UK government scraps cider tax plans

The UK government has been forced into a climbdown over plans to increase cider duty by 10% as it tries to rush through key legislation before the dissolution of parliament ahead of the General Election.

The Labour government has been forced to make the concession as it attempts to get its Finance Bill passed through parliament before this Thursday’s deadline.

The Conservatives and the Liberal Democrats have hailed the move as a major victory for consumers and businesses, but Labour said it will reintroduce the tax increase should it win the 6 May election.

The news has delighted the National Association of Cider Makers (NACM), which was concerned the heavy tax increase could reverse the growth shown by the cider category in recent years, as well as force smaller cider producers to the wall.

NACM spokesman Simon Russell told the drinks business: “We are delighted, even if it is only short term reprieve.

“We hope it means the government has listened to us, and we think they have as they have also listened to the consumer reactions to the tax.

“What is most important to us is to have some degree of certainty over the future because people and businesses have made commitments over planting new orchards and their financial direction.

“We will want to sit down with the next government in order to establish a plan for the future which we can stick to.”

The 10% above inflation increase on cider duty came into effect on 30 March, but will now be reversed on 30 June unless Labour wins the election.

Chancellor Alistair Darling said the tax was justified due to the fact cider had historically avoided the annual duty rises placed upon beers, wines and spirits in recent years.

The increase was particularly unpopular among voters in the cider heartlands in the west of England.

The drive to push legislation through parliament before the break-up, known as the “wash-up period”, has historically seen ministers having to make concessions in order to ensure the bills are approved.

Henry Chevallier, chairman of the NACM, believes that the announcement points tothe possibility of good news in the future, rather than an immediate cause for celebration.

“We understand that the government is amending the legislation to mean the increase in cider duty is temporary until 30 June," he said.

"People are not immediately going to find the price of a pint of cider reverts to where it was before the Budget.
 
“Whoever forms the next government will decide to either continue the increase – some 10% above inflation – or reduce it to be in line with all other alcohol which went up by 2% above inflation.
 
“So it is the prospect of some good news rather than immediate good news.
 
“It is likely that political and parliamentary expediency has led to this action rather than a concession to the cider industry.
 
“Though the government and all politicians have quickly learned that this a major issue for many consumers and that very many voters want to see a successful British industry flourish, and it will if treated fairly.
 
“Our plea is that we have the chance to sit down with whoever is in government after the election to understand what they expect from the industry and to share with them what works best for consumers, cider makers and growers.
 
“The investment cycle for a cider orchard is more than 30 years – it takes five years for the first apple to fall and 10 years before a return on investment is made.
 
“Uncertainty created by changing the policy on duty year on year undermines the investment made by cider makers and puts at risk what has been achieved in recent years.
 
“If the government – of any political persuasion – can provide a sensible and stable duty environment then we can grow the industry and deliver more revenue to the Treasury and provide an even broader choice of quality ciders for consumers to enjoy.”

Alan Lodge, 07.04.2010