Budget 2017 Receives Mixed Response From Licensed & Hospitality Bodies

Chancellor Philip Hammond’s first budget has received a mixed response from industry leaders. Following the announcement that all alcohol will be subject to inflationary rises the WSTA have worked out how this will impact on the price of wines and spirits.

The rate of inflation is 3.9%. This is calculated by using the RPI estimate for September 2017 provided by the Office of Budget Responsibility.

This means:

• Duty on a 750ml bottle of wine increases by 8p to £2.16

• Duty on a 750ml bottle of sparkling increases by 10p to £2.77

• Duty on a 750ml bottle of fortified wine increases by 11p to £2.89

• Duty on a 70cl bottle of vodka at 37.5% increases by 28p to £7.54

• Duty on a litre bottle of vodka at 37.5% increases by 40p to £10.78

• Duty on a 70cl bottle of Gin at 40% increases by 30p to £8.05

• Duty on a litre bottle of Gin at 40% increases by 43p to £11.50

The revised rates are due to come into effect after midnight, Sunday 12th March.

The Government will also introduce a consultation on a new duty band for still wine and made wine between 5.5% and 8.5% abv.

Commenting on the Chancellor’s decision to raise wine and spirit duty by inflation, Miles Beale Chief Executive of the Wine & Spirit Trade Association said:

“It is disappointing that the Chancellor has failed to support a great British industry. He has increased what were already excessive and unfairly high rates of duty for the UK’s wine and spirit consumers and businesses.

Between Brexit’s impact on the pound and rising inflation the wine and spirit businesses face a tough trading landscape. This is a missed opportunity to back British business and help out struggling consumers.

The added uncertainty of another Budget in 6 months’ time is unwelcome and will further undermine business – and consumer – confidence.

At least there is some sign that Philip Hammond cares about levelling the playing field. It is important that he treated all alcohol products equally. It is welcome news that he has introduced a consultation on wine and made wine between 5.5 – 8.5% – a category which holds a great deal of potential for innovation, especially for lower ABV products.”

The ALMR welcomed the Government’s Budget Statement and steps to address business rates inequality for pubs and bars and to promote growth and investment across the UK’s businesses.

ALMR Chief Executive Kate Nicholls said:

“The Chancellor has stated that he wants to make the UK the most attractive place in the world to do business. Cuts to Corporation Tax will help hardworking and successful businesses continue to grow and invest in their teams, but it must form part of a wider strategy on business tax.

“If the Chancellor is serious about encouraging investment then we need to see a detailed blueprint of how it is to be achieved and how this links with the Government’s wider industrial strategy.

“It is very encouraging to see the Government acknowledge and back the valuable work being carried out by the UK’s hardworking pubs, bars and restaurants. Sector-specific relief will help those businesses hardest hit by the revaluation. This much-needed Government support will save the sector over £24m and will help safeguard investment and jobs. We are pleased to see the Government acknowledge the issue and act positively to support a crucial growth champion and a sector with turnover of £60bn employing over 1.5 million. The £300m worth of relief made available to local authorities will also be crucial for addressing costs for hardworking, entrepreneurial restaurants also facing increased rates bills.

“The ALMR has been spearheading the campaign for business rates reform for a few years and we have been incredibly vocal on this issue over the past few months. The ALMR has been actively campaigning non-stop since September and helped coordinate a campaign as the voice of the sector at key meetings with Ministers and MPs. The ALMR’s Budget campaign focused on securing immediate support for those businesses hardest hit and facing the biggest increases and this is a good first step on the road to permanent reform.

“The next step is for the Government to instigate the long term, root and branch reform that is needed for pubs and bars. The Chancellor indicated that the Government will look at more frequent revaluations, something the ALMR has been pushing for, and we look forward to working with him going forward.”

BBPA Chief Executive Brigid Simonds, said:

“We very much welcome the specific help for pubs with rate relief; £1,000 off for all pubs with a rateable value less than £100,000. We campaigned very hard for this and it is vital that this is extended in future years.

