News

Trade slams Brown for unexpected hike on sparkling duty

22 March 2007 By db staff writer

The drinks industry has given a mixed reaction to yesterday’s budget. The continued freeze in excise duty on spirits has been widely applauded. The 1-pence increase per pint of beer or litre of cider have received a lukewarm response, while the decision to add 5-pence to a bottle of still wine and, notably, 7-pence per bottle for sparkling wine has drawn widespread criticism.

Speaking to the drinks business, Wine & Spirit Trade Association chief executive Jeremy Beadles said: “The increase on sparkling wine is an anomaly. We have been lobbying for reduction of the tax on sparkling wine to [the same level as] still wine. The different tax rates make the market very unattractive for people supplying to the UK.” This marks the first increase to sparkling wine duty rates since 1999 – and the WSTA believes that suppliers will have been unprepared for the decision, worsening the impact.

It remains to be seen how the retailers will respond to this latest tax increase on wine: will they absorb the cost, or pass on the burden to consumers? Further erosion of already tight margins will beg serious questions about what cost cutting will be required in order to hit sensitive price point barriers. Will the consumer be further short-changed when it comes to quality?

TRADE TALK

Dan Jago, director BWS, Tesco
"I think that the excise increases represent another unsurprising and unradical inflationary increase, which places further burden on retailers and suppliers in terms of administration. I did expect there to be an increase in excise duty on spirits and was mildly surprised when that didn’t happen.”

Frazer Thompson, ceo, English Wines Group
“We’re not exactly delirious. Just as the UK wine industry is really starting to take off, another brick has already been added to the sack we’re already carrying. What baffles us is why sparkling wine attracts more duty than still. I’ve thought about it and can only imagine that it is connected the the Chancellor’s policy on CO²emissions. He’s taxing bubbles.

Edwin Atkinson, director general, The Gin & Vodka Association
“This is a welcome further step towards delivering a fairer alcohol tax regime in the UK.” He went on to praise the Chancellor for again narrowing the duty gap within the alcoholic drinks market, explaining that the freeze on spirits duty is an important move at a time when the sector is already experiencing high taxation on its products and increased production costs.

Mike Benner, chief executive, CAMRA
“This is a false economy for the Government as we may now see an exodus from pubs after beer prices rise. This is bad news for the millions of people who enjoy British pubs but will now face a higher cost to visit them. Therefore trips to the pub will become less frequent and the revenue the Government makes from VAT will suffer. At a time when 56 pubs a month are closing, the smoking ban is imminent and supermarkets are selling beer at ridiculously low prices, British pubs needed a lifeline from their government and that has been denied them.”

John Mills, managing director, Gaymer Cider
After many years of decline, cider is becoming a real consumer success story in part because of a stable duty regime. We have delivered innovation, improved quality and broadened consumer choice and in doing so we have increased the revenues that the government receives from cider – at a time when the overall revenue from all alcohol has declined. By imposing an increase in duty levy the government has deviated from the strategy it has taken over the past five years whilst raising less than £5m in increased taxation for the Treasury.”

Andrew Holland, analyst, Dresdner Kleinwort
“It wasn’t a particularly eye-catching budget for the drinks industry. Obviously most companies make their money on spirits and beer, so another year with no rise on the duty on spirits has got to be helpful, and a penny on a pint of beer is in line with inflation. I think it’s unlikely that anyone in the trade will feel particularly strongly about this budget either way.”

Nick Goulding, chief executive, Forum of Private Businesses
“The Chancellor has used smoke and mirrors to disguise the fact that there is nothing in this budget to support small businesses. In fact the resulting confusion created by some of his initiatives will serve only to increase the red tape burden. The reduction in the main rate of Corporation Tax will benefit larger firms, not the smaller businesses that make up the majority of the private sector.”