by andy on 31st January 2010
This lovely beast is a Laffer curve, it describes how much tax revenue could be raised by taxing a certain item such as beer.
On the far left, where the tax rate is set to zero, you don’t raise any revenue because your tax rate is 0%. In other words you are not taxing a pint.
On the far right where you are taxing something at 100%, the amount of revenue raised is again zero. This is because that although you might be willing to buy a pint taxed at 100% I wouldn’t be prepared to make it – I wouldn’t get any money for the ingredients or labour. So no beer is made, none is sold, and therefore no tax revenue.
Now obviously beer is taxed and the government gets revenue from the duty and the VAT, so we know the curve goes up as you move towards the middle. It follows in a pretty straightforward way that there’s a bit somewhere in the middle that’s at the top. That’s where you get the most tax revenue.
Some chancellors decide to tax things to the left of the peak (for example at point A) because they think that all tax acts as a restraint on trade and trade builds strong happy countries. Unfortunately we haven’t had one of those since Gladstone’s era.
Most chancellors are self interested and tax items at the peak because that’s where they make the most money. Occasionally we get chancellors who are round the twist that tax items to the right of the peak (at point B for example) where they actually gather less money than they could.
Guess what kind we have at the moment ?
In the last year Alistair Darling raised the duty on beer over 20%. A few days ago the British Beer and Pub Association reported that the revenue to the government was down by an estimated £258 million.
£258 million! Enough for a nice new hospital, or some decent equipment for the army. Hell, you could resurface a moat and get a nice new duck house for that kind of money.
Rumour has it that someone once drew Alistair a Laffer Curve on the back of an envelope. He must be holding it upside down.
H/T to Pete Brown for his take on this.
by andy on 30th January 2010
I’ve spent the last few days brewing, making sales, struggling with paperwork, and composing a letter to the council that is so vitriolic that on reflection I’ve decided not to send it. So I’d missed these three stories that taken together are deeply disturbing.
A bit of context. Public finances are in a dreadful mess, with at least two trillion pounds of debt (Feb 2009 according to the OECD) and 200 billion pounds ushered into existence by quantitative easing. The debt is bought by international financial markets who give money to the government in return for gilts. They demand a certain level of interest to do this and that interest level is reflected in the interest rate charged on mortgages and other day to day credit transactions.
If the rate of interest goes up, the economy will tank and with a mere 0.1% growth in the last quarter (if you can believe that) it will not take much.
Why would those wicked financiers demand more interest ? They’ll do it if they think that Britain’s ability to pay back the gilts has become riskier, for example if Britain’s credit rating was downgraded. It happened to Greece late last year.
Now, as a matter of fact, despite the sheer cack handedness of the way the economy has been handled over the last few years, the ‘market event’ has not happened. Britain’s economy has run off the cliff but like Wile E. Coyote we are not falling because we haven’t noticed yet. You’ll note that I’ve described the carnage of the last few years as ‘not falling’; imagine what ‘falling’ might be like.
Opinions vary on why, but a very plausible theory is that the markets are waiting for a change in government when they believe George Osbourne will become Chancellor. The theory goes that he will immediately make drastic cuts in public spending to start setting the situation to rights. He is after all, a Tory. In other words, George is under the microscope.
On Thursday, George published this piece of nonsense full of sound and fury and the latest psycho-economic theories but studiously ignoring the elephant in the room.
At round about the same time the world’s most influential bond manager (Bill Grosse) wrote:
The UK is a must to avoid. Its Gilts are resting on a bed of nitroglycerine.
…and finally today we learned that the Standard and Poor’s, the credit rating agency had downgraded Britain’s banks. This is frequently a precursor to downgrading an entire country’s credit rating.
It’s beginning to look as if at the end of Davos, the markets have reached a judgment about George, and by extension about the likely future of the UK. Just like Wile E. Coyote, we may well be about to learn what gravity really means.
