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WSTA Summit: ‘Once in a lifetime’ opportunity for excise duty review

Published:  15 September, 2020

Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA) has highlighted the potential of an upcoming government review into excise duty, which could have a major impact on the robustness of the industry to face challenging times.

He said the once in a lifetime opportunity would allow the WSTA and the trade “to redress some of the distortions” around the way alcohol is treated in the UK.

Beale is due to meet with Exchequer secretary Kemi Badenoch next week, where he will push for a “fairer system”.

Speaking this morning at the opening address of the WSTA’s first virtual summit, he stressed that the industry is standing on the verge of a “seismic structural shift in the way we trade as an international industry”.

The review could lead to structural change not only around the financial burden placed on the sector by duty and VAT, but how the industry and its relationship with the Treasury are viewed.

“We are well placed to help shape the government’s review, which we believe should result in a fundamental change for both businesses and consumers,” Beale said.

“Ahead of the autumn budget, our overriding message will be that wine and spirit businesses have been hit very hard by Covid. We’re still very much in rebuilding and in recovery mode, and she needs to understand this.”

Beale reiterated that not all alcohol categories are treated equally in the eyes of the Exchequer.

Beer and spirits are currently taxed by degree of alcohol, yet spirits pay over 50% more duty per litre of pure alcohol than beer and sparkling wine pays more duty per unit of alcohol than any other widely consumed alcoholic drink.

“This is not a level playing field, and it’s not possible to defend,” he said.

As well as doubling down on duty, the WSTA took the opportunity to highlight some of the crunch points looming for the industry.

Beale advocated for further flexibility on things like the furlough scheme and loan repayments, and even extending the VAT cut to include alcoholic drinks.

“It’s not all about helping sandwich chains,” he said, though he added that “we should be careful what we wish for” on extending government support long-term.

Thanks to the rule of six, the “on-trade reopening continues to be hobbled by an unclear outlook and unconfident consumers. The chancellor could do more, particularly for the hospitality sector and its suppliers”.

The address also drew attention to the rapidly approaching end of the Brexit transition period and withdrawal agreement, which was agreed last October.

While it would be “unreasonable” to criticise the government for not preparing for Covid, the same “cannot be said of the government’s preparations to the end of the transition period”, he said.

“Amazingly, we’ve yet to see the latest version of the detail set out in the border operating model. Frankly, this beggars belief. This close to 1 January, we should be testing a new regime, not waiting on the detail.”

On the subject of labels, he said: “We still don’t know whether it’s going to be possible to design a wine label that can be used in both the UK and the EU, despite us giving the UK government a workable solution months ago.”

He also addressed the “dreaded” VI1 forms. The extension currently only applies to wine coming from Europe and are likely to cost upwards of £100m when they are introduced on 1 January 2021.

“The current requirement to have to undertake laboratory analysis may well put smaller wineries off sending small shipments to the UK at all. For many independent merchants who performed very well during lockdown, this may well mean that they lose their ability to source the full range of their products, and their USP at the same time.

“What’s really frustrating is that it doesn’t have to be like this. The government could even now decide not to introduce these rules which were frankly designed to act as a non tariff barrier to protect EU producers from third country imports. It makes no sense to maintain those rules in a country where over 99% of the wine we consume is imported. This is not taking back control.”

Despite stubbornness from the government on VI1s, the WSTA said it would not let the issue drop.

It is now eagerly waiting the review of the Wine and Spirit All-Party Parliamentary Group which began a probe back in July into the effect of rolling over the legislation verbatim on EU wine coming into the UK.

Beale said: “When a group of MPs heard evidence from a variety of WSTA wine businesses, they were left in no doubt as to the impact and the clarion call from the industry to suspend import certificates for wine and review whether they are needed at all. If and only if they are needed, then we should incorporate them into a wider technological fix.”