FROM THE GRAPEVINE: August 2019
Originally published in London Wine Fair's Grapevine: 220819
By Richard Siddle
Is the political mood right for a fairer alcohol duty strategy?
I'd have thought the “political mood” was a little pre-occupied with other issues to be worrying about alcohol duty?
I hear what you are saying, but whilst it might appear Brexit dominates every living, breathing moment of this government there are moments when normal life continues. One of which will be when the Chancellor stands up to deliver the next Budget. Now whether that comes before the infamous October 31 No Deal Brexit deadline or after, we'll have to see, but for the drinks lobby there is no point sitting on your hands. If you want your case to be heard, you need to be on the front foot now.
What is the drinks lobby up to?
Well, you wait for one drinks duty campaign to come along and you get two almost at the same time. Last week saw the official launch of a new initiative, Wine Drinkers UK. This campaign hopes to make the consumer case for a cut in wine duty, by setting out in as many ways as possible to the public, national media, and MPs just how unfair the level of duty is on wine, compared to the other drinks categories. The campaign has been set up in direct response to the unprecedented decision in last year's Budget for the Chancellor to freeze duties on beers and ciders, but increase duty on wine in line with inflation, 3.1%. Wine it seems was an easy target to hit with a duty hike compared to the loud, influential, beer and spirits lobbies which plays nicely to MPs on all sides of the house with pubs and local breweries and distilleries in their local constituencies. Winning good local and regional media PR at the same time. It seems if you can afford to drink wine, you can cope with any duty rise.
And the Wine Drinkers UK campaign hopes to change the Chancellor's mind?
Fortunately for the wine industry the new Prime Minister has changed the Chancellor completely, so it remains to be seen whether the new incumbent, Sajid Javid, has the same alcohol duty strategy in mind. He won't if the Wine Drinkers UK campaign has its way. It hopes to push the message home that wine is actually the nation's most popular drink and it's not fair to expect the average wine drinker to pay more for their favourite tipple whilst the Treasury uses it like a political football to kick around and help balance its duty books.
So what's the campaign doing?
It has, over the last couple of weeks, been trying to get column inches, tweets, Instagram posts and seconds on TV and radio news channels with its Cut Back Wine Tax message. Using consumer wine journalists like Helena Nicklin and Joe Fattorini to do so. All backed up with strong facts like its own research that claims wine is the nation's favourite drink, drunk by 81% of those who drink alcohol compared to 79% for beer and spirits. It's calling on everyone in the wine trade to get involved, like sending a templated letter to their local MP, or getting businesses to post their logos on the Wine Drinkers UK website in support.
You mentioned two campaigns?
Yes, the spirits lobby is also at it too. But with a different aim: to first freeze spirits duty and then “reform” alcohol duty as a whole, and no doubt, spirits specifically. The UK Spirits Alliance has been set up primarily with the backing of the major spirits giants including Diageo, Pernod Ricard and Brown Forman. It sees itself as a “campaigning coalition” to “help provide a voice for the entire” spirits sector. Noticeably it is also calling for a “fair excise duty regime” and makes the case for an industry that “generates billions for the public finances every year” and that it needs “a stable tax regime” in order to help its members “continue to invest in the UK”. No actual specifics of what that “reform” might look like, but it's fair to assume it will be one that will benefit the spirits industry and “provide the confidence and security business needs”.
But duty levels are set by the UK government not by the EU, so why would leaving the EU have any impact on duty?
They are indeed