Frosty reception

Spirits producers angered by strip-stamps; wine and beer face higher tax burdens; cider makers roll out the barrel

WELL, THIS TIME the fuss was all about the Civil Service and, apart from that, it was generally agreed that this year’s budget was something of a damp squib. Indeed, with most of the talk about freezing – stamp duty, inheritance tax, air passenger duty, vehicle excise duty, insurance premium tax, climate change levy – there really wasn’t that much to be said.

In fact, the drinks industry, along with the tobacco guys, is one of the few areas that is to endure a tax rise. 4p was slapped on a bottle of wine and 1p on a pint of beer, although there was also evidence of the cold snap even here with duties on cider, sparkling wine and spirits all frozen.

However, this isn’t where the controversy has been generated. The Chancellor’s proposal to introduce a strip-stamp scheme for spirits has had the industry up in arms. 

"This is one of the largest regulatory burdens of the budget," says Quentin Rappoport, director of the Wine and Spirits Association (WSA).

"It is a devastating blow to a highly efficient UK industry and, frankly, an example of the worst kind of policy making.  We have worked long and hard to prove that this measure isn’t  ffective but the government hasn’t listened."

Strip-stamps will be no deterrent to fraudsters, claims the WSA which points out that numerous countries worldwide have already trialled similar schemes and abandoned them.

"A wine duty increase in line with inflation is also not as innocuous as it may seem," Rappoport continues.  "Indeed, last year’s rise at the same level had a devastating effect, cutting sales growth in the sector by three-quarters.

This increase will inflict further damage, both to the trade and the Treasury revenues as even more shoppers go abroad to buy cheaper."  Now, that’s fighting talk. It is beginning to look as if there’ll be fireworks over this budget after all – in this industry at least.

"The 2% duty reduction in 2002 and successive freezes in 2003 and now this year too, are three tremendous results in a row – quite a hat-trick from Gordon Brown.  Cider is a unique industry that makes a major impact in the rural economy, and the ability of cider makers to have a sustainable duty regime and a platform to develop is vital.

In the last two years more cash has been ploughed back into our local economies and we have seen some encouraging signs of increasing interest in cider from both consumers and drinks retailers."

Hugh Archibald, Chairman of the National Association of Cider Makers

 "For small importers like me, the strip-stamp scheme is a nightmare.  Our costs will rocket and the Chancellor’s offer of £3m to aid small firms with capital investment is totally out of proportion to the impact strip-stamps will have in our sector.

It potentially creates barriers to entry, restricts competition, pushes up prices and reduces ranges.  The irony is that it favours the large established multinationals whose high profile brands are most easily traded in the black economy."

Bill Oddy, managing director of The Drinks Company

"I am disappointed with the duty increase on still wine which is substantially higher than the rate of inflation.  This is an administrative burden on the industry for the retailer, producer and importer. Instead of these ‘annual’ 4p increases, I wish the government would work with our industry on the management of duty increases over a longer period to ease the pain felt by the industry."

Christopher Carson, CEO, Constellation Wines Europe Ltd

"We are bitterly disappointed that the Chancellor has not joined with us and taken advantage of the very real benefits of our alternative anti-fraud package which offered the Treasury an effective solution to fraud, and more money, more quickly, than tax stamps.

Tax stamps will impose financial pain on legitimate businesses, particularly smaller enterprises, but will not defeat the fraudster."

Gavin Hewitt, chief executive of The Scotch Whisky Association

"We wait to see what new proposals are being proposed by the Chancellor to alleviate the huge compliance costs that legitimate industry will have to withstand.  The industry retains its longstanding position that the stripstamp measure must be proportionate and should not add costs to the legitimate industry, without providing proven benefit by hitting the illegitimate.

All our companies will be hit by this proposal and we have already made the government aware that the offsets proposed so far, will not alleviate many of the costs."

Edwin Atkinson, director general of the Gin and Vodka Association