Saturday, 4 September 2010

Diageo lines up with the puritans in calling for higher duty on beer.

In what can only be described as an orgy of self-interest, the booze manufacturers and their representative organisations are leaping about trying to sound all good and righteous in submissions and representations to the current Treasury review of alcohol duty. At the forefront is Diageo in calling for higher duty on beer and wine:

Diageo wants to see "full equivalence" between all kinds of alcohol, so that one unit is taxed at the same rate, regardless of the drink. The strongest drinks would therefore pay the highest level of tax. Diageo is proposing the move as a way of staving off political pricing on drinks such as alcopops and strong cider, targeted by health campaigners for encouraging binge drinking.

Now all this is just a little disingenuous of Diageo – makers of eight out of the top 20 spirits brands – since such a change would raise the level of duty on beer and wine considerably. Presumably Diageo think Guinness can take the hit while they increase profits on higher margin spirit and spirit derived brands.

All this has brought a robust response from the beer business with Wetherspoons’ boss, Tim Martin weighing into the drinks company branding them, “a bunch of morons” and this position has been – more moderately – supported by others:

Kristin Wolfe, head of alcohol policy at SABMiller, said: "Excise tax 'equalisation' is a ruse for making high strength alcohol cheaper relative to low strength alternatives," she said. Ms Wolfe pointed to the lower production costs associated with spirits. "Unless spirits are taxed proportionately higher, they can be sold at a much lower price per unit." Mark Hunter, head of Molson Coors in the UK, branded Diageo's call "self-serving".

What should concern us is that booze businesses appear to be lining themselves for a scrap that is essentially over market share within a declining industry. Oh yes, did we mention that alcohol sales have fallen year on year for six years?

And the effect of Diageo’s representation – if implemented – would be a further discouragement for the pub trade. On top of the smoking ban, a further increase in beer duty (dubbed ‘equalisation’) would undoubtedly push a further bunch of long-established pubs from marginal viability into closing.

That any booze producer is calling for any increase in tax is wrong. Yet the prohibitionists, puritans and health fascists will seize on Diageo’s proposal as another little nail in the coffin of the pub. And this time it will be the drinks industry hammering in the nail.

All this despite the welcome discovery that drinking helps us live longer!


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