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| 04 September, 2018
The WSTA is calling on the Chancellor to freeze alcohol duty again, as he did last year, which increased Treasury coffers by £270 million in six months.
A letter written by Treasury Minister Robert Jenrick to Stephen Pound MP last month revealed that Jenrick acknowledged “measures…taken in recent Budgets – have made a real difference and been highly valued by pubs, customers and communities” and the WSTA is urging a similar approach this year.
However, the Minister went on to claim that duty freezes had not been beneficial to the Treasury and “have come at a significant cost to the Exchequer in lost revenues.”
Following independent analysis by EY, the WSTA challenges this view; in fact, the boost in economic activity in the wine and spirit sectors that is supported by a freeze in duty leaves the wider economy better off at no cost to the Treasury.
The WSTA has pointed out the gap between Office of Budget Responsibility (OBR) models and reality, which have been proven to overestimate consumption of wines and spirits over recent years and is urging the Treasury to look again at their numbers before the Budget.
As previously highlighted by the WSTA, the latest HMRC data, following a welcome freeze last November, shows that the Chancellor raked in a £270 million windfall from alcohol duty – a 5% increase on last year.
In March 2017 alcohol duty was hit with an inflationary rise of 3.9%, yet the summer following the rise failed to raise as much for the public purse.
The WSTA warn that a rise in duty would likely result in a reduced economic contribution from the wine and spirits industry.
EY’s report said a duty freeze results in: “a favourable outcome for the UK economy, since economic activity is significantly higher”, while there is expected to be a “negligible impact on tax revenues”.
The EY projections show that if alcohol duty is frozen this year it would boost the UK economy by £1.1bn and create an estimated 27,000 jobs by 2022.
Any duty rise that would be announced in the Autumn by the Chancellor would come into force on February 1st, 2019 – a matter of weeks before the Brexit deadline – and would be particularly painful for the wine and spirit trade and its consumers.
Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said:
“The Chancellor got it spot on last year and froze duty, which we know increased revenue for the Treasury.
“UK consumers already pay some of the highest alcohol prices in Europe and it makes no sense to hit wine and spirit businesses, pubs and consumers with a duty rise. But don’t just take our word for it, independent analysis by EY has shown that the best outcome for the economy is a fair freeze for all.
“I’m looking forward to meeting the Minister Robert Jenrick, because we suspect OBR forecasts could be misleading; and data from the real world clearly shows the economic benefit of a freeze. I also wrote to the OBR in 2016 regarding the projections but have not had a reply from them.
“The reality is that freezing alcohol duty is a win/win/win – more money for the Treasury, support for British business, pubs and the cash strapped consumer.
“Any rise in duty would be particularly harmful for importers and small businesses, who are acutely exposed to the risks of leaving the European Union. With Brexit fast approaching duty is one decision which is entirely in the Government’s hands. Any rise would send the wrong signal, undermining UK business and consumer confidence.
“We are asking the Chancellor for a fair freeze for all.”
The UK alcohol industry is one of the most heavily taxed in Europe, as we are stung by the third highest duty rates for wine and fourth highest duty rate for spirits across the EU.
According to the latest figures from the EY report, the wine industry contributes £7.8 billion in tax to public purse and the wine industry supports 189,000 UK jobs. The spirits industry contributes £9.1 billion to Treasury coffers and supports around 284,000 UK jobs.
The wine industry in the UK contributes £18.9 billion in economic activity after Britain has secured its place as a key hub for importing and distributing wine across the globe.
Partly down to the soaring success of British gin the spirits industry has generated an impressive £30.1 billion in economic activity.
The WSTA is calling on its members and the public to lobby MP’s to highlight the UK’s grossly unfair alcohol taxation policy.
Duty hikes were expected at the 2017 November Budget, but politicians listened to the WSTA, businesses and consumers and scrapped planned duty rises.
During his Budget speech in November, the Chancellor said: “Recognising the pressure on household budgets and backing our Great British Pubs, duties on other ciders, wine, spirits and on beer will be frozen.”
The WSTA has drafted a Budget submission document which will shortly be submitted to the Treasury, clearly setting out that a further freeze on duty for all alcohol products will help an aspirational and innovative industry realise its potential.