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Jersey's Treasury Minister has fought back at claims his inflation-busting price hikes on alcohol and fuel are too much, by suggesting businesses in either sector are making excessive margins.
Next week States Members will discuss Budget 2017, which will increase alcohol prices by around 5%; and motorists will be sharing some of their pain, with fuel also set to go up - the Treasury Minister wants to add 2p to a litre of unleaded, an increase of 4.2%, in a measure which he hopes will bring in an extra £921,000.
Speaking to the Corporate Services Scrutiny Panel yesterday, Senator Alan Maclean, said that there were "unexplained margins" in the supply chains for alcohol and fuel, and he urged the competition regulator to investigate.
His argument is identical to that used by his predecessor, Senator Philip Ozouf, in previous budgets.
Panel Member, Constable Chris Taylor asked Senator Maclean if he would consider reducing beer duty, as has been done in the UK, in order to boost the hospitality industry.
Senator Maclean replied: "The hospitality industry is extremely important, and i'm pleased to see tourism/hospitality is performing well. I think we've moved away from attracting people as a destination through cheap booze and cigarettes.
"If you strip out taxes and duties, a pint of bitter in Jersey is 50% more expensive in Jersey as in the UK, so where is the problem with our [Budget] rises? There are margins which are unexplained.
"I'm just observing there are significant margins, and that is a matter for the regulator, to make sure the market is operating for the people of Jersey. We are observing margins which are unexplained, and that is for others to deal with.
On fuel he said:
"There is a much larger margin somewhere in the supply chain, above and beyond what you see in the UK, something around 53% on road fuel, in the supply chain somewhere, to the detriment of consumers in Jersey. That is not in the interests of consumers, businesses or the Island, and its regardless of what we do with duties."
Senator Maclean went on to argue that alcohol duty was being increased to discourage people from drinking, and so reduce the cost to the Island of alcohol-related illness; but under pressure from the Panel he admitted that the money raised through alcohol duties was not 'ring-fenced' to pay those health costs, and just went into general states revenues.
However, the CEO of the Liberation Group (which has 46 pubs in Jersey, as well as its local brewery and the Victor Hugo wholesale business) Mark Crowther rejected the allegations of excessive margins:
"We operate in the UK and Jersey and the margins are broadly the same, there are no excessive margins. Our retail prices are also broadly similar."
Speaking in this month's edition of Connect, he added:
"I was very shocked when we saw the proposed level of 5% of alcohol duty increases. The reason we were so shocked was because we had had no forewarning. No one had said, “...what do you think?” or “we’re thinking of this, what would your reaction be, are we going down the right route?”
"So we just felt it had been kind of dumped on us without anyone coming and engaging with business - and bearing in mind the amount of impot duty that we pay to the States of Jersey every year (£10m) we felt that we could have at least had a conversation; particularly because we feel the increases, at more than three times the rate of inflation, are excessive.
"I think it will have a very damaging effect. I mean alcohol duty in Jersey is always amongst the highest in the whole of Europe, and that is just going to put another further step up on that - and particularly at the current time when you know the economic background in Jersey is fairly challenging to say the least; the last thing we need is a further kind of cost hike which will add you know 3.5p of duty, roughly, to a pint of beer and a lot more on litres of spirits and wines.
"We can decide now whether we want to invest in Jersey, or in Guernsey, or Alderney or even in the UK; and when you have a backdrop of inflation busting tax rises, it doesn’t really feel like a stable place that one would be piling into to do more investments."
You can read the full article with Mr Crowther here.
The Treasury plans are being amended by Deputy Russell Labey - he is proposing that alcohol prices are increased by no more than 1.5% instead. The Budget debate begins next Tuesday.
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