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Government has “failed” the industry – now extend alcohol duty relief

Published:  16 May, 2023

Industry chiefs have expressed a modicum of optimism about potential changes to the current plans for the new duty escalator, which could possibly avoid plunging businesses into a tangle of red tape – if only the government continues (or maybe begins) to listen to reason.

Yesterday’s opening session of the London Wine Fair (LWF) saw the Wine & Spirit Trade Association’s (WSTA) leadership team, headed up by chief executive Miles Beale, look into the barrel of a particularly loaded gun, with inflation, the upcoming duty changes and a new waste regime, aka the Extended Producer Responsibility (EPR), all currently pointed at businesses.

In the March Budget, the Chancellor announced that – with the exception of draft products – all alcohol duties would be subject to a 10.1% increase from the previously proposed rates on 1 August.

That’s only half of it. Also on 1 August, the new alcohol duty increases are set to kick in, which will see alcohol taxed in multiple bands according to rising abv.

Last month, the government showed a degree of solidarity with the industry, by announcing a temporary easement mechanism for wine businesses, which would treat all wine with an abv of between 11.5% and 14.5% as if the strength were 12.5% abv. However, that is due to end on 1 February 2025 and looks to only kick the duty can further down the road.

Of the government’s plans, Beale said: “There was – and remains – no pressing need to increase duty rates. With inflation rising, the government is already receiving additional VAT receipts from the sale of beer, wine and spirits so the increase is pure opportunism. It won’t even deliver significant increases in revenue to the Exchequer – and may yet prove to have the very opposite effect as consumers choose to buy less. It’s an active and inept choice to increase pain and misery on our industry and its consumers.”

If the duty rates go up in August as planned, they will inflict more than just a 10.1% increase in duty for wine businesses and consumers. Duty on most still wines will increase by 20% and duty on fortified wines to go up by about 40% – the largest hike in half a century.

Now, the WSTA is calling for the government to take the easement further, by entering it into regulation permanently.

This would bring the escalator more in line with the existing system, where products between 8.5% and 15% abv is charged at a set rate per hectolitre of wine.

Beale had strong words for the current government. Far from making the current system fairer and more simple, it has “failed” the UK drinks industry, he said.

“That’s not a statement I make lightly, nor is it one I want to be making… How is it economically rational for wine and spirits to pay 50% more duty for the same amount of alcohol than beer; and more than three times the rate levied on cider under the new regime?”

He finished by urging businesses to contact their local MPs and lobbying them to heed the calls of the wine industry, while also issuing a plea to the government.

“It’s not too late… Stop fighting us. Stop fighting amongst yourselves, stop fighting each other… and trust business to help deliver a shared agenda.”