
Alcoholic drinks also incur VAT at 17.5%.
Note that on a £3 bottle of wine, duty and VAT accounts for £2.03, leaving under a pound for retailer, wholesaler, bottler, importer, and producer. No wonder it tastes so lousy. On a £5 bottle of wine, the supply chain gets nearly 3 times as much money, which is why £5 wine tastes much better.
It seems completely obvious to me that the simplest way in which the government could increase the cost of alcohol would be to put a flat duty across all alcoholic beverages of, say, 25p per unit. This would simplify an existing system rather than add new and complex rules and monitoring to retailers. It would allow for loss-leaders, but no sector can survive on loss-leaders (there's an old gag with the punchline "we'll make it up in volume", which stopped being funny around the time of the dot-com implosion).
[*] This creates an upward pressure on alcohol content, to the top end of each band. I don't know whether this has caused wines to get stronger, but my impression is that they have and it might be connected.
NICE and other experts are proposing a minimum price per unit (10 ml) of alcohol (numbers such as 40p and 50p are bandied around). The government doesn't like that, possibly because the powerful supermarket lobby wants to keep selling cheap booze (starting at somewhere around 15p per unit at the moment). The supermarkets favour a rule of "not below cost price", which would allow them to keep selling cheap booze - the big supermarkets have tremendous purchasing power and generally dictate their cost prices to their suppliers - while preventing off-licenses and convenience stores from doing the same. It seems unlikely to me that "not below cost price" would have much effect on "happy hour" in pubs and bars - often connected, at least in the public mind, with alcohol problems - because the wholesale cost of drinks is only a small part of the cost burden in on-licensed premises.
At present, government controls on the price of alcohol are in the form of a duty - a tax paid by the importer or manufacturer. Current duty on spirits and beer is based on alcohol content (23.8 pence per unit of alcohol on spirits, 17.32 pence per unit in beer). Duty on cider, perry, and wine is calculated using a complex banding system. For instance, still wine between 5.5 and 15% alcohol is subject to duty of 225 pence per litre[*], which works out at 15p per unit for the strongest wines and about 18-19p for a typical wine. The lowest duty per unit of alcohol, by far, is on still cider at just under 7.5% alcohol, which incurs 4.8p per unit.
Alcoholic drinks also incur VAT at 17.5%.
Note that on a £3 bottle of wine, duty and VAT accounts for £2.03, leaving under a pound for retailer, wholesaler, bottler, importer, and producer. No wonder it tastes so lousy. On a £5 bottle of wine, the supply chain gets nearly 3 times as much money, which is why £5 wine tastes much better.
It seems completely obvious to me that the simplest way in which the government could increase the cost of alcohol would be to put a flat duty across all alcoholic beverages of, say, 25p per unit. This would simplify an existing system rather than add new and complex rules and monitoring to retailers. It would allow for loss-leaders, but no sector can survive on loss-leaders (there's an old gag with the punchline "we'll make it up in volume", which stopped being funny around the time of the dot-com implosion).
[*] This creates an upward pressure on alcohol content, to the top end of each band. I don't know whether this has caused wines to get stronger, but my impression is that they have and it might be connected.
