Supermarkets and VAT? Pull the other one Mr Martin...

27-Jan-2014 - Last updated on 27-Jan-2014 at 12:09 GMT

Cards on the table; I’m a JD Wetherspoon fan. I like their pubs generally and admire them as a company, they have very much bucked the downward trend of the licensed trade. Every now and again though, Tim Martin pens an article or appears on the radio and trots out his line about supermarkets getting an unfair advantage because they don’t pay VAT on food and nobody seems to challenge his view.

So, at the risk of bringing about the wrath of the Demi-God of the industry, I’m going to step where the supermarkets seemingly fear to tread.

The notion that supermarkets don’t pay VAT where pubs do is nonsense.

VAT, lest we forget, is a “value added tax”. Pubs add that value by preparing meals from ingredients and selling those meals at a profit to the customer. Supermarkets sell ingredients that customers prepare and consume away from their premises so there is no value added in the same way. Supermarkets sell ingredients, pubs sell meals.

Lop-sided

We are regularly given numbers to back up arguments in these pieces as well, and some of these need challenging. Tim Martin tells us that supermarket wages run at 10% whereas pub wages run at 30%. Now, I can’t challenge the number for the supermarket wage spend but 30% in a pub, in my experience, would probably get the manager fired.

I don’t know how many Wetherspoon sites run a 30% wage spend but my best guess would be zero, although I am fully prepared to stand corrected.

Of course, we would all support the notion that too many pubs are permanently closing their doors; it’s always sad to see businesses fail. The idea that the big bad supermarkets are to blame though, and that Wetherspoon are some sort of cuddly saviour of the industry, really needs examining without a lop-sided interpretation from one side or the other.

Supermarkets are successful because people like to use them; they are convenient and cost effective. They are businesses as well though and entitled to make a profit, they operate in our free market economy and fail or succeed according to how good they are at what they do.

If people did not want what supermarkets sell then supermarkets, the same as pubs, post offices and village shops, would fail and close their doors.

Comfortable

Tim Martin, along with many other commentators, wants more people to drink in pubs instead of the home. That’s entirely understandable, because they operate pubs, but we should be wary of attempts to skew markets in any way; that’s not how our free market economy works.

People are choosing the home over the pub for many reasons other than price, it is a factor but there is more to it than that. People’s homes are far more comfortable than they used to be. We have conservatories and nice kitchens; we like to have friends round for dinner. Social media has entered our lives in a huge way and people have no need to go to the pub in order to meet their friends.

That might sound sad to the few who don’t have a Facebook account but that is where we are at. Staying in is not the sad option, many people enjoy spending their evenings at home; the pub trade needs to understand that.

Hobby horse

People’s habits have changed and many community pubs are surplus to requirements. That is the sad truth and the evidence of it is all around us. Many communities don’t have a pub anymore and they don’t miss having one.

Here’s a question: how many pubs have been wiped out because a JD Wetherspoon opened up on their doorstep? That’s a free market in action and Wetherspoon are perfectly entitled to operate within that market. Supermarkets are doing the same thing, serving a market.

Tim Martin should get off his VAT hobby horse and get on with what he’s good at; running pubs.

Steve Finn is a licensed trade consultant