"Alcohol from shops ‘should be taxed more' "

From Friday's Evening Standard:

Lives would be saved if alcohol served in pubs was taxed at a lower level than drinks bought from shops, an expert claims.

Nick Sheron, a liver expert at the University of Southampton, suggested that lowering tax in pubs while increasing duty to make supermarket alcohol more expensive would reduce the damage done by excessive drinking.

Dr Sheron, writing in the British Medical Journal, said: “It's not pubs that are the problem, it's people buying the cheapest alcohol and drinking it at home.”

The linked extract is actually a bit more intelligent than the headline or article suggest, as it talks about 'Varying VAT' (which we can't do of course, as it's the EU who sets the rules).

If we are agreed that it is 'better' for people to drink in pubs than at home, the quickest win is of course to scrap the smoking ban (which would go down like a cup of cold sick with the bansturbators); as a secondary issue, if we want people to drink in pubs rather than at home, the key to this is reducing the price differential between the two. Alcohol duty itself does not discriminate between beer from the supermarket or beer in the pub - what makes the big difference is VAT. As I've said before:
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Beer tax is £16.15 "per hectolitre per cent of alcohol in the beer", i.e. the 'beer tax' on one pint is about 40p. The EU imposed Value Added Tax is 13% of the total selling price (or 15/115 of the total selling price). Remember that 'beer tax' is the same whether it's sold in a supermarket or in a pub, but VAT is a percentage of the total selling price!

So if a pint of beer in a supermarket costs 80 pence, and a pint in a pub costs £2.40 (i.e. three times as much), the total tax on the pint from the supermarket is 50p but the total tax on the pint in the pub is 70p. Ask yourself...

1) What would happen if they went the whole hog and scrapped the beer tax entirely in some vague attempt to help pubs, and both supermarkets and pubs passed on the full saving to the consumer* - then the pint in the supermarket would fall to 40p and the pint in the pub would fall to £2. All of a sudden, a pint in the pub would cost five times as much as a pint from the supermarket that you drink at home. Would this help pubs? Methinks not.

2) What would happen if they went the on the other tack and scrapped VAT but increased beer tax to 55p per pint (in the interests of some sort of fiscal neutrality), and both supermarkets and pubs passed on the full tax changes to the consumer* - then the pint in the supermarket would increase to 95p and the pint in the pub would fall to £2.25. All of a sudden, a pint in the pub would only cost two-and-a-third times as much as in the supermarket. Would this help pubs? Methinks it would.

Ergo, if 'they' really want to help pubs via the tax system (rather than just scrapping the smoking ban), it's not the beer tax they should be looking at, it's the bloody VAT, The Worst Tax of All.

* The price-demand curve for alcohol is inelastic, so this is one of the few cases where the consumer bears the bulk of a sales or turnover tax.