The Government has announced the 'below cost ban' will be defined as the rate of duty + VAT, despite concerns from critics that few drinks are sold below this level. A Home Office press release said "This is an important first step in delivering the government's commitment to ban the sale of alcohol 'below cost' price."
However some media reports described the measures as 'minimum pricing', a different approach based on cost per unit. See here for the differences between a below cost ban and minimum pricing. The ban on sales below a duty + VAT rate has been calculated as preventing retailers from selling:
- a litre of vodka for less than £10.71
- 440ml lager for less than 38p
- a litre of cider for less than 40p
- 700ml whiskey for less than £8
There has been ongoing controversy over how a 'below cost ban' could be defined since the Coalition first pledged to crackdown on cheap alcohol. The on-trade had previously warned that supermarkets would 'beat a below cost ban' under a duty + VAT definition, arguing production and distribution costs should be factored in. A press release from the Association of Licensed Multiple Retailers’(ALMR) today said it would “make no difference to pocket money prices on the high street nor the irresponsible retailing practices of Britain’s supermarkets”.
However retailers and supporting bodies have called for a duty + VAT definition, with Asda already adopting the approach last year. A press release from the Wine and Trade Spirit Association (WTSA) welcomed the move as the "practical way to implement the policy", adding that "alcohol pricing and taxation cannot provide the solution to alcohol misuse". Drinks producer Diageo said the proposal was "the least distorting option".
The announcement of the below cost ban appears to have re-opened the pricing debate, first ignited in 2009 when the former Chief Medical Officer called for a 50 pence per unit minimum price. Speaking on BBC Radio 4 feature, Professor Ian Gilmore said of the measures: "It's a step in the right direction but I have to say, it's an extremely small step." Gilmore and other health interests including Alcohol Concern have continued to call for a 50p minimum price. Professor Nutt argues the harm caused by 'super strength' lagers also supports the case. See here for a Channel 4 news report.
As it announced the measures, the Home Office published a review assessing the potential impacts of pricing measures:
The Home Office said options for implementation of the measures were still being considered.