With all this blah-di-blah about the UK's fine and ancient tradition of binge drinking, let's look at some numbers:
1. Total alcohol duties are around £8 billion a year* (table C4), with as much again for VAT. That's £16,000 million.
2. There are about 60,000 pubs in the UK, paying an average of £300 for a licence to serve alcohol. That makes £18 million, i.e. bugger all compared to alcohol duties and VAT. The forms are ridiculously long and complicated, of course.
3. There are basically three places where you can drink - at home (which causes no bother to anybody), on the streets (which is up to local councils to allow or forbid under local by-laws**) or in the pub (which causes little bother in itself, it's outside the pub and on the way home where things can turn nasty - violence, vandalism and drink driving etc).
4. The turnover of all UK pubs is about £15 bn, or 60,000 x £250,000 a year. The VAT on that is somewhere over £2 bn, or £40,000 per pub.
5. Good taxes are more like user charges, and help balance the interests of different parties, in this case, publicans, drinkers and local residents.
6. So why not scrap VAT on alcohol - whether sold in the shop or in the pub - and fundamentally reform existing licensing laws? We should allow local councils to auction off the licences for market value instead! If an average pub no longer has to pay £40,000 in VAT, it can happily bid at least half that much for a licence - maybe much more - and stay in business. For people who drink at home, causing no bother to the general public, booze gets cheaper, of course.
7. For every additional hour opening time in the evening (which is what causes the perceived problems) a higher rate would emerge, via the auction process. So the pubs that shut at 11 o'clock end up paying (say) £20,000, those that shut at midnight end up paying (say) £30,000 a year, and so on. The local council can use that extra £5 million income (average 200 pubs x average £25,000 licence) to pay a bit of overtime to policemen to sort out the troublemakers, catch the drink drivers and to ambulance crews to get people to A&E; as well as clearing up the broken glass and other minor acts of vandalism***.
8. We then also have a simple and fair way of measuring and dealing with the 'external costs' of binge drinking. Local councils can say exactly what the licence income is and have a pretty good idea of the direct costs.
9. And of course, from a libertarian-but-considerate-smoker's point of view, local councils should also be allowed to auction off a restricted number of smoking licences, say one for every four pubs in the area. If that increases a pub's takings by one-third, they'd be worth at least £10,000 a year****, so that's another half a million quid for the local council for sweeping up cigarette butts and so on.
* That £8 bn is considerably more than the cost to the NHS of £3 bn for alcohol related injuries and illnesses.
** The same general principles could be applied to supermarkets and off-licences of course - if a local council is happy to allow drinking in the street, it can auction off 'off-licences' to local shops.
*** Let's say four hours a night overtime for 50 additional police officers/medics x £50 per man/woman hour x 365 nights a year = £3.7 million a year, with £1.3 million left over for clearing up broken glass and so on.
**** Average turnover per pub £250,000 x one-third = £80,000, on which gross margin 20% = £16,000
Nothing subtle about it
43 minutes ago
6 comments:
Mark, please start a political party.
Call it 'It's Costed' and stick with it. USP? Prove us wrong.
As the founder (ok, co-founder) I'll vote.
STB.
Thanks! That's a bloody good USP.
"[drinking] at home (which causes no bother to anybody)"
Who you kidding? I think a few families involved in domestics might disagree. And who is to say all the problems on the street are caused by people coming back from pubs?
I don't see the sense in the license bidding thing either. It is not late opening that cause binge drinking and violence. In fact, alcohol sales have actually fallen since the new laws came in and since people now have longer to drink and also tend to drink more locally in quieter pubs, I don't see how people could be bingeing more.
I think taxation could be more targeted at the pubs that encourage trouble - your Yates Wine Lodges etc - that have music so loud and remove all the seating so people have nothing else to do but drink - make them pay more tax.
Mark, wouldn't the cost of said licence up the cost dramatically of starting a business thus limiting market entry. I'm all for new thinking on this but I'm not really sure about this one. I'm not much of a fan of consumption taxes these days but it seems that whilst pub drinking may have greater social costs than other drinking, it is wrong to assume that the latter have none. A consumption tax does seem the way to incorporate that but how about one that actually matches the cost rather than fills the coffers.
I've gotta agree with the above: what percentage of alcohol related crime is related to pub-bought alcohol, and what percentage to shop-bought alcohol? I suspect a lot of it is from shop-bought alcohol. Even if the split is 60-40 with the larger share going to pubs, putting the whole tax burden on pub-bought alcohol is not smart. Also, taxing pub-bought alcohol may not reduce crime as, even if pub-bought alcohol is related to crimes at a higher rate, it may be that the sorts of people who go to pubs are more likely to commit crimes, rather than pub-bought alcohol having a higher propensity to lead to crime. And adding huge start-up costs for firms instead of VAT, a tax that is proportional to the size of the firm, would not be good for competition.
Neil, re domestic violence, it is up to battered partner to report violent partner to the police, this has nothing to do with the tax system.
Yates would automatically end up paying more tax, market forces would see to that.
PT and SC, if anything, this reduces start up costs. Think about it, when you take over a pub, you have to make a large up front payment for goodwill to previous owner. That money is gone.
As a higher annual licence fee (all figures mentioned in my post are annual figures not one-off!) reduces the future profits, it reduces the price you have to pay for goodwill to previous owner. So it is less risky for new entrants and slightly harder for encumbents to stay in business, as more successful landlords bid up the value of the licences.
So it reduces barriers to entry and increases competition.
PT, I am opposed to consumption taxes as well (i.e. VAT) but in this case the money is raised to cover specific external costs and seems fair enough to me.
SC, re shop bought alcohol, I did say that local councils could do exactly the same thing with supermarkets and off-licences (in place of VAT).
Plus I don't imagine for one minute that this will prevent all alcohol related crime, the idea it to have less money going to central government and more going to local government, and for local councils to be able to match income and costs.
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