British chancellor continues to target alcoholic drinks

The UK’s Chancellor of the Exchequer has again hit alcoholic drinks with a 2% above inflation price rise on beer, wines and spirits. 10% going on cider

Alistair Darling, in his latest and probably his last budget, has confirmed that duties on beers, wines and spirits will go ahead with a tax escalator which automatically increases tax on alcohol by two percentage points above inflation and he is putting 10% on cider, all from midnight this Sunday (March 28).

He added that there was a “long standing anomaly” with the duty on cider and in September the categories would be redefined with stronger cider being taxed more heavily – a move designed to tackle harmful and under-age drinking.

The Wine  & Spirit Trade Association, the lead body for the industry, has come out and said the “5.1% increase in alcohol duty brings further unwanted price rises for consumers and threatens to cause more job losses in the drinks industry in the year ahead.”
WSTA chief executive Jeremy Beadles said: "Successive punitive tax rises on alcohol are taking their toll on household budgets and mean further job losses in the drinks industry are on the cards this year.
"The last year alone has seen business closures and 30,000 job losses and today's Budget means higher prices for consumers and more misery in a sector that ought to be part of Britain's economic recovery."
The WSTA says the budget rise means taxes on wine and spirits have risen by more than 25% and 20% respectively since March 2008. Since 1997 the Government has taken an extra £4 billion from consumers in alcohol taxes.
The effect of the tax on a typical item is as follows:
- 10 pence on a 75cl bottle of wine
- 36 pence on a 70cl bottle of spirits
- 2 pence on a pint of beer

Gavin Hewitt, chief executive of The Scotch Whisky Association, said: “The Chancellor’s duty escalator policy is totally misguided. The policy has failed.

“Revenue from spirits to the Treasury fell by £49m in 2009. Today’s duty rise by a Scottish Chancellor will not secure the increased revenue that he is looking for and undermines an industry that brings massive economic benefit to Scotland. He has hit Scotch at home and set a bad example for duty regimes in our export markets. Today’s decision is worsened by the announcement that the above inflation rises will continue for an extra two years to 2015,” said Hewitt.

“After the election the new government needs to take a long hard look at the excise duty regime. The escalator should be abolished, duty on spirits should be frozen and the duty discrimination faced by Scotch, which the chancellor has worsened again today, should be addressed through approximation of duty rates, and eventually duty equivalence for all alcoholic drinks over the life of the next Parliament.”

Henry Chevallier, chair of the National Association of Cider Makers (NACM) said: “We knew we were being singled out – the Pre Budget Report told us that.

“We are at saturation point on the duty on alcohol – even for a success story like cider. This dramatic increase could well reverse the growth we have generated in recent years.
“Depending on how retailers deal with the duty this will add significantly to what consumers pay for a pint of cider. We have no control over the retail price of cider, but it could mean up to 10p a pint.

“The Chancellor has a big budget deficit to address and whilst it might appear obvious to increase the tax on alcohol, the reality is likely to mean reduced demand and therefore less cash in the Treasury coffers,” said Chevallier.

“What makes this so serious is that cider makers have invested millions to plant thousands of acres of new orchards in the last decade,” he concluded.

Peter Darbyshire, managing director of major UK wine supplier PLB, said: “This budget, aside from being highly damaging to cider producers, has really left us in limbo. He hasn’t necessarily damaged the industry any more than he has already over the years, but neither has he made any commitment to helping us in the future, particularly in light of the pub closures.

“The only slight blessing is that there has been no talk of a minimum price on alcohol which I hope is because he has listened to the WSTA’s argument, but I still don’t consider him to be a friend to our business and we’re still in the position of seeing a fall off in revenue for our industry as price points will remain. There is a potential transfer of purchase to neighbouring countries especially if the exchange rate recovers (admittedly an unlikely eventuality),” said Darbyshire.