Government set to milk wine sector with duty tax

Government set to milk wine sector with duty tax

Wine is set to overtake beer as a contributor of duty tax to UK Government coffers, with little sign that ministers plan to halt the duty escalator for alcohol.

Figures produced by the UK Government as part of its Autumn pre-Budget statement, issued yesterday (29 November), show that the Treasury expects to increase returns from wine duty tax by 58% over seven years. It recouped GBP3.1bn (US$4.8bn) in wine duty receipts in the last financial year, to the end of March 2011, and expects to be reaping GBP4.9bn by the end of March 2017.

If proved correct, this will see wine overtake beer as the single biggest contributor of duty tax to the Government, within the alcoholic drinks sector. Beer and cider duty receipts are only expected to rise by 14% over the same period, to GBP4.1bn.

Despite the disparity in duty levels between beer and cider, the two are placed in the same bracket. In addition to the relatively low duty on cider, part of the reason for the slower increase in beer duty receipts is that beer consumption has been falling in the country and this is expected to continue. 

Duty receipts from spirits, meanwhile, are set to increase in value by around 30% by 2017, to GBP3.5bn.  

The forecasts, which were published by the Government's Office of Budget Responsibility, are based on current policy. They assume that the Chancellor will maintain a so-called duty escalator on beer, wine and spirits of annual rises of 2% above inflation. In his annual mid-year speech yesterday, Chancellor George Osborne made no mention of stopping the escalator, despite proposing tougher caps on rail fare rises and freeze on fuel duty. 

Much of the drinks industry has continued to express its dismay at the duty escalator. Today, the CEO of brewer and pub group Marston's, Ralph Findlay, said in his company's full-year results statement: "Pubs make a real contribution to employment, and the government can help by recognising that its policies on taxation, and beer duty in particular, are damaging to pubs, brewers and jobs."

Last week, figures released by the UK's largest wine group, Accolade Wines, showed that the average price of a 75cl bottle of wine is likely to top GBP5 next year, predominantly due to duty. Since 2002, duty has accounted for 80% of the price increase on an average bottle of wine, said the Hardy's winemaker.