UK: Government's 'below cost' alcohol ban divides industry

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  • On-trade says ban too narrow
  • Retailers support move
  • Lack of evidence hampers decision

The UK Government's decision to ban sales of alcohol below the sum of duty tax and value added tax has split opinion in the drinks industry amid accusations that it will do little to affect prices.


The Government announced today (18 January) that it will introduce a defacto minimum price on drinks in England and Wales by banning their sale at prices below duty tax and VAT. A litre of vodka will cost a minimum GBP10.71 (US$17) and a 70cl bottle of whisk(e)y will cost at least GBP8 following the move.

Representatives of the UK's on-trade argued today (18 January) that the Government has played too safe with the definition of 'below cost'. The CEO of the British Beer & Pub Association (BBPA), Brigid Simmonds, said: "This is a clear measure that can be implemented quickly and will stamp out the worst cases of below-cost selling. However, it will not have a significant impact on low-priced alcohol in supermarkets."

She said there is a "real need for the Government to do more to support the pub". Under the new rule, a 44cl can of lager would cost a minimum of GBP0.38, compared to an average price of around GBP3 per pint in the on-trade.

Other sections of the drinks industry have embraced today's announcement. Faced with some kind of action on pricing, such a narrow definition of below-cost is seen as the least worst option and just-drinks is aware that a number of retailers and drinks companies have lobbied hard for this.

"We have consistently argued for a ban on the sale of alcohol below the level of duty plus VAT on the basis that these are both consumer taxes and therefore the cost should be passed on to the consumer," said the Wine & Spirit Trade Association's CEO, Jeremy Beadles. 

"It's equally vital to recognise that alcohol pricing and taxation cannot provide the solution to alcohol misuse," he added, however. The Scotch Whisky Association called on the Scottish Government to implement the same 'below cost' ban in Scotland.
David Young, a partner at international law firm Eversheds, said that the Government's 'below cost' ban "plays to the gallery" and will have little impact. "These measures are unlikely to solve anything; the issue is deeper-rooted," he said.

"As for the drinks industry, it will no doubt feel demonised (again), but its markets are global not purely domestic and, in conjunction with retailers, suitable adjustments will no doubt be made which preserve viability for both," Young added.

The Government itself said in its review of alcohol pricing, also published today, that it remains unsure of the best path to tread.

It said that research suggests a link between pricing and consumption, but added: "On the basis of the evidence reviewed, it is not possible to determine which pricing policy may be most effective."

As part of efforts to tackle excess drinking, ministers have also promised to "overhaul" the UK's licensing laws and are in dicussions with drinks industry leaders on a "responsibility deal" that would include commitments from drinks companies on labelling and marketing. Duty tax on beer, wine and spirits, meanwhile, is set to rise by another 2% above inflation in the 2011 Budget, to be announced in March.

Here are the minimum prices for different drinks, under the new rules, as published by the Home Office:

  • One litre of vodka: GBP10.71
  • 440ml can of lager: GBP0.38
  • 70cl bottle of whisk(e)y: GBP8
  • One litre of cider: GBP0.4
  • 75cl bottle of wine: GBP2.03

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