Gordon Brown, the UK chancellor, unveiled this year’s budget today and in doing so dealt the drinks industry a blow with increases on the price of beer by 1p and on a bottle of wine by 4p.
But the duty on cider and sparkling wine will be frozen, as will the duty on spirits, for the sixth Budget in a row, provoking a mixed reaction from the drinks industry.
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“”It is scandalous that duty on still and fortified wine has been increased by 2.8%, which is 0.5% above inflation. The growth in wine consumption has already been slowing because of the state of the economy. It will be made worse by the latest increase hitting the British drinks industry which has suffered so much from cross-border shopping, smuggling and fraud”, said Jo Williamson, chairman of the Wine & Spirit Association.
He continued: “It’s exasperating that Mr Brown has once again ignored both sound economic reasoning and the need to bring our rates down as a first step towards reducing the taxation gap between the UK and mainland Europe. This move merely exports more UK jobs to the continent.”
The Association also expressed its disappointment that wine-based Ready To Drink beverages (RTDs) will be adversely affected yet again because the increase in tax on still wine will also raise the tax on wine-based RTDs, although this stealth tax was not explicitly announced today.
Meanwhile Stewart Gilliland, chief executive, Interbrew UK and Ireland expressed disappointment at the 1p a pint increase in duty on beer in today’s Budget.
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By GlobalData“The brewing industry is already under pressure from the increasing popularity of wine and premium packaged spirits and this decision will intensify this by depressing consumer demand, thus widening the gap between beer and other alcoholic drinks. It also adds to the problem of illegal imports of alcohol, the cost of which is estimated by HM Customs & Excise as £215 million a year.
“We would have preferred a decision similar to last year’s duty freeze on beer. The increase shows a lack of support for the brewing industry from the UK Government compared to other EU countries where there is support for domestic drinks products and duty remains several times lower, for example beer in Germany and wine in Southern European countries.”
But The Gin and Vodka Association welcomed the freeze on spirits duty: “This is the sixth standstill in duty in a row, ” said Edwin Atkinson, director general of the Association.
Gordon Brown has not increased the tax on spirits since January 1998 – which means in real terms that Excise has been reduced every year for the last six years.
“We are delighted that the Chancellor has listened to our case. It reduces the tax discrimination against spirits compared to imported wine. This is vital at a time when producers of a indigenous UK product have been pressed hard by increased costs and foreign competition.”
And from Diageo, the spirits industry leader, Tony Mair, corporate affairs director, Diageo GB said: “We are very pleased that the Chancellor has delivered a duty freeze on spirits for the sixth successive year. He has clearly recognised the high price sensitivity of spirits compared to other alcoholic drinks, and the need to keep reducing the level of tax discrimination against spirits.
“Since 1998, the Chancellors decision to freeze spirits duty has delivered year-on-year increases in revenue for the Treasury – revenue from spirits was £2.186 billion in 2002*, compared to £1.605 billion in 1998* – as well as creating stability which has enabled the industry to invest greater spend on innovation. We hope that the Chancellor will go further in the future and cut spirits duty, delivering a much-needed boost to the industry.
“We will continue to work closely with government to ensure that their proposed new anti-fraud measures do not threaten the competitiveness of the legitimate industry.”
