UK government to consider ‘production costs’ in below-cost ban?

In considering the introduction of a ban on below-cost selling, the UK Government may include ‘production costs‘ under its definition to discourage supermarkets from offering drink deals on alcohol to consumers.

According to the trade title M&C Report there, any action to include the cost of production would be welcome by the on-trade, which complained that the duty plus  VAT definition would not stop the cheapest deals in supermarkets. Cans of lager could still be sold for 38p under this definition, for example.

However it’s understood that including production costs in the equation would prove a “legal minefield” and the Home Office there has already stated that it’s not in favour of including such costs in such a ban.

According to a Home Office spokesperson, this legislation is due before the end of the year with implementation planned for 2012 and she did not envisage anything more than duty plus VAT “.. at this stage”.

However Pubs of Ulster believes that Stormont should move now and now wait to see what becomes of the recently-introduced below-cost selling ban in Scotland.

“Stormont may be tempted to wait and see what happens in Scotland, where they are introducing minimum pricing, but we would encourage the ministers to move now and not wait,” said Pubs of Ulster Chief Executive Colin Neill.

DUP assemblyman Jim Wells, who will take over as health minister in two years, understood why some people would be wary of proposals to increase prices for any product but there were “clear benefits to society whilst only placing a very small cost burden on the vast majority of people in Northern Ireland.

“The vast majority of people would agree that there is something wrong in society when it is possible to buy alcohol in a supermarket more cheaply than you can buy water. That is the problem which a minimum unit pricing of alcohol would be eliminating,” he said.

Stormont is considering setting minimum prices for wine at between £3.60 and £6.30 a bottle and strong beer at between £1.20 or £2.10 per pint.

“Some people think that it’s about pricing people back to the pub but it isn’t and it won’t because no matter where the minimum price is set, pubs will always be dearer,” Collin Neill pointed out, “But it is about addressing the misuse of alcohol through prices that are ridiculous.

“When you can get a unit of alcohol for less than 13p, something is wrong; it’s irresponsible. We’re taking extreme measures in our industry to ensure that people act responsibly — if the supermarkets moved themselves then the minister wouldn’t have to take this action.”

And he pointed out that non-drinkers are effectively subsidising low cost alcohol promotions in supermarkets.
Without action to deliberately support struggling pubs, the industry would continue to face difficult conditions, given the high overheads of liquor and satellite television licences, rates and entertainment costs, he concluded.

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