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WSTA warns of further hefty price hikes if duty is not frozen

Published:  16 October, 2017

The Wine & Spirit Trade Association (WSTA) has warned of further wine and spirit price hikes if the Chancellor fails to freeze duty in the November Budget.

Calling on the government to freeze alcohol duty in the forthcoming Budget (22 November), the WSTA said a further 3.4% duty rise would add another 7p on a bottler of wine and 26p on a bottle of spirit.

The call follows fears that Chancellor Phillip Hammond is due to increase duty by a projected inflationary rise of 3.4% in the second Budget of the year as the government moves its main fiscal event from spring to autumn.

In March this year the Chancellor raised all alcohol duties by 3.9%, which added 8p to an average priced bottle of wine and 30p on a bottle of spirits.

Such increase would hit hundreds of British business hard, from English vineyards, new start up distilleries and producers to distributors and retailers, said chief executive, Miles Beale.

“Don’t be fooled into thinking that when the Chancellor announces ‘no change’ to alcohol duty plans that he is doing everyone a favour - no change means that duty on all alcohol will rise in line with RPI inflation, which in March meant a rise of 3.9%,” he said.

Overall plans for an inflationary rise would cost the wine and spirit industry around £220 million in new tax liabilities, he warned, with the industry facing £1.9 billion higher duty bill by 2022 if rises planned for the duration of Parliament went ahead, he said.

A freeze on wine and spirit duty would help back British business and bolster Brexit trade deal opportunities, said Beale, adding the looming hike in duty was causing “real concerns” for UK wine importers who feared the duty regime would hamper trade negotiations and damage future investments.

The wine and spirit trade within the EU is worth almost £4.5 billion to the UK - in 2016 the UK traded £2.2 billion of spirits with the EU and just shy of £2.3 billion in wine.

Wine businesses and consumers already pay £4.2 billion in duty each year and spirits consumers and businesses £3.4 billion, according to WSTA.

Following the freeze in the 2015 budget, wine duty income increased over the following year by £136 million, up 3.6%, and following the 2% cut to spirits duty that year it helped to increase revenues by £124 million over the same period, according to HMRC figures.

When spirits duty was frozen in 2016, revenues increased by 7% the following year.

The UK alcohol industry is one of the most heavily taxed in Europe, with British drinkers paying 68% of all wine duties collected by all 28 EU member states and 27% of all spirits duties.

This is by far the most of any member state despite accounting for only 11% of the total EU population, according to the WSTA.

The last time the UK experienced a double hit on alcohol duty increases was almost a decade ago under a Labour government and during the financial crisis of 2008.