Below-cost ban 'will be VAT + duty'
The Government is to announce details of its plan to ban below-cost alcohol sales today — using a definition that would still permit cheap sales at supermarkets.
According to reports in the national media this morning, the Government has gone for the controversial definition of below cost as duty plus VAT.
As the Morning Advertiser reported back in May 2010, this would still let supermarkets sell beer for about 54p a can and wine for £2.33 a bottle. Those figures are likely to be slightly higher now because VAT has risen from 17.5% to 20%.
The BBC reports that it would work out as 38p for a can of weak lager and £10.71 for a litre of vodka.
Pub and brewery chiefs had argued that the cost of producing the alcohol must be taken into account in the definition of below-cost sales.
The MA reported back in August 2010 that Home Office officials saw the duty plus VAT definition as the easiest to put in place in practice.
Pressure on pubs
The Campaign for Real Ale (CAMRA) said that the Government definition of below-cost as duty plus VAT will do nothing to alleviate the pressure on pubs and allow supermarkets to continue to sell alcohol below-cost.
It called for the cost of production to be factored in, which it said would produce a price of 40p a unit — nearly double what is being proposed.
"Today's decision means pubs will continue to close as they are undercut by supermarkets selling canned beers at pocket money prices," said chief executive Mike Benner.
"A ban on selling beer at below duty plus VAT will have a negligible impact as supermarkets sell only a tiny proportion of beer at below these levels.
"CAMRA believes a floor price of around 40 pence a unit would be required to prevent supermarkets selling alcohol at a loss. The Government's decision to set a floor price of only 21 pence a unit is a betrayal of their previous promise to ban the sale of alcohol at below cost and means supermarkets will continue to be able to sell alcohol as a loss leader.
"The Governments appear all too ready to impose higher costs and regulations on well-run community pubs but are prepared to turn a blind eye to the irresponsible attitude towards alcohol expressed by the supermarkets."
Federation of Licensed Victuallers Associations operations director Martin Caffrey said: "To call 'cost' Vat plus duty is utterly incorrect. This wouldn't solve any of the issues of pre-loading or binge drinking.
"It's almost worse than nothing because it will fend off any proper legislation [to tackle cheap supermarket alcohol]."
Cop-out
Michael Kheng, boss of Lincolnshire bar group Kurnia said: "It is ridiculous. There needs to be a cost element in there. I don't think any supermarkets are selling at below duty and VAT — if you take those factors out you are left with a few coppers.
"The Government proposals are a cop-out — it is totally unfair."
Practical
Meanwhile, the Wine and Spirit Trade Association (WSTA) supported the proposals.
"We have consistently argued for a ban on the sale of alcohol below the level of duty plus VAT on the basis that these are both consumer taxes and therefore the cost should be passed on to the consumer," said chief executive Jeremy Beadles. "This is the practical way to implement this policy.
"It is important this policy is applied nationally. We are sure ministers will want to ensure it is not undermined by separate and different price initiatives by local authorities.
"It's equally vital to recognise that alcohol pricing and taxation cannot provide the solution to alcohol misuse. What's needed is education and rigorous enforcement of laws to address misuse and related anti-social behaviour.
Click back later this morning for updates on this story.
