Sunday, 19 February 2012

The Great Beer Duty Propaganda Coup

What seems to be fairly well accepted is that UK PLC has a national debt. It is generally accepted that the debt is higher than is good for the UK economy. To me, the biggest argument for getting that debt down is to reduce the interest payments to service that debt. It is estimated that the debt is over £30,000 for every working person in the country and that the interest on this debt represents nearly £2,000 a year for ever household in the UK. Nearly £2000 out of the taxes you pay do nothing other than pay the people1 who have lent us the money for the privilege of us borrowing it. That's £2000 every year that can't be spent on hospitals, schools, police, roads and infrastructure investment.

Unfortunately my little brain is unable to work out the percentage of GDP that goes to pay this interest, but it seems it's not insignificant. It seems to me that paying down the debt with at least some urgency is important2.

There are two ways of reducing debt. It doesn't matter if we are talking about an individual, a business or a country; spend less or earn more. Most of us would tend to say that earning more is the more preferable of the two options. Individuals can, perhaps, work harder, if they can find someone who will give them more work to do. Businesses can sell more, charge more for what they sell, or more usually, try to do a combination of the two. Spending less is more painful, less popular, and sometimes a bad long term solution, although for the brave it can be a good short term fix.

A country has more difficulties in implementing a comfortable deficit reduction program. Spending cuts are deeply unpopular with the majority of the population. At the very least we notice a deterioration in quality and availability of public services. A proportion of the population will be hit harder with reduced income or even job losses. People are right to get upset about this.

A country gets income from taxes. No one likes paying taxes. Income tax is shown on your payslip and therefore a direct reminder of how much money you would have had if it wasn't being deducted. Hiding taxes in duties, VAT and worst of all, employers NI contributions means that more tax is now raised by hidden means than the direct, and in my view the most honest and fairest; income tax.

There has been quite a bit of noise from Her Majesty's Government in the last few weeks about binge drinking. Funnily enough, the budget is coming up. The chancellor dare not put up income tax, but something has to be done other than cutting spending.

It's simple really, whip up a bit of irrational hysteria about a drink problem that is much less serious than is painted, happy in the knowledge that the whole thing will sell newspapers and help TV ratings, so the media are on side.

Wham! up goes alcohol duty again. The Government gains popular support and increases revenue to the exchequer. Job done.

I hope I'm wrong on March 21st, but I suspect I won't be.

What really is getting my goat is that The Portman Group have come out in support of this propaganda coup. So no, I feel no remorse for putting the boot in at them when they piss me off.
"The Prime Minister is absolutely right to highlight the behaviour"
From the site http://www.tululuka.net/alco/
Rather than challenge the Prime Minister's panic creating comments, The Portman Group actually supports him. I fail to see how a body that is supposed to be helping the alcohol industry, can be doing so when it is getting into bed with neo-prohibitionary sentiment. They should not be rolling over and saying "you know what? you are absolutely right, alcohol is just bad, no good thing ever comes out of drinking alcohol"

Don't get me wrong, I'm not saying that there aren't people who could do with watching their alcohol consumption, or more importantly, look at how their consumption affects others.  I'm not saying that alcohol related illness and alcoholism isn't present, indeed, I'd be a liar if I said I'm not directly affected sometimes.  Falsely feeding the general public with the idea that it is right to increase duty, because there is a wholesale problem, is tantamount to propaganda, but that is the message we will be given come The Budget.

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For information, if a pint of 4% beer is sold in a pub for £3, out of that, £0.71 goes to the exchequer in VAT and duty. If you have also paid 20% income tax, NI contributions etc3 you will have to have earned £3.75 "top line" to be able to afford that pint. Your £3 pint has earned the exchequer around £1.46. That's not including other taxes paid by the pub and the brewery in the form of their employees income taxes, duty on the fuel to transport the beer and many other hidden taxes. And that's now, just wait until The Budget.

1What is baffling is who are all these people who have lent the money in the first place.

2The reader my disagree. Perhaps if you have lost your job as a result of public spending cuts it is not unreasonable for you to think that a little more debt spread across the population to prevent hardship is reasonable. A valid point of view.

3The actually net amount anyone pays in income tax in complex. It depends on your circumstances but has to consider income tax, NI contributions both employee and the larger4 employers contributions offset against tax credits. I think 20% is a low estimate.

4no, not many people know that this tax on employing people is significant.

8 comments:

anon said...

Never a true'r word said. Maybe it's a case of the Portman Group giving the proverbial hand job to save them taking it in the arse at a later date.

