Monday, 19 June 2017

Feeling the draught

The government are currently consulting on ways to change the system of alcohol duty. The main objective is to improve incentives for lower-alcohol products, but that hasn’t stopped various bodies adding their two penn’orth. One suggestion that has been made is to reduce the level of beer duty for products sold in the on-trade in an attempt to give pubs a boost. However, an obvious problem with this is the possibility of pubs selling beer for consumption off the premises, and it would clearly be administratively complex and confusing to customers to apply two separate prices.

One way of getting round this would be to confine the duty concession to draught beer, which by definition is only sold in the on-trade. While a tiny amount may be taken home in carry-outs, in the overall scheme of things it is trivial. This was proposed by SIBA in their general election manifesto.

However, it’s hard to avoid the conclusion that this is just another case of special pleading, where a trade body calls for lower taxation on the particular products made by their members. And, as I have argued before, it’s highly tendentious to argue that on-trade drinking has any claim to being intrinsically “better”.

It’s also questionable whether a duty cut would make any significant difference to the balance of consumption. It’s generally recognised that minor tweaks to relative taxation levels have little effect on consumer behaviour. Despite the duty on them having been halved, sub-2.8% beers have made little progress in the market because people basically aren’t interested in drinking them.

The duty plus VAT on a pint of 4% beer comes to 52p. Even if that was completely removed, it would only reduce the price of a pint from £3.50 to £3. Is that really going to make much difference to levels of pubgoing? I’ve made the point in the past that, while relative price is a factor to some extent, the main reasons deterring people from drinking in pubs are non-financial. In any case, the likelihood is that pub operators would very often take the opportunity to fatten their margins rather than passing all the savings on to drinkers.

The conclusion must be that this is just another case of a trade body wanting a favour from the government for its members. There’s a good case for a general cut in beer duty, if it could be afforded, but having differential rates for packaged and draught beer would be ineffective and divisive gesture politics.

And, of course, most of the benefits would accrue to the brewers of Carling and Stella, not the members of SIBA!

13 comments:

  1. The Blocked Dwarf19 June 2017 at 13:05

    "£3.50 to £3."

    I might go as far as to say that the sort of person who might frequent a pub the more due to that saving are precisely the sort of people pubs might do better without.

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    1. As I said in one of the linked posts, "Lower prices would no doubt attract more custom from those with more time than money, but they wouldn’t bring the better-off flooding back."

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    2. I am not sure that I agree with you. I am comfortably off but I would be certainly change my watering hole if it raised its prices from £3.00 to £3.50. And I wouldn't be alone in doing that. You only need to look at websites like Money Saving Expert to see the efforts missle class people will go to to save a few pence on, for example, their grocery bill.

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    3. A price differential might make you change pub, but the question is rather whether you would drink significantly more in pubs if the price of a pint was £2.50 rather than £3.00.

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  2. Agree. What I am seeing in my traditional drinking areas for 35 years,is those with funds going out when they want to where they want,but those with low funds seeking out the cheaper outlets and avoiding the £5.50 a pint outlets in the process.The price sensitive who really don't want to stop going out are extremely savvy at knowing where to go for these cheaper outlets.I do note however that there are a small to my observations group who now ration nights out because of cost,but these I feel may be a minority out of the total pool of drinkers. Hence on balance I agree,other factors in society are the main drivers in a change in patterns for most,not the absolute price.

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  3. Why not simply charge a set rate per ml of ethanol in any potable product, together with a series of penalty clauses for incorrect labelling of products?

    That gets rid of the two-dozen or so duty rates and replaces them with just one.

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    1. The Blocked Dwarf19 June 2017 at 19:20

      Why sin tax/duty at all? On anything? Do the Public Health nazis really think removing duty on alcohol would have us all on Gin Street before the week was out? Personally I have always favoured a universal Sales Tax, 20% on everything sold anywhere be it at the car boot or at Miss Dommina's Services for Gentlemen. Scrap VAT etc. No exceptions for no one. Might put some accountants out of work but...honestly... who cares? The savings to the public purse alone would be worth it, never mind the laffer curves. Hell put the same 20% on all income no exceptions, no breaks, no rebates and you could run the entire HMRC from a smart phone.

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  4. Technically I pay less beer tax than the lot of ya. The duty on my lout may be the same but the VAT is a % of selling price so I pay less coin in VAT & therfore less tax over all.

    It would be fair, not special pleading to abolish VAT on booze & increase duty to compensate. Putting only 1 tax on beer, the same amount wherever you choose to neck it.

    Won't save pubs though. 50p to neck an ice cold one in your own garden or £4 to neck one in a dumpy pub beer garden full of fag dimps? No brainer.

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  5. 'it’s highly tendentious to argue that on-trade drinking has any claim to being intrinsically “better”. '

    I think there are several arguments that it is: The on-trade provides an environment in which people who might otherwise be alone may socialise and just 'get out the house'. It extends greater and more varied employment opportunities than the off-trade (anything from regional manager of a big pub chain down to casual bar staff). Draught beer - particularly in reusable casks - has an environmental benefit over small package product found in the off-trade.

    That's three 'societal' reasons before we even get down to things like beer quality and choice. In order to defend and protect the pub culture we enjoy we need robust lines of argument that aren't simply 'we personally prefer drinking draught beer in a pub to a few cans at home'.

    Reducing everything to a subjective relativism that nothing is intrinsically better or worse than anything else is a reasonable and consistent philosophical position, but without pubs where are people going to meet to discuss philosophy?!?

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    1. Yes, of course there are plenty of positive aspects to pub drinking, many of which I have championed over the years. But it doesn't follow that it is intrinsically better across the board. As I said in the blogpost I linked to,

      "Each form of drinking can be done either responsibly or irresponsibly, and the vast majority of drinkers fall into the first category. Neither on- nor off-trade has a unique claim to the moral high ground."

      Don't forget that, for many people, even getting to the pub, especially to drink alcohol, is impractical or prohibitively expensive. And many instances of off-trade consumption are not readily transferable to pubs anyway. I really don't think anyone should be criticised for settling down with a beer to watch Midsomer Murders, or enjoying a bottle of wine with a family meal.

      Plus, of course, a large section of the population are now actively made unwelcome in pubs.

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    2. The Blocked Dwarf20 June 2017 at 07:33

      URL contains illegal characters

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    3. Works for me. Try cutting and pasting this:

      http://pubcurmudgeon.blogspot.co.uk/2014/01/out-of-control.html

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  6. You mention the 2.8% beer duty decrease. I sometimes get a couple of bottles of Mann's Brown Ale in (they often are on sale for 90p for a 500ml bottle). The problem is that they aren't something you want to drink in quantity, and even if you did there's not a lot of point in drinking something so low in alcohol.

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