Stop the binge drinking subsidy

By John Ellis

- Last updated on GMT

Related tags: Minimum price, Supermarket, Liberal democrats, Value added tax

John Ellis: time for action on supermarkets
John Ellis: time for action on supermarkets
John Ellis of the freehold Crown Inn, in Oakengates, Telford states the case for action against cheap supermarket booze.

It might sound like a sensationalist headline from the tabloids, but it's true that you, I and every other taxpayer is directly subsidising the cost of cheap alcohol in supermarkets. How do I work that out?

Simple, follow this:

Supermarket buys case of beer for £10 and sells it as a loss leader for £8. Value added tax is minus £2. VAT repaid to supermarket is £2 x 17½% = 35p.

No business can sustain making losses, so the loss on alcohol is cross-subsidised by increasing food prices. So, a £50 food bill is actually increased to £52.

Extra value added is £2. However, food is zero-rated for VAT, so the Chancellor gets no VAT on the extra food; the supermarket still gets the £2 back it cost on its loss leader, but it also gets 35p back from the taxpayer.

The supermarket gets extra profit, while society pays in every way.

Minimum price

So, how to stop it? Well, there are two much-vaunted ways:

Put a minimum price on a unit of alcohol. This opens the way for the health fascists to keep up pressure on the Government to keep interfering with the minimum price; 50p per unit may not seem too drastic, but once the principle is set, what is to stop them doubling or trebling it on a whim?

There is then nothing to stop any Government minister looking for the populist vote by raising it to £5 per pint. Think it couldn't happen? We used to think they could never stop people smoking on private property, but that law came in!

Below cost ban

Alternatively, make it illegal to sell alcohol (and, perhaps, any other controlled, licensed drug) for less than the cost of production, duty and VAT.

That would also stop the dodgy cross-subsidising of alcohol against food, children's clothes or any other kind of goods.

It would also reduce the availability of subsidised alcohol to any thug who wants to kick-up a bus shelter, while achieving the main aim of those who are more moderately and reasonably concerned with health and alcohol issues.

Fortunately, the excellent news from Europe last week is that the minimum-price method is illegal, as it would be anti-competitive, while the second option appears not to raise any legality issues.

Meanwhile, the Liberal Democrats licensing spokesman, Don Foster, is promoting the plan not to permit the "dumping" of alcohol on the market (Lib Dems: radical reform of the tie​).

Let's hope, in the run-up to the election, that all political parties will see this is the only way of stopping this problem.

Related topics: Legislation

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