Thursday, 14 September 2017

Read it and weep

From The Daily Mail:

Last orders for the traditional boozer? A third of British pubs have now closed since the 1970s thanks to rising business rates and beer taxes...

Yes, it is very sad, but it was the smoking ban wot dunnit, as a pub landlord tries to explain in the comments (and is roundly shouted down).

It's not the beer duty (42p per pint) it is the VAT - one-sixth of the average price of pint £3.60 is 60p. That's more than the beer duty FFS. If a pint of canned in the supermarket costs £1, the beer duty is also 42p but the VAT is only 17p. That's what makes the difference.

It's not the business rates either, here's some total fuckwittery from The Daily Star:

A massive 19% rise in business rates is set to hit 17,000 pubs across the UK – forcing them to whack a 5p price rise on each beer.

A pub can't pass on a property tax or rent anyway but what are the numbers..?

From The British Beer & Pub Association:

Pubs and bars pay 2.8 per cent of total business rates, yet account for just 0.5 per cent of total business turnover.

OK, that means about £800 million in Business Rates each year. But what's their total turnover..? The Morning Advertiser says it's £22 billion.

So the 0.5% is complete shite, multiply £22 billion by 200 and that means UK "total business turnover" is £4.4 trillion, two or three times total GDP.

Divide £800 million rates by £22 billion turnover, that's 3.6% of turnover, about 13p per pint. A quarter of the VAT and one third of the beer duty. Pretty much naff all in other words.

If Rates bills increase by 19% (no reason to assume this is true, but let's run with it), that means 2.5p more per pint, not 5p. But nice try.

As ever, you wonder, are these people corrupt or stupid? At least Tim Martin bangs on about VAT and troubles himself less with beer duty and Business Rates.


Jonathan Bagley said...

TBF, the top comments blame the smoking ban and have a lot of likes and support. That was the reason I stopped going in pubs. I'm amazed some people are still prepared to go to the pub and then stand outside to have a cigarette. How is that a relaxing enjoyable evening? I switched to vaping in 2012 and could probably find vape-friendly pubs, but have got out of the habit.

A K Haart said...

"are these people corrupt or stupid?"

Corrupt is my guess. They know how few people will check the numbers and spoil the story.

Rich Tee said...

Where I live in the north of England it has been all the rough pubs that have closed. The nicer, more respectable ones seem to be doing fine. Although it may just be that it is taking longer for them to feel the effect.

Bayard said...

"are these people corrupt or stupid?"

No, they are the people who pay the business rates, aka the landlords (that's as in pub owner, not pub manager), so of course they are moaning.

View from the Solent said...

"Camra blames ......"
That'll be the Camra that campaigned for the Beer Orders which led directly to the formation of Pubcos - how many pubs have the latter destroyed?
And the Camra that campaigned for the smoking ban.
I hope there is a place in the 7th circle of hell reserved for them

Mark Wadsworth said...

JB, thanks, I didn't sort by most popular, I just scrolled down a long way to the first smoking comment and saw that he or she got two stroppy replies.

AKH, agreed.

RT, do the surviving ones sell food?

B, is also my assumption, so why do Camra come in on their side...?

VFTS ... because Camra is always on the wrong side of an argument?

Lola said...

If BR increases the rent chargeable by pubcos must, logically, reduce. Ditto Pub prices and hence mortgage and hence interest. So why will increasing BR increase beer prices?

mombers said...

So have the pubs that have had a reduction in rates passed that on?

Methinks some of the noise around rates is simply that it's a very explicit cheque that gets written, and can be quite volatile due to retarded decision to revalue every 5 years instead of annually. VAT is somehow accepted as it just moves in lock step with revenue.

Curtis said...

maybe not just about food, if the smoking ban is actually one of the causes, then pubs which are frequented by non-smokers (or groups of people where the majority don't smoke) won't feel as much of an effect.

Obviously pubs can't pass on rent or tax rises, but isn't the point that such increases are making some pubs unviable to run, resulting in closure?

L fairfax said...

But wouldn't reducing VAT just make their rents go up? Or am I missing something?

Mark Wadsworth said...

L, it won't, we know that.

M, no and probably yes.

C, pub will close if theres a more profitable use for the space.

LF, vat cut = higher profits = higher rents = higher rates, that is true.

L fairfax said...

So is therefore VAT a good thing as it gives the money to the tax man as opposed to landlords. I am not 100% sure this is true.

Derek said...

Any tax will give the money to the taxman instead of the landlord, LF. Even the poll tax. So you could say that any tax, be it VAT or anything else, is good from that point of view. But taxes also have effects on economic activity and so we have to compare those. When we do we find that the disincentive effect of VAT is much higher than that of most other taxes. So it doesn't just take money from the landlord: it also reduces the amount of business that the pub does. That's why we say it's a bad tax.

Mark Wadsworth said...

LF, Derek explains.

Lola said...

D and MW Is it not so that VAT is a de facto tax on gross profits and 'rents' a tax on net ones? That is rent is an expense, whereas VAT just shifts the supply and demand curve equilibrium to the left?

John Miller said...

Why the fashion to judge everything by turnover?

I'd judge an overhead's impact according to a gross margins.