Tuesday 6 July 2010

Not so simple

You might have thought that banning retailers selling alcoholic drinks below cost price was something quite easy to achieve. But in practice it’s proving far less straightforward than many imagined. The government have put forward four different options for consultation. One, just defining cost as duty plus VAT, is seen by many as too low as it excludes any production or distribution costs. Another, defining it as the invoice price paid, would mean opening up retailers’ accounts to expensive and time-consuming audits. And the remaining two simply seem to give manufacturers carte blanche to create a cosy price-fixing cartel that would effectively end price competition at the lower end of the market.

It also isn’t stated whether any option will deny retailers (and indeed pub operators) the ability to sell off surplus or short-dated stock below cost rather than be forced to pour it down the drain.

Yet another example of how, when governments try to interfere with the workings of markets in the pursuit of “higher purposes”, they so often end up with a can of worms floating on a raft of unintended consequences.


  1. I once lived in a state where the
    prices were fixed by the state,
    what you pay and what you charge.
    What you could sell and who you could sell it to. Mind you ,it
    needed a wall, barbed wire and watch towers to enforce it's
    application. The DDR (East Germany)
    till 89
    Of course they had an helping hand
    from "concerned" citizens such as
    ASH,TUC,BMA and not forgetting our
    dear friends in the ECHTEBIERSCHUTZE..(CAMRA)

    We dont have the walls or barbed wire,we just have the invisible
    hands of guidance and control.

    For how much longr may we ask ?

    The Free Corps

  2. This is what you get when you have politicians who mostly have no political principles - and that includes most MPs nowadays - and who go for populist claptrap instead.

    They wanted a quick fix, but quick fixes usually go pear-shaped, as this looks like doing.

  3. I'd hate to see a craft brewer who uses good ingredients in generous quantities have a higher floor price than an industrial bland fizz producer. This could undo the benefits of progressive beer duty if implemented carelessly (and it will be).

  4. That's already the case, though, so it's hard to see that banning below-cost selling would make much difference. I would imagine even now it only applies to a very small amount of deep-discounted megabrands sold by the major supermarkets.

    If it is done, though, duty+VAT is the only simple and transparent way of doing it.


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