Autumn Statement could still see a huge rise in wine duty

While the Chancellor’s Autumn Statement brought some good news for the drinks industry, there was a sting in the tail with wine duty.

As we reported yesterday the Statement offered “crumbs of comfort” to the industry, but today’s reaction to the Chancellor’s speech warns of rises to come.

According to the Wilson Drinks Report the continuation of the wine and spirits duty escalator will mean a huge rise in duty receipts on wine.

Tim Wilson, managing director of WDR, said : “We expect that the Chancellor will continue to implement the duty escalator on wines and spirits over the remainder of this parliament, and beyond. The level of increase in the predicted total duty receipts is proof of this. Wine duty would need to increase by 5.1% each year on average to achieve the estimated level of duty receipts by 2018/19.

Despite volumes of still wine being in steady decline at the moment, wine duty receipts are expected to increase by 54% between 2012/13 and 2018/19. This is because HM Treasury believes that economic growth will be accompanied by large increases in the sales of wine.”

Wilson added : “We have been saying for some time that the Chancellor will prioritise duty freezes on petrol over freezes on alcohol duty – today’s announcement that the fuel duty has been frozen again demonstrates that any spare cash will be used to help car drivers, not drinkers, before the next election.”

Meanwhile others have reacted positively to the Chancellor’s announcement on business rates.

James Thompson, head of business rates at Deloitte Real Estate, said: “The Chancellor’s announcements on the two per cent cap in business rates will be welcomed by retailers and businesses. This will result in a total cost saving of around £1bn to businesses over the next 12 months.

“While some businesses will benefit from the postponement of the revaluation from 2015 to 2017, other businesses will suffer. Some high street retailers are paying more in business rates than the rental value of their shops.

Andrew Buchanan, pub operations director at Thwaites said: “We welcome Chancellor George Osborne’s move offering a rebate of £1,000 to pubs with a rateable value of under £50,000 over the next two years. Whilst this is not enough to be of benefit to all pubs it is a big step in the right direction and will help to ease the financial pressure that business rates exert on the pub industry. Greater flexibility through the introduction of monthly instalments of payment of business rates is also a welcome enhancement.

“It is also very encouraging to see that the Government has recognised the significant role pubs and dining plays in helping communities and the high street to survive. A thriving hospitality offer is fundamental in attracting shoppers back to the high streets. By encouraging them to stay longer and spend more locally this will help to boost sustainability in our town centres.”

The Chancellor also announced plans for a registration scheme for alcohol wholesalers, in a bid to tackle duty fraud.

Matthew Clark of PwC, said: “The Chancellor is proposing to introduce a new registration scheme for alcohol wholesalers to tighten control of the supply chain. According to the Treasury, 7% of UK alcohol is sold with no duty. The Treasury believe this measure will raise revenue of more than £200m per year.

“We don’t have the details of how the scheme will work yet, but the key issue is that the level of penalties under the regime need to be set at the right level to discourage smuggling of this kind. A fraudster can benefit by £80,000 – £120,000 in unpaid alcohol duty for the sale of a single HGV load of illicit booze. If the penalties are set too low they will be seen as part of the cost of doing business rather than acting to stop the trade.

“Care must be taken to make sure that the regime does’t capture legitimate businesses.”

The British Beer and Pub Association also welcomed the move. Chief executive Brigid Simmonds said: “The BBPA and our members are fully committed to working with HMRC and all stakeholders to tackle alcohol fraud. We have always welcomed HMRC’s proposals for wholesaler registration, which requires robust enforcement to be effective, alongside due diligence on first customer relationships.”