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WSTA calls on Government to scrap alcohol tax hikes and help bring down inflation

Budget | 28 June, 2023

Wine and spirit businesses are calling on Government to scrap duty hikes and avoid prohibitive price rises, which will further fuel inflation.

With the Government’s fiscal policies failing to control inflation, there’s little more than a month to go before the Government is set to make matters worse with wine duty set to increase by 20% and spirits duty by over 10%.

Instead of doing all it can to bring down inflation, the Treasury is ploughing ahead with plans to introduce the biggest single alcohol duty increases in almost 50 years, further exacerbating the cost-of-living crisis at a time when interest rates are at their highest since 2008.

The Wine and Spirit Trade Association says, “it’s not too late to scrap crippling duty hikes” and bring some respite to wine and spirit businesses and consumers.

From August all alcohol will be taxed by strength meaning some higher ABV wines, from hotter countries, could disappear from UK supermarket shelves. As well as reducing consumer choice the duty hikes will bring price rises for 90% of wines sold in the UK.

Spirits face a similar challenge as premium products such as gin, vodka and whisky must contain a minimum strength prescribed by law.

Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said:

“We are careering towards an extremely tough period for wine and spirit businesses with tax hikes and other costs, including a prolonged cost of living crisis for their consumers, persistently high inflation – especially for food and drink – and rocketing prices for glass, leaving little room for many businesses to turn a profit. Inevitably some won’t be able to stay afloat, with SMEs most at risk.

Amongst all this pressure the Government has chosen to impose more inflationary misery on consumers on 1 August, with the biggest single alcohol duty increase in almost 50 years. But it’s not too late to scrap these crippling duty hikes.

Ultimately, the Government’s new duty regime discriminates against premium spirits and wine more than other products.  Wine from hotter countries – like new trade deal partner Australia – will be penalised most of all, because the grapes grown in hotter climates naturally produce higher alcohol wines. And, at the same time, you cannot reduce alcohol in wine like you can for some other products. Making wine isn’t an industrial process; reducing wine’s alcoholic content is limited, changes the product and is costly to carry out. Nor can the alcohol in full strength spirits be reduced for products such as gin, vodka and whisky where a minimum strength prescribed by law.

In the end the Sunak-Hunt changes to wine duty will reduce consumer choice and push up prices. For spirits you can expect at least a £1 increase on a bottle of gin or vodka and a leap of £1 per bottle of wine when duty is increased by 20% (+VAT).

Wine and spirit businesses are looking to find ways to keep their products affordable, but there is no quick fix, and there are too many tax and costs increases and too few options – especially for wine and full strength premium spirits where reducing ABV simply isn’t realistic.”

Sir Graham Brady, chair of the 1922 committee and chair of the All-Party Parliamentary Group (APPG) for Wine and Spirits, said:   

“We can be proud of Britain’s position as a global hub for the wine trade, but that position must not be taken for granted. The new duty increases represent self-inflicted damage to the sector, creating significant bureaucratic challenges for SMEs with the potential for job losses and increased cost to the consumers”.

Kathy Caton, co-founder of Brighton Gin, said:

“I don’t resent paying taxes, I just want it to be fair across the board. The stifling duty costs act as a handbrake to growth for businesses like ours. Instead of putting barriers in our way the Government should be promoting and supporting ‘Brand Britain’ and helping what was a booming sector.

This is also incredibly unfair on consumers who should not be facing higher prices for their favourite drink, especially while the cost of living and inflation crises put ever-increasing pressure on household budgets.”

Steve Moody, executive chairman of Fells, the largest distributor of port in the UK said:

“The Government’s duty rises will have the biggest impact on fortified wines, including sherry and port, which will see duty rise by 44% (+VAT) adding around £1.50 to a bottle.

Hitting the port industry with red tape and a tax hike seems go against the pro-growth agenda that this government that professes to support. We don’t need Ministers to understand every aspect of an international industry like ours, but we do need them to listen to us!

A shock price hike like this will drive a coach and horses through these fragile supply chains.  At the very least, port and other fortified wines should receive the same easement period the Chancellor has given to other wines that are made from fresh grapes.”

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