Magazine article Public Finance

Price Hike Is No Tonic

Magazine article Public Finance

Price Hike Is No Tonic

Article excerpt

Thirty years ago, Downing Street (where I then worked) was in the grip of an economic crisis. Then it was inflation, where now it is deflation, but the results were the same: plunging production, soaring unemployment and genuine doubt about whether Britain had a stable future.

On top of that, we were in the last few months before an election had to be held.

And what was the contribution of the Central Policy Review Staff, then the Cabinet's source of 'blue sky thinking', to the crisis? It was to produce a paper on alcohol policy. Its conclusion, backed with charts, tables and graphs, was that drink was too cheap and the government should increase its price.

In the comical ineptitude of its timing, the CPRS was matched this week by Sir Liam Donaldson, the government's chief medical officer. Donaldson is not unreasonably concerned about the dangers of alcohol to health - aren't we all, at least so far as the health of others goes. He therefore wants minimum prices for booze - £20 for a bottle of vodka was suggested.

In the CPRS's days, reports such as this were private, so ministers could transfer them from their boxes to their waste paper bins without public utterance. These days, what should be intimate advice to ministers immediately gets out into the public domain.

So Work and Pensions Secretary James Purnell. perhaps because he isn't health minister, got the job of kicking Donaldson's suggestion into metres-high grass. He knows that an election is coming and he is young enough to remain hungry for office.

As any elected politician in his shoes would tell you, a time when recession is hurting is not the best time to put the most obvious anaesthetic beyond the pockets of poorer citizens.

A medical officer with a political instinct would have held his fire. In 18 months' time, whichever government is in power is going to have to face the conseguences of the present save-the-banks spending spree. Public expenditure will have to come down or taxes go up; or both.

'Sin taxes' are not popular, but no tax ever is. And health concerns would be a good cover for the government when it wants to increase its revenues from alcohol.

Clearly it makes more sense to tax drink rather than set a minimum price for it, as the Scottish Government is planning to do and as Donaldson seemed to suggest. For if you set a minimum price, you add to the supermarkets' profits at the expense of consumers. Tesco, bless it, is not obviously now in need of a major boost to its revenues at the consumer's expense. …

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