Diary of a Shopkeeper, 7th March
As a shopkeeper selling wine, beer and spirits, the first thing I look for in any Westminster budget is whether there’s going to be an increase in the tax on alcohol. Most folk don’t realise how much of every bottle goes direct to the government as Excise Duty: a lot!
For the average bottle of wine you buy, £2.23 goes straight to HMRC as duty. More for sparkling wine like Prosecco, or fortified wine like Port.
This figure is worth remembering if you’re thinking of buying a bargain £4.99 bottle. £2.23 of that is duty; 40p is the cost of the bottle, and 20p shipping costs. The retailer makes a profit of £1 (from which they pay rent, staff, insurance etc.) And the total VAT is 83p.
That leaves just 33p to make the wine. And when I say “make the wine” I mean buy the land, plant the vines, wait a few years till they’re productive, tend the vines, harvest the grapes, ferment the wine, and prepare it for bottling. And on top of that, it has to pay for running the whole complicated farming-cum-food-processing-cum-marketing business.
The chances of getting a decent bottle of wine are low when you’re only paying £4.99 for it – because you’re only spending 33p on all that winemaking investment and activity.
If you can afford it, you get a much better quality to price ratio by spending a few pounds more. £9.99 gets you roughly £2.70-worth of wine. Treat yourself to a £19.99 bottle and you’re drinking £7.03-worth, meaning better land and grapes, and more careful winemaking. This is simply because the fixed costs like duty are the same whether you buy a cheap or an expensive bottle.
The good news is that in last week’s budget there was no increase in duty. It’s just as well, as the extra costs associated with Brexit are starting to kick in.
No tariffs were introduced when the UK left the EU, but all wine importers have had to accept extra costs from new labelling requirements, extra certification, and more complicated customs checks. These work down the supply chain to your friendly local wine shop, and increases of between 20 and 50p for most bottles seem unavoidable.
Well, I suppose those figures could be a lot worse. If you’re having a bottle or two of wine a week then an increase of 40p or £1 is unlikely to break the household budget.
Although, funnily enough, it seems that small figures can break the national budget. “An increase of 1% for NHS pay is the absolute maximum we can afford,” the government told us a few days ago. (That’s in England. In Scotland, an “interim” figure of the same size has been backdated to 1st December, but the final 2021/22 increase is still to be confirmed.)
What the government really means is, it doesn’t want to afford more than 1% for nurses. Really it can afford as much as it feels like. Who would have thought, even one year ago, that the government could “afford” to pour around £400 billion into the economy to keep it from total collapse?
But the need was there, and they met it. Just as, back in 2007/08, they found £237 billion to stop the banking system from collapsing. (Or was it £500 billion? Estimates differ – and hey, what’s the odd £263 billion between friends!)
The government has a responsibility to protect and support the population of the country. That’s what it’s there for. And economic support has been one of the more successful areas of government intervention over the past year. Certainly, it has not attracted the same accusations of ineptitude and corruption as PPE provision and Track and Trace.
The UK government has its own central bank, the Bank of England, and it can literally create as much money as it wants and needs. £400 billion, say. This isn’t cash that’s borrowed from a commercial funder, or has to be repaid; it certainly isn’t drawn from taxation on businesses or individuals. It’s money that is newly created, at the click of a mouse.
All Prime Ministers have a Big Lie that defines their politics. Teresa May’s was, ‘There’s no magic money tree.’ She said this in 2017, while arguing with a nurse, funnily enough. (Not so funny for the nurse, who hadn’t had a pay rise since 2009.)
The truth is, the UK government owns a magic money tree called the Bank of England. If it shakes the tree at one point and not at another that’s because it chooses to do so, in line with its political preferences at the time.
In this respect it differs greatly from governments like ones in the Holyrood and School Place, who have no central bank, and very limited means to increase their income. For them, budgets do have to be balanced based on available resources.
Different too, from our own individual household budgets. If we want to buy a £14.99 bottle of wine rather than a £4.99 one, we have to make sure we can afford it. But what the UK government has to do is create enough money to protect and support the population of the country – and to give the nurses a decent pay rise.
You could say it’s their duty.
This diary appeared in The Orcadian on 11th March. Other diaries continue to appear weekly. I am posting them in this blog a few days after each newspaper appearance, with added illustrations., and occasional small corrections or additions.