Unemployment looms if tax increases continue

The UK government’s plans for punitive tax hikes on alcohol in next month’s budget could result in more than 75,000 job losses throughout the sector, according to industry leaders.

A delegation of five trade association chairmen met with chancellor Alistair Darling and business secretary Peter Mandelson on Monday 16 March to outline their fears over the 2% above-inflation tax escalator on alcohol due to come into effect next month and warned against any further increases in next month’s budget.

In particular, the industry conglomerate were keen to stress the devastating effect last year’s 17% leap in excise duty and the implications of the four-year tax escalator, scheduled to begin this year, could have on jobs in the drinks industry.

A statement from the group said: “In asking for a duty freeze, industry leaders argued that it is essential now to help businesses across the whole sector cope with the most testing economic conditions. “This will save jobs and help to sustain Treasury revenue that would otherwise be at risk from falling sales.

Scotch Whisky Association chairman Paul Walsh, Fenella Tyler of the National Association of Cider Makers, chairman of the Gin and Vodka Association Ian Jamieson and British Beer and Pub Association chairman Mark Hastings, joined wine and Spirit Trade Association chairman Christopher Carson in the separate meetings with the chancellor and the business secretary.

The coalition outlined their research, from Oxford Economics, which predicts how the proposed measures will see a drop in alcohol sales by over 11% while consumer prices will rise by more than 17% – figures which they say cannot be justified by a government which is looking to help people through these testing economic times.

The group also claimed that the government itself would lose out as a result, with tax revenue from alcohol falling £1.6bn lower than original Treasury estimates.

“The government has a real opportunity next month to reverse its planned tax increases on the drinks industry to protect jobs and Treasury revenue,” said a spokesman for the trade associations. “We appreciate the opportunity to make our case directly to the Chancellor and Lord Mandelson and hope that they will take a closer look at the potential impact on employment of any further tax increases.”

The meeting came hot on the heels of calls from the chief medical officer for England, Sir Liam Donaldson, to introduce a minimum price on alcohol of 50p per unit contained in each drink.

The proposals have met with scorn across the industry and indeed in Parliament, with the prime minister dismissing the proposals as a way of punishing the sensible majority for the excesses of the irresponsible few. The proposal by Donaldson echoes a similar claim by the Scottish government that a minimum price of 30p a unit would boost industry coffers and help fight alcohol abuse and misuse in the country.

The Scotch Whisky Association (SWA) warned that the government’s own figures showed its approach bore no relation to market reality. A SWA spokesman said: “The claim by the Scottish government, backing the Royal College of Physicians, that a 30p unit minimum price will reduce consumption by 30% but boost profits 68% defies belief. “Only a week ago, the government’s own framework document stated that the higher 40p a unit would reduce consumption by just 2.6%, or less than one drink a fortnight. “Now we are being told a lower unit price will reduce consumption by a third.
 
“A 30% reduction in consumption would wipe seven million bottles of Scotch off the Scottish market, which is inconsistent with the claim that the government does not wish to harm the Scotch Whisky industry. “In any event, a minimum pricing scheme is likely to be in breach of EU and international trade law.”

Alan Lodge, 18.03.09