Minimum pricing won’t make alcohol expensive

By Mark Daniels

- Last updated on GMT

Related tags Minimum pricing Price

Daniels: "Supermarkets will continue to sell alcohol much cheaper than pubs can"
Daniels: "Supermarkets will continue to sell alcohol much cheaper than pubs can"
So I seem to have spent much of the last ten days fending off questions from customers about just what the Minimum Price legislation would mean to them. It’s amusing to watch how a little bit of pub maths and a lot of hyperbole can make somebody’s perception of an idea change.

By the time they’d finished counting up on their fingers, the price of a bottle of cheap plonk in a supermarket was going to exceed ten pounds.

I’d be quite happy if it did, because then my prices wouldn’t look so expensive, but the fact of the matter is that, if introduced properly, minimum pricing means that the average bottle of vin de table would still only cost around £4.50*.

Most off-trade products would rise by pence, rather than pounds, and despite the Daily Mail’s best attempts to scaremonger the nation in to action, sensible consumers – which make up the majority – would notice very little difference to their average domestic alcohol purchases.

Of course, there are some products that would indeed see a big lift in price. Tesco’s standard lager, for example, would jump more than 63%. But that would still only make it £1.03 a can. Is that expensive…?

Implemented correctly, the minimum price of alcohol would mean that the onus would be on the retailer to ensure it is sold at no less than 45p per unit, not the wholesaler. And this, to me, is a good thing: it forces the off-trade, often able to wash their hands of the product and accept no responsibility for their part in the social issues faced on a Saturday evening, to be more responsible with their pricing.

But who, ultimately, would win should minimum pricing be introduced? Some think it would help shrink the gap between pubs and supermarkets but, given the examples above, it still wouldn’t. So pubs will see little effect from it, other than the risk that, once implemented, minimum pricing could become a stick with which to beat the industry further: “let’s not increase duty this year, but we’ll stealthily raise the minimum price threshold.” What point does it need to reach before the on-trade would have to start thinking about it too…?

By introducing it, the government win as a higher retail price clearly means more VAT for the Treasury.

But if the responsibility for setting the price falls to the retailer, they will continue to be able to do their deals with the wholesalers. If Asda sells a two litre bottle of Strongbow at £3.15, under minimum pricing that will increase to £4.05; but their buy price will remain the same so, ultimately, the winner will continue to be the off-trade, who will make more margin out of minimum pricing and also be able to keep their prices more stable after each budget for some time to come.

Slowly, stories are emerging that David Cameron’s big idea is illegal under EU law and that we could be prosecuted if we chose to implement it. So perhaps we should revisit an idea that I’ve mooted before and was raised in last month’s duty debate by David Hamilton, MP: instead of ‘minimum pricing’ per unit, why not a lower rate of duty for products sold in on-trade environments, such as kegged and casked drinks, against a higher rate of duty for pre-packaged products sold through the off-trade?

It’s an idea pooh-poohed by the Treasury because they would find the arithmetic too difficult to deal with, but is a sensible solution to a difficult solution and wouldn’t raise the tempers of our continental friends. It would have the effect of evening out the price chasm between on- and off-trade products and would have the desired effect of preventing the supermarkets from selling irresponsibly cheap booze.

In the meantime, though, [my] customers shouldn’t worry. Supermarkets will continue to sell alcohol much cheaper than pubs can.

But they can’t provide you with lively barmaids, enthralling conversation, live music, pub quizzes, darts matches, card games or the good old fashioned debate around the bar. Whatever the topic…

*based on an average bottle of standard red wining containing 9.8 units

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