“We have been very clear with Government that pubs are paying 2.8 per cent of Business Rates, but only generate 0.5 per cent of turnover – an overpayment of £500 million. This very specific acknowledgement that pubs are so important to local communities and are a force for good, is very welcome.

“I am also pleased that the Chancellor has also announced a wider review, and has taken up the cause of ensuring the rates burden is shared more fairly, especially when it comes to on-line business.

“We will wait to see further details of the funding for local authorities, and we would urge them to make pubs a priority. Pubs play a vital role in their local communities and are a force for good.”

“When it comes to beer duty, a return to unpopular beer duty rises, with an extra 2p duty on a pint, is not good news for the British beer industry and in turn pubs.

“Business Rates, auto-enrolment of pensions, the national living and minimum wage, and the Apprenticeship Levy were already adding the equivalent of 5.3p in beer duty.

“Beer tax has now risen by 43 per cent the past ten years. This latest rise will mean 4,000 fewer jobs this year, mostly in pubs. Tax rises on all alcohol will add £125 million to the cost base of pubs.

“Britain’s beer taxes are three times the EU average, and an astonishing thirteen times higher than those of the largest producer, Germany. If we are to compete in the future and as we move towards the challenges of Brexit, action must be taken on tax, to ease the burden on a beer and pub industry that supports around 900,000 UK jobs.”

Sue Cooper, Co-Owner at Little Valley Brewery in Yorkshire said “This Budget has been one that is both disappointing and damaging for the beer industry. Despite calls from the industry for the Chancellor to cut beer duty, we have been ignored and beer drinkers are now facing a 3% increase in beer duty.

This is a huge setback for the brewing and pub industries, which employ around 900,000 people and are already under immense pressure in an ever-competitive environment. Our question to Mr Hammond is simple: how do you expect one of the nation’s strongest and much loved industries to thrive when faced with this adversity? Analysis from Oxford Economics shows that an increase in duty doesn’t create a pot of gold and would in fact put an estimated 5,300 jobs in jeopardy. With this in mind, we find it hard to justify the added pressure from the Government on our industry, which has shaken confidence and removed any reassurance for the future when it is needed most.”

Paul Connelly MD of Beacon commented:

“The hospitality industry continues to experience significant price pressures and this Budget has not helped. We are well aware that the inflationary worries waiting in the wings in the form of rising wages due to the continued roll out of the National Living Wage, revised business rates and increased food costs are not going away. Food inflation doubled in February, so this is a very real concern for businesses and consumers alike. Today the Government has unfortunately added to these pressures by increasing the duty on beer and wine by 3.9% – the first time there has been an increase since 2012. This might be the final straw for many hospitality businesses who had been holding off passing price increases onto the consumer. My worry would be if that does happen then it will undoubtedly dampen consumer spending that has fuelled the positively revised growth forecasts of the last 12 months and smaller, independent businesses on the front line of feeling a tightening of discretionary spend will start to suffer.

Today’s Budget further highlights the need for businesses to seriously consider the importance of price control and revised procurement practices if they are to remain profitable in such a turbulent business landscape.”

Colin Valentine, CAMRA’s National Chairman says: “UK beer drinkers, pubs and brewers have been let down by the Chancellor’s decision to increase beer duty for the first time in five years.

“The announced two penny a pint increase marks a return to the days when the much-hated Beer Duty Escalator contributed to 75,000 job losses, 3,700 pub closures and a 24% fall in beer sales in pubs. The rise in beer duty will ultimately hit consumers in their pockets and lead to pub closures across the country.

“The government’s U-turn on beer duty is a real missed opportunity to support consumers. The UK still pays one of the highest rates of duty across Europe, only consuming around 12% of the beer yet paying nearly 40% of all beer duty in the EU. Further beer duty increases will lead to unsustainable price increases in pubs. The decision completely ignores the pressures that are being faced by the beer and pub sectors.”

Unique role of pubs in England recognised by business rate relief

The Government has recognised the unique role that pubs play in our communities in England by introducing a new temporary £1,000 discount on business rates bills for all pubs with a rateable value of less than £100,000. CAMRA has warmly welcomed this relief and has called for it to be made permanent and increased further in future Budgets.

