City: Bet Lynch the brewers' darling on bootlegging

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The Independent Online
EIGHTEEN million Coronation Street fans are in suspense. Is the Customs & Excise about to pounce on Charlie, Bet Lynch's toyboy? Charlie, a long-distance lorry driver, is buying cheap beer in France and illegally selling it on to Reg Holdsworth, who runs the local corner shop. Bet, the lovable, law-abiding landlady of the Rover's Return, refuses to buy Charlie's bootleg booze. Relations - already chilly after he entered her in a Dolly Parton lookalike contest - are getting icy.

So much for mere fiction. The real soap opera is taking place between the Channel ports, where more and more people are following Charlie's example, hopping across the sea to buy cheap grog by the vanload. Whether the alcohol is for (legal) personal consumption or for (illegal) on-sale, the practice is hurting the Exchequer and infuriating the brewers.

Whitbread estimates the Treasury lost pounds 470m in duty and VAT forgone last year, as the British flocked to buy their drink from the supermarkets and wine shops of Calais and Boulogne, where French duty on beer is a fraction of the UK's. The Excise reckons the figure is lower, because some of the shopping was additional to rather than substituting for UK purchases.

What is certain is that the activity is increasing. Cross-Channel beer purchases doubled to 1.25 million barrels last year - equivalent to the entire annual production of two large regional brewers such as, say, Vaux and Wolverhampton & Dudley. Add in wines and spirits, and the British spend more than pounds 1bn a year loading up with booze from French shops. That means lost sales in British pubs and off-licences.

Sir Paul Nicholson, chairman of Vaux, called the bootleg trade last week 'a scandal', citing evidence of vans loaded with drink transferring on to 40ft wagons after arriving in Dover. 'It's easy money, easier than drugs. I don't think the Government really understand how much money they're losing. The Customs are showing a remarkable reluctance to do anything about it.'

Expect similar sentiments later this week as a string of brewers, including Allied Lyons, Bass, Whitbread and Wolverhampton & Dudley report financial results. Small family brewers, led by Anthony Fuller, are also planning a protest this week.

The rewards for the beer arbitrageurs (or 'lagertrageurs' perhaps) are pretty compelling. Step 1. Hire a Ford Transit for pounds 25, fuel up (pounds 10), buy return ferry fare (pounds 50). Step 2. Cross Channel and head for a hypermarket or the increasing number of specialist beer wholesalers. Pay pounds 432 for a vanload: 144 24-bottle cases of beer at pounds 3 a case. Step 3. Head for home. In the unlikely event you are stopped by the Customs, say the beer is for a party or wedding. Step 4. Sell the beer for pounds 6 a case (still an attractive discount to British supermarket prices of around pounds 10). Step 5. Pocket illegal profits of pounds 300 per trip.

The brewers want to see a massive cut in UK duty, to bring it down towards French levels. Some even cheekily argue that a cut might lift the total tax take. This is absolute twaddle. Lower duty and therefore lower prices would marginally lift total demand, but not nearly enough.

Even so, there is no way cross-Channel shopping will ever be curbed until the huge gulf between UK and French duty is narrowed. The Government is deeply reluctant to jeopardise the pounds 6bn it gets in taxes on alcohol, especially as it tries to get its vast borrowings under control. The French government would be equally reluctant to commit electoral suicide by lifting its wonderfully low alcohol duties.

There will be much talk of cracking down on the professional criminals. But there is no way the Excise can do much to catch and convict the myriad small- fry smugglers, who sell a couple of cases to their friends to help finance a weekend break in Paris. Anyway, much of the cross-Channel bulk buying is genuinely for personal consumption: after all, if people are prepared to pay gas bills years in advance to avoid VAT, why shouldn't they buy their drink by the cellar-load?

The bootlegging is going to become more widespread. The Channel tunnel will see to that. Meanwhile, the waste continues. Whitbread, for example, will continue to ship its Manchester-brewed Boddingtons across the Channel, where it will be sold to day-tripping Mancunians who'll lug it home again. Completely potty. Europe should get on with harmonising its absurdly divergent indirect tax system instead of agonising over a putative single currency. Who knows, it might even save Bet's teetering romance with Charlie.

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