UK wine trade ‘must make its voice heard’ on duty reform for industry to thrive, experts warn

Wine industry experts are calling for UK wine businesses to urgently fill in the government consultation on the proposed changes to alcohol duty by the end of this week – or end up with an unfair and “unworkable” system that will disproportionately hit wine and spirits. 

There has been growing frustration with the proposed review of the alcohol duty which was announced at the last Budget, and many in the industry argue that the new UK excise duty proposals places an unfair burden on both wine drinkers – in terms of higher taxes relating to other categories – and the trade – through a huge increase in red tape.

However, time is running out for wine businesses to report their fears, as the consultation for the changes that were announced at the Budget in October, closes on Sunday morning (30 January).

Writing on Twitter, international wine consultant and entrepreneur Justin Howard-Sneyd MW said that far too few of the comments in the previous consultation were supportive of the wine sector – and there are a disproportionate number of comments from beer and cider producers.

“If we want a thriving wine sector (both producers and merchants), we need to make our voice heard,” he said.

Although the decision to equalise the duty between still and sparkling wines has been welcomed in many quarter as it will do away with “an anomalous and illogical difference” Howard-Sneyd said, and the principal of tying duty to alcohol strength was essentially fair, the current proposals are likely to result in unintended consequences whereby wine and spirits suffers in comparison to beer and cider. This will result in very significant increases for the average duty in wine.

Replying to the lengthy tweet, James Miles, md and co-founder of Liv-ex said that it was the “last chance saloon” for  the wine trade and their customers to change the outcome of the excise duty review.

“The current proposals are unfair to drinkers and unworkable for business,” he wrote on Twitter.

Unintended consequences

WSTA chief executive Miles Beale has previously said he was “mystified” at the Treasury’s plans to “embed unfairness” by lowering the tax on beer by 8-19p, on and cider to 9p per unit and to raise the duty on wine to 26p per unit.  It should, he said be “fair, simple and logical”.

“Speaking today, he called it a “once in a century chance to reform alcohol duty”, calling the current proposals “far from economically rational”.

“The proposals would embed and increase the illogical and unfair treatment of spirits and wine,” he argued. “Beer and cider tax remains the lowest and will not go up, but on the flip side 70% of all wine, still and sparkling, will go up in price, as will 80% of all still wine, 95% of red wine and 100% of fortified wines. Spirit drinkers will face the highest taxes of all at 29p a unit.”

He added that for wine in particular the proposals are “much more complex and unworkable in the real world”.

“There are far more different wines on the market than beers or spirit drinks – well over 100,000 SKUs on the market, and given the permitted tolerances for wine it’s not even clear how to best calculate the duty. In addition, levying tax by degree will require huge changes to the supply chain and major changes to IT systems – all coming on the back of the changes required when we left the EU. These proposals will result in more costly red tape and will be particularly prohibitive for SMEs. And all for marginal gain to the Treasury.”

He said it was clear that the current Government proposals won’t achieve what the Chancellor said he wanted.

“Under the Chancellor’s proposals wine will have to pay almost 3 times the duty per unit (10ml) of alcohol than cider and over twice the duty levied on beer from a small volume beer producer. And for wine the measures are impossible to implement. At this stage we hope these are unintended consequences and that, once the Treasury understands the impact the current proposals would have, Ministers will modify their proposals and deliver a system that is fairer, simpler and – above all – workable.”

Australians warn of price hikes

It comes after Australian wine producers called on the UK government to scrap the proposals, saying it will wipe out the benefits of UK-Australian free trade agreement (FTA).

An increase duty on wines above 11.5%ABV is likely to add 40p onto a bottle of Australian wine, the lobby group Australian Grape and Wines said, costing the industry around £70m. This would wipe out the £26m benefit that is set to follow the trade deal currently being negotiated, the group’s chief executive Tony Battaglene said.

A spokesperson from Treasury Wine Estates added that the proposals would “significantly” impact the Australian wine industry, increase costs for UK consumers, and “diminish future growth prospects in the largest export market for Australian wine growers and UK consumers.”

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