Kristy said...

Ummmmm, call me silly but.... "Don't get me wrong, I'm not saying that there aren't people who could do with watching their alcohol consumption, or more importantly, look at how their consumption affects others.".....isn't that what Portman said??? Maybe I'm not so good at reading but what I read is Portman want an end to alcohol being abused so you appear to be in violent agreement to me!

The real problem is that currently duty is a blunt tool and that's what needs looking at. As you agree with Portman there is a problem in the UK with binge drinking that has to be addressed, one way would be to overhaul the duty system to incentivise lower alcohol production i.e beer. An end to the duty escalator is long overdue and what we need is a duty system that recognises the alcoholic strength of drinks.

The fact is Britons now pay 40% of all beer tax in Europe. UK rate is eight times higher than France, ten times higher than Spain and eleven times higher than in Germany - what we need is fair treatment for beer.

Dave Bailey said...

Hi Kristy, good to have you commenting.

I do not agree that there is any significant "binge drinking" problem. Humans have drink alcohol since we invented agriculture. It's as daft as the Government wanting to chastise us for wanting to have sex.

There will always be people who abuse alcohol. The current Government propaganda will solve nothing and indeed so long as there is a "you are all very naughty and too immature to understand" type of approach to alcohol it will continue to increase its forbidden fruit status.

I do not agree that The Portman Group should be agreeing with ridiculous statements from the Government.

I don't agree either that we should be banging on about this "duty system that recognises the alcoholic strength of drinks" - we had that before the silly HSBD thing. Beer had a fair duty system where the amount payable was directly linked to the units of alcohol.

I know that The Portman Group suits some elements of the alcohol industry, but not mine. Agreeing with silly statements from the Prime Minister only exacerbates it in my view.

Tandleman said...

"The fact is Britons now pay 40% of all beer tax in Europe. UK rate is eight times higher than France, ten times higher than Spain and eleven times higher than in Germany - what we need is fair treatment for beer. "

We should continually bang on about this. It might also be worth mentioning that behavioural problems in these countries with relatively cheap take away alcohol are rather less than ours. I think Mr Cameron needs to look a little deeper into things.

Sucking up to the prohibitionists will get us exactly nowhere. Like being nice to terrorists, they regard it as a sign of weakness.

Cooking Lager said...

1. The "people" who have lent the money are institutional investors. mainly pension funds buying gilts as "safer" investments than equities. Also banks that buy them for short term redemption.

Gilts are bonds, but from a country. As a LTD, Hardknott can issue both equity and bonds. Brewdog have figured there is as much money in selling worthless paper as selling beer. The world is full of mugs and one is born every minute.

The BofE has also been printing money to buy these gilts (called QE). Different only on scale from Weimar Germany & Zimbabwe.

On the general issue of tax, my view is that beer geeks tend to be middle class people with more money than sense. I cannot think of a better demographic to hammer with taxation until the pips squeek.

wowninjas said...

I wholeheartedly agree. Eventually this self-defeating tax policy will fall apart when the Government realise that they're starting to make less money from duty and tax on beer. What we really need is huge posters in the street that say "Drink British Beer, Drink us out of the recession!".

Séan Billings said...

The Irish government has the same policy. Demonise alcohol and then use it as a cash cow.

Sin taxes are an addiction for any state which uses them. They do little or nothing to reduce the harm associated with the thing being taxed, but the money gained is soon considered vital to the state.

I am convinced that governments like those in the UK and Ireland are well aware that they cannot tax people better and are more concerned with how much they can squeeze out of the alcohol consumer without driving too many of us to untaxed alcohol (homebrew, smuggled, trips to France, etc.) than any theoretical reduction in alcohol related harm.

It's a pity that in the rush for more taxation and restriction, no one is doing anything to actually change peoples attitude to alcohol. It would be nice to encourage an attitude where alcohol is fine, but getting utterly pissed is not, but that is not compatible with the hysteria required for the tax solution to seem sensible.

RedNev said...

Yes, the thought had crossed my mind too that all the anti-booze propaganda in government and on the BBC at present may be linked to the Budget.

Most of us here seem to agree that we shouldn't adopt the anti-alcoholics' language, so here's something that slipped through the net: 'alcohol abuse'. Abuse has perpetrator and a victim: the correct word is 'misuse'. Using the word 'abuse' in relation to excessive or addictive alcohol consumption trivialises a word that still needs to be used in contexts where there are real victims of actual abuse.