Top doctor: pubs should pay less VAT
A health campaigner says VAT on alcohol sold in pubs should be slashed — and minimum pricing introduced — to help pubs and encourage sensible drinking.
The novel proposal comes from Dr Nick Sheron, head of clinical hepatology at the University of Southampton, who says cutting VAT to 12% would mean duty could be raised without hitting the on-trade.
"VAT is already levied differentially on food and drink; more VAT is charged to drink coffee on the premises than to take it away," he wrote in this week's British Medical Journal.
"If this policy was applied to alcohol but was reversed—say, for example, reducing the VAT for on-sales from 20% to 12%—it would be possible to increase the rate of duty to compensate for this without increasing the price of alcohol in pubs."
Sheron, who co-founded the influential Alcohol Health Alliance, said increasing duty alone would "increase the price of a pint in struggling country pubs".
"The ingenuous benefit of minimum pricing is that it would not affect prices in pubs,
"The average unit of alcohol in a pub already costs more than £1 and much more in many cases.
"Pubs are expensive to run and have to charge more for alcohol. As a result they pay more VAT, which puts the price of drinks up even further."
Sheron rejected the Government's proposals for banning below-cost alcohol sales, saying: "No form of 'below cost' ban can deliver a price of 40 pence a unit without swingeing increases in duty on alcohol."
He said the Treasury was "not immediately keen" on the idea of changing VAT when it was raised at a recent meeting — "but produced no concrete reason why it could not work".
"This is a welcome recognition from the health lobby that pubs are part of the solution not part of the problem and have a role to play in helping deliver more responsible consumption.
"The BMJ is spot on when it says failure to tackle pocket money prices will mean government fails to achieve its public policy objectives."
Sting in the tail
But Association of Licensed Multiple Retailers head of communications Kate Nicholls highlighted a sting in the tail of the proposal.
"The idea of a differential VAT rate to reflect their special status would undoubtedly help to the redress the unlevel playing field between on and off trade. But it will only deliver a meaningful solution if it is pursued in isolation.
"If it is simply offset by an increase in alcohol duty then the potential benefits would be lost.
"We saw what happened when this policy was applied in 2008 when VAT was cut to 15% and alcohol duty increased by a compensatory amount. Pubs just got a double whammy and supermarkets refused to accept, let alone pass on a duty increase."