Hat tips to The Devil’s Kitchen, Burning our Money, IanPJ on Politics.
by andy on 26th January 2010
(Hilariously, this image comes from the Envirowise government website where they ask for acknowledgment. I am of course happy to do so.)
I get most of my news from blogs these days. I read far more than are on our official blog roll. That’s mainly for beer or rather local related blogs. Much of the stuff I read is not suitable for those of a nervous disposition. Occasionally, something comes up that is so horrifying it bears repeating here.
….and today’s example is the official estimate of government waste, that is, the government’s own estimate.
It’s (wait for it)
15%
Fifteen; one five percent.
I was so shocked I had to sit down for a moment.
To put this into context, that’s what we were paying in VAT last year. It’s simply wasted.
Burning our money is all over this.
On top of this, today is the official announcement of the end of the recession. During the Christmas season the UK economy grew 0.1% although a lot of forecasters were expecting 0.4% This is very close to the margin of error and several quarters growth have been revised down after the first announcements. In all probability there was no real growth last quarter and the cold start to this quarter, combined with the fact that it’s not Christmas will probably send the numbers properly negative again.
You can see from the official graph that the drop from the 2006 peak to the present day is 9% avoiding the technical definition of a depression by a mere 1%
We could still get there if we work on it.
+++UPDATE+++
One implication is that the election could start as early as next week.
by andy on 22nd January 2010
I’m feeling somewhat put upon this morning. I’ve woken up to discover that self harmers have now taken to using alcohol! as reported by the BBC.
I believe I’m an innocent bystander in all of this, albeit a slightly blood spattered one from standing too close. As it happens I did know someone who self harmed at university, typically just before exams started. She ended up in hospital one day having rather overdone it and I’m not sure what became of her after that.
The thing is, the BBC doesn’t seem to particularly care why people self harm, or indeed why – during the reign of benevolent king Gordon of the workers paradise – that self harming seems to be on the increase.
No, what the BBC seems to think is important is that self harmers drink. The whole tone suggests that somehow the drink is causing the self harm.
Well, I don’t know about you but if I was sitting at a table preparing to carve bloody chunks out of my forearms, I’d need a stiff drink first. The surprising thing is that a mere 64% of them drink.
Its ironic that BBC is well known for its lavish hospitality and I dare say that there are one or two staff members who have been known to take the odd glass. But I don’t think I could conclude that there are a larger than average number of self harmers at the BBC.
That wouldn’t be fair, and just like the BBC I try to be fair.
by andy on 22nd January 2010
I’ve got a lot of time for Nick Herbert MP and his team. Over the last few years I’ve found them responsive to an occasional email and there’s even been a small change on the roads of Steyning that I asked for and he made happen. It’s a matter of considerable regret that I don’t feel able to support him at the next election because of the leadership of his party. Not that I expect that to make any difference – Steyning would elect a frog if you put it in a blue tie.
A few days ago, Andrew Lansley, the shadow health secretary made some ill thought out comments on alcohol labeling. I copied my piece to Nick Herbert’s PA Gloria and asked if she could forward it onto their health department.
There are two main points in my original piece.
- Centilitres of alcohol are units. There’s no point in renaming them.
- Finding out the calorie content of real ale will be expensive – fact – and no one cares – my opinion but an informed one.
Gloria responded that there’s nothing in the draft manifesto about Centilitres. She forwarded me the link and she’s absolutely right. Nary a mention.
Unfortunately the BBC piece has a video clip of Andrew Lansley talking on the subject and he does say exactly that. So at the moment it’s a toss up between Andrew Lansley floating a daft idea or a policy that simply hasn’t made it into the draft yet.
Even more unfortunate is the fact that the extremely expensive and massively useless calorie idea has made it into their policy paper ‘A Healthier Nation’ and is in some sense official. Gloria sent me this:
We will seek to agree the
standardisation of labelling, where necessary at a European level, and will ensure that alcoholic products provide an indication of calorie content.
it goes on to say:
When surveyed earlier this year, four in ten did not know a glass of wine has the
same calories (120) as a slice of cake, or that a pint of lager and a small sausage roll have 170 each.