While this discount will provide welcome relief for the majority of pubs, not all will benefit as the relief does not apply to the largest pubs so a minority are still faced with very large business rate increases.

Colin Valentine, CAMRA’s National Chairman adds: “We are delighted that the Government has recognised the vital role that pubs play both in our local communities and our economy by introducing a new rate relief specifically for pubs in England.

“The announcement of a new rate relief for pubs in England is a ground-breaking step which recognises both the importance of pubs and the unfair impact of the business rate system on pubs. This new relief offers huge assistance to pubs and is a step towards CAMRA’s ambition of securing a £5,000 rate relief reduction for all pubs.

“While this is welcome news for most pubs, some of the largest pubs will be excluded from the new relief. For example, the CAMRA award winning Baum pub in Rochdale will be unaffected by this discount. The Baum pub’s rateable value is going up by 376.6%, and the pub will pay an additional £47,327 per year once transitional rate relief ends.

“CAMRA is calling on local councils to use the new discretionary fund announced today to support those pubs that will still be hit by massive business rate increases over the coming years.”

The Scotch Whisky Association (SWA) says the Chancellor’s decision to increase excise duty on spirits by nearly 4% or 36 pence a bottle in today’s Budget is a major blow to a key UK industry, undermining competitiveness at a time when the Government should be supporting home-grown exporters.

As a result of today’s increase, the level of tax – excise duty and Vat – on an average priced bottle of Scotch Whisky is now an onerous 79%, one of the highest levels in Europe, and 21% higher than in 2010. The excise duty burden on a 70cl bottle of Scotch is £8.05 and the total tax is £10.20.

The SWA said it is time for a fundamental review of the alcohol duty system, describing the move as damaging to a major industry and at odds with the Prime Minister’s words during a speech in Glasgow last week, where she described Scotch Whisky as ‘a truly great Scottish and British industry’. The Scotch Whisky industry supports more than 40,000 jobs across the UK, many in economically fragile areas, and adds value of around £5 billion annually to the economy.

The increase goes against recent experience that a duty cut would boost the public finances. Following more supportive duty moves, revenue from spirits duty increased by 4.2%, or £132 million, to £3.25bn in 2016. The SWA also warned that a duty increase could undermine the recovery of the UK market for Scotch.

Julie Hesketh-Laird, Scotch Whisky Association acting chief executive, said: “A nearly 4% duty rise and a 79% tax burden on a bottle of whisky is a major blow, reversing recent progress. Distillers will find it hard to understand why the Chancellor is penalising a strategically important British industry with this tax increase.

“At a time when government should be supporting a key home-grown sector, we face a damaging tax rise on top of the uncertainties of Brexit. Looking to the autumn Budget, we will be arguing strongly that it is time for a new approach to excise duty outside the constraints of EU excise law. The system is in need of a fundamental review and reform to make it fair and competitive.”

Ian Wright CBE, Director General, Food and Drink Federation said:

“We are pleased to see productivity and innovation at the heart of today’s Budget.

“We welcome the Chancellor’s commitment to improve productivity, boost R&D and help bridge the skills gap. Access to a skilled workforce is particularly pressing for food and drink manufacturing as we require an additional 130,000 new recruits by 2024. It is important that food and drink manufacturing as a sector is fully recognised in the new technical qualifications and we look forward to being closely involved in their implementation.

“It was also pleasing to see details of how the £4.7 billion from the National Productivity Investment Fund announced at Autumn statement will be invested in science and innovation. A number of global food and drink companies have already chosen to base their R&D centres here and we want the UK to be the number one location of choice for others too.

“The revision of the R&D tax credits system was something we had asked government for and we support. Increasing simplicity around the process for claiming R&D tax credits will benefit companies of all sizes – and SMEs particularly.

“We continue to oppose the Soft Drinks Industry Levy because of its undue focus on sugar (as opposed to calories) and because there is no evidence that it will reduce obesity. Consequently, while we’re pleased to see the Chancellor acknowledge the efforts made by soft drinks manufacturers to reduce sugar levels in their products, we continue to believe that implementation of the Levy should be paused while such good progress is being made voluntarily.”