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