So, because a minority of drinkers either do not know or do not care, around 450 small businesses around the UK are going to each get a bill of several thousand pounds each in order that the punters be made to care. But wait – there’s more:
rather than just printing the number
of units on a bottle of beer, we will add information about the number of bottles drunk by an average person each week and the volume of alcohol contained within that bottle.
There’s really not going to be very much room on the bottle label for anything anyone is actually interested in, such as the name, or the style is there ? This presumably will be on top of all the other labeling requirements such as our address, allergy information and so on that we are currently obliged to add.
What I find really annoying about this paper is the use of the word ‘we’. The truth is that no one in the new government will lift a finger to do any of this, the unpaid labour will be performed by me personally as I go though our labels to meet new requirements and the final bill for the calorie analysis will end up on the price of a pint along with the inevitable duty rises of 2010.
Another reason not to vote for the Tories. They really are working quite hard at it.
by andy on 17th January 2010
I’m a bit late to the party on the latest about this. Man Widdicombe wasn’t though.
For what it’s worth, I’m very much against this. I don’t want the government setting the price of a pint. Don’t imagine it will stop at 40p a unit, that’s just the first step.
by andy on 15th January 2010
Apparently Nanny has decided we are not paying sufficient attention to our livers. A Liver Tsar has been appointed who will be round to your house to ensure:
- You are not drinking more than the recomended number of units per week.
- You are eating all of your liver and bacon – including the gristly bits.
I expect the post will come with a nice office and a staff of PAs who will of course become known as the Liver Birds regardless of gender.
by andy on 14th January 2010
I’m feeling a slight sense of cognitive dissonance. An MP talking sense. A Labour MP talking sense!!
If we genuinely believe that the only way we can stop people over-indulging is to make alcohol too expensive for “them” (and we know who “them” are, don’t we?), then we might as well throw in the towel right now.
Do go read the whole thing.
by andy on 14th January 2010
…a spokesman.
One of the reasons that I’m looking at the election with a sense of foreboding rather than relief is the feeling that if there is a change of government, things will get no better and may well get worse. Further evidence of this arrived yesterday when the BBC reported the proposed Conservative policy on bottle labels.
To summarize the “big idea” alcohol units will be replaced by centilitres of pure alcohol and calorie values will be added.
The first part of this is almost Homer Simpson like in its ignorance. In the UK, units of alcohol are centilitres. All this will accomplish is small breweries taking a hit as unused stock of labels are thrown out and replaced with new ones.
The second part of this is rather more lethal. There’s no doubt that beer, like any alcoholic drink, contains calories. In some drinks the alcohol contains the majority of the calories (at around 7 calories a gram of pure alcohol). In real ales the rest of the drink also has a high calorie value from the various unfermentable sugars that give it body and flavour.
So, in order to get an accurate calorie value for a particular beer, we are going to have to get it analyzed by a nutritional laboratory. I made a few calls yesterday and the so far the best quote I’ve had is around £500 per beer. We currently have 5 beer styles and are hoping to introduce one or two more this year. So we might be looking at several thousand pounds of costs just to continue selling. This is on top of the duty, VAT etc. etc. that already goes out the door on a monthly basis. A large scale industrial brewery will laugh this off, but the 450 UK microbreweries will find it more than painful.
In the meanwhile, will anyone on a diet be drinking real ale ? Not if they have any sense.
Economic life in the UK is lying on the floor bleeding, is ‘Call me Dave’ the clot we need ?
by andy on 12th January 2010
Snow beer’s been made this year so far as the brewery has been frozen. Heh.
….but today there is water rather than rude noises in my taps. Perhaps we’ll be able to get going now.
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