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WSTA calls for 2% cut in duty as sector gives Treasury a £200 million boost

Published:  08 February, 2016

The Wine and Spirit Trade Association has met with Treasury officials as part of its campaign for a cut in duty in next month's Budget.

The WSTA wants to see a 2% cut in duty in duty to rebuild confidence in the sector, which will in turn boost investment, create jobs and drive exports.

The industry's case is boosted by the latest figures which show the economic benefits of tax cuts in the sector.

Last year, the chancellor George Osborne froze the duty on wine and cut the duty on spirits by 2%.

His decision meant that Treasury revenue from wine and spirits increased by 4%, adding an extra £210 million in the nine months to December 31.

The Treasury took an extra £114 million in tax on wine sales, more than double the increase the rise in 2014, and an extra £96 million for spirits.

Tax revenue from spirits had actually declined by £11 million in 2014.

Denis O'Flynn and Miles Beale, respectively chairman and chief executive of the WSTA, met with  Treasury Exchequer Secretary Damian Hinds MP last Thursday.

They were accompanied by Mark Driver, owner of the Rathfinny vineyard in Sussex, and Helen Chesshire, the founder of Brighton Gin.

Beale said:  "The wine and spirit industry has faced difficult trading conditions over the past few years, seeing sales and revenues decline, which has impacted on its ability to create jobs and to invest.

"Our ask of the Chancellor in the 2016 Budget is therefore very simple. To build on his admirable decisions at the last two March budgets, and to move away from some of the highest excise duty rates in the EU.

"Evidence now clearly shows that these cuts are not only popular, but have led to greater revenue for the Exchequer, more jobs, greater investment by the industry and a better deal for consumers."

O'Flynn said: "The UK's wine and spirit industry as a whole supports nearly 600,000 jobs in the UK and contributes £45bn in economic activity.

"Further support for wine and spirits will bring more jobs, grow exports and allow our great British products to compete in the fiercely competitive global marketplace."

Both the department for the environment, food and rural affairs and UKTI have affirmed their commitment to expanding UK exports of gin.

At the launch of the WSTA's London Gin Trail in the autumn, secretary of state for the environment, Elizabeth Truss, said: "This is a particularly exciting time for the gin industry with the UK being the biggest exporter of gin in the world.

"I want to harness the ambition of our 'gin-trepreneurs', helping them to grow the UK's reputation for quality gin both here and abroad."

A cut in the duty on spirits would be a good way to support that aim, Helen Chesshire told the Treasury.

"British gin is going down a storm across the world. But for small businesses like ours excise duty rates are a drag on growth," she said.

"They affect our cashflow, tie up working capital and stop us recruiting and expanding our business."

The story is similar for the UK's winemakers.

Driver said: "English wine is no longer seen as artisanal product and is competing with the best in the world.  

"A 2% cut - or dropping duty on sparkling wine to the level of still wine - would lead to a fairer playing field and incentivise investment in modern, high value agriculture.

"This would allow us to compete globally - and that's what English wine really needs to encourage a golden future."

The duty on sparkling wine equates to £2.63 a bottle, against £2.05 for a bottle of still wine.

Around £7.26, or 74%, of the price of an average bottle of spirits goes to the Exchequer.

The UK has the second highest wine duty in the EU, and the fourth highest spirits duty.

Representatives of the Scottish Whisky Association also met with the Treasury last week.

According to a recent survey conducted on behalf of the SWA, some 85% of UK respondents thought the 76% tax on spirits was unfair.

David Frost, chief executive of the SWA, said: "We had a constructive discussion with the Exchequer Secretary to the Treasury, highlighting the significant increase in Government revenues this year - nearly £100m - as a result of the spirits duty cut in March, as well as the boost that decision gave to distillers, large and small.

"We explained how a reduction in excise in next month's Budget would support public finances, promote investment and jobs across the UK and continue the progress made towards fairer tax for one of the UK's most iconic and successful industries."