Officer Fiasco goes on duty

12 December, 2008

Come the March Budget, will Darling move again to increase taxes on alcohol?

Ihave a friend who grew up in Trenton, New Jersey. He was (and still is) a bit of a tearaway, and all through his teens he had minor run-ins with the local police. So frequent were these incidents that eventually he got to know the local officers by name. Splendidly, the cop he seemed to deal with most frequently was called Officer Fiasco. He swears this is true, and given the bizarre and eccentrically woven tapestry that his life has become, I have no reason to doubt him.

A fiasco, as any fule kno, comes from the Italian word for flask or bottle. The original straw-wrapped Chianti bottles are "fiascos". How this came to mean "a ludicrous or humiliating failure" is a bit more difficult to discern. Perhaps the bottles were made so fine and delicate, such a celebration of the glassblower's art, that they needed to be wrapped in straw before they could be used, negating the achievement by hiding it. I'm sure the straw weavers were happy, though.

I'm sure there's a clever connection to be made between this and the recent VAT cut and duty increase - one thing wrapped in another, giving a net change of nothing at all but producing more work for everyone involved. Certainly everyone I've spoken to has found it to be nothing short of pointless. The lucky retailers (like us) have just been able to adjust the VAT figure on their EPOS system and pootle on as normal.

For importers, and anyone dealing with the wholesale end of the business, it's definitely more of a pain. All price lists have had to be adjusted to reflect the relevant changes, but again, the net outcome is so small as to make no difference.

While the VAT cut has been big news, the duty hike has been downplayed - unsurprisingly, given how unpopular this sort of action is, even at Budget time. It will be interesting to see what happens when Mr Darling presents his Budget in March 2009. I wonder if the duty will be spun as being "frozen" (who will remember it went up in December 2008?). Or the duty may increase again, a move that will be unpopular but almost certainly necessary, in terms of revenue generation.

Regardless of what happens in the Budget, it's important to remember that when the VAT rate reverts to 17.5% at the end of 2009, duty will stay at its elevated level, meaning prices will have to go up.

So overall, beers, wines and spirits are not more affordable but less, and will become more so over the next couple of years, up to

the 2010 Budget.

The knock-on effect is that smaller licensed businesses will be seen as less competitive, when in fact they are the ones forced to reflect the true market cost of what they are selling. The bigger operators, by which I mean the multiples, will continue to sell alcohol near and below cost price. This is anti-competitive and unfair.

At a time when the big financial institutions are being bailed out, what of the small operators? All they want is the chance to make a steady living, but all are being squeezed by behemoth supermarkets and, in a particularly unfair scenario, unable to obtain credit with the banks that have just been refinanced with money from all of us.

It's not so much robbing Peter to pay Paul, but robbing Peter and Paul, and then mugging anyone who comes to their assistance.

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