Phillip Hammond is due to increase duty by another projected inflationary rise of 3.4%, in the second punishment Budget of the year, as the Government moves its main fiscal event from spring to autumn.
In March this year the Chancellor raised all alcohol duties by an eye-watering 3.9% which added 8p to an average priced bottle of wine and 30p on a bottle of spirits.
The WSTA is warning that there will be little to celebrate this festive season with duty set to go up again, a month before Christmas, adding another 7p on a bottle of wine and 26p for spirits.
The looming hike in duty causes real concerns for UK wine importers who fear the unappealing duty regime will hamper trade negotiations and damage future investments.
Following the release of the Government’s white paper on trade this week Liam Fox highlighted that imports to the UK were just as vital to the economy as exports.
The wine and spirit trade with the EU is worth almost £4.5 billion to the UK. In 2016 the UK traded £2.2 billion of spirits with the EU and traded just shy of £2.3 billion in wine.
Ade McKeon, General Manager UKIR of Accolade Wines, a global importer and exporter and the UK’s biggest wine company, said:
“We want government to take a reasonable approach to excise – and not impose a second excise duty increase this year. Since the Referendum Accolade Wines has had to face a combination of serious challenges in the UK. As an international wine company we have to consider our investment decisions carefully. We are hoping to see the Chancellor, our local MP, send us a positive message on 22 November by freezing alcohol duty.”
Accolade Wine’s Head Quarters are located in Weybridge in Surrey but they also own the largest wine production site in Europe based in Bristol.
The last time the UK experienced a double hit on alcohol duty increases was almost a decade ago under a Labour government and during the financial crisis of 2008.
Overall plans for an inflationary rise, in a second Budget in November, would cost the wine and spirit industry around £220m in new tax liabilities.
The industry faces £1.9bn higher duty bill by 2022 if rises planned for the duration of Parliament go ahead.
The WSTA is calling on members to lobby MP’s to highlight the UK’s grossly unfair alcohol taxation policy which is leaving everyone out of pocket.
Wine businesses and consumers already pay a staggering £4.2bn in duty each year and spirits consumers and businesses £3.4bn.
Duty is so high that 56% of the average bottle of wine in shops and supermarkets is now taken by the Treasury in tax and VAT and an eye watering 76% of a bottle of spirits.
The UK alcohol industry is one of the most heavily taxed in Europe, with British drinkers paying an extraordinary 68% of all wine duties collected by all 28 EU member states and 27% of all spirits duties. This is by far the most of any member state despite accounting for only 11 per cent of the total EU population.
Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said:
“We are hearing very mixed messages from government. On the one hand Liam Fox is championing the importance of imports to the UK.
At the same time Philip Hammond is revving up to hit us with a second inflation busting hike in seven months in alcohol duty – making the UK less attractive to importers.
Don’t be fooled into thinking that when the Chancellor announces “no change” to alcohol duty plans that he is doing everyone a favour. No change means that duty on all alcohol will rise in line with RPI inflation which in March meant a rise of 3.9%. Next month we are set to see yet another 3.4% added to the staggering amount British consumers already pay in wine and spirit duty.
Whether it’s English Vineyards, new start up distilleries, producers, distributors or retailers, there are hundreds of British businesses that will be hit hard by another such increase.
This is why we are calling on our members to contact their MPs and ask the Chancellor to end these unpopular duty rises and support our great British wine and spirits industry. By freezing duty the Government can support British businesses and consumers and even help to increase revenue to the Exchequer.”
The WSTA is arguing that a duty freeze is not only beneficial UK wine and spirit businesses, but also to Government given recent evidence that rebalancing the UK’s unfair wine and spirits tax regime can actually lead to an increase in duty revenues.
HMRC figures show that following the freeze in the 2015 budget, wine duty income actually increased over the following year by £136m (+3.6%) and following the 2% cut to spirits duty that year it actually helped to increased revenues by £124m over the same period.
When spirits duty was frozen in 2016, revenues actually increased by 7% the following year.