Thursday 13 December 2012

A piss-up in a brewery

Can the coalition organise a piss-up in a brewery? One thing’s for sure: a piss-up will be more expensive.

Yesterday, CAMRA (the Campaign for Real Ale) led a demonstration at Westminster to protest against the fiscal escalator applied to beer. This policy, introduced by the last Labour government and maintained by the coalition, increases the duty on beer by inflation plus 2% each year. As a result, the tax on beer has increased by more than 40% since 2008.

CAMRA opposes the fiscal escalator because it is damaging a British growth industry, craft beers, and a vital community asset, the local pub. And with fewer pubs selling costlier beer, more drinkers are buying cut-price beer from the big supermarkets, which contributes to worse drink problems.

Which leads us to another controversial government alcohol policy, a proposed minimum price of 45p per unit (in England and Wales; things are more advanced in Scotland). How bad would this be?

Suppose you could not buy any alcoholic drink for less than 45p per unit. That would mean a minimum price for a pint of beer (average strength 5% = 2.8 units) of £1.26. In my local pubs, the price is around £2.80 to £3 a pint and it is closer to £4 in London. The minimum price for a standard-sized 75cl bottle of wine (average strength 12% = 9 units) would be £4.05. The cheapest bottle of wine I’ve seen lately in a British supermarket cost £3.99 and there’s usually nothing under about £4.50.

The only drink that would increase in price significantly is the cheap lager sold by supermarkets below cost price as a loss leader. Selling below cost is predatory pricing, and it is a major factor behind not only problem drinking but also pub closures.

But is a minimum price per unit the right strategy? The ‘unit’ is a notional measure unrelated to production costs, when the problem is the sale of drink below cost. And as we saw during the last Labour government, the unit value of a pint of beer was arbitrarily increased from 2 to nearly 3 units, and a bottle of wine from 6 to 9 units.

CAMRA instead suggests an alternative policy:
CAMRA supports a genuine ban on the sale of alcohol at below cost. This would take into account the cost of brewing and retailing beer. This would result in supermarkets being unable to sell beer below an average cost price of around 80p a pint. CAMRA does not support proposals for a minimum price unrelated to the costs of producing and selling beer.
An 80p per pint floor price would have no effect on real ale or pubs. Pubs, unlike supermarkets, need to make a profit on the beer that they sell and so would be unaffected by any action against below cost alcohol sales.
Blanket policies are disproportionate and treat the civilised majority of drinkers like children. CAMRA’s alternative would be much more focused on the real problem.

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