First wine, now spirits set to take a hit with rise in inflation and duty to slap a further £60m on consumers

By Jo Gilbert

Published: 25 October, 2016

The price of a bottle of wine and spirits is facing a major hike if duty rises in line with inflation, industry experts have warned.

Current government policy dictates that alcohol duty increases are pegged to inflation, which means that if inflation increases by 3%, as many experts forecast this month, a bottle of gin along with all other spirits could go up an extra 34p a litre.

UK consumers already pay £3.3bn in spirits duty and this measure could hit them with a bill for £60m more.

Last week, the Wine and Spirit Trade Association (WSTA) estimated the average bottle of wine coming from the EU could go up 29p thanks to the fall of the pound, which would have a "punishing effect" on the UK where 99% of its wine is imported.

Inflation means that wine could be in for a second blow, with an average 6p added to the average bottle price if wine duty goes up 3%.

According to the WSTA, wine isn't the only sector which is about to feel the bite.

74% of the cost of the average bottle of spirits in shops is already taken up in tax, but if inflation rises as anticipated and the government proceeds as planned, this will go up further.

WSTA chief executive Miles Beale, said: "Drinkers of gin and other spirits are already paying a staggering amount in duty. Unless the government reviews this policy, the rise in inflation will slap a further £60m on spirits consumers.

"And wine consumers could face a double blow if potential duty rises of £120m are added to the impact of the devaluation of the pound, which - together - could cost over £400m this year alone.

"Worth almost £40bn the UK wine and spirits industry makes a significant contribution to the UK economy and supports almost 600,000 jobs. These British jobs will be put at risk by damaging tax rises unless the government re-examines its excise duty policy."

The WSTA has denounced planned hikes counterproductive, pointing to evidence which shows that, following the freeze in wine duty in the 2015 budget, wine duty income actually increased on the previous year by £139m (+3.6%) from April 2015 to March 2016.

Following the cut in spirits duty in the 2015 budget, spirits duty income also increased on the previous year by £125m (+4.1%) from April 2015 to March 2016.

If there is a 3% increase in wine duty at the budget in March 2017, it has been estimated this would cost the industry and consumers an additional £120m.

Likewise, if spirits duty were hit at the same rate, the cost to industry and consumers could be an additional £60m.

Wine duty in the UK is currently the equivalent to £2.08 on a bottle of still wine, £2.67 on a bottle of sparkling wine.

For spirits, duty rates are £11.06 for a litre of spirits at 40% abv.

55% of the average bottle of wine in shops and supermarkets and 74% of a bottle of spirits is accounted for by tax.

Wine consumers paid nearly £4bn in duty in 2015/16 accounting for 37% of all alcohol duty income.

Spirits paid £3.15bn in duty accounting for 29.4% of all alcohol duty income.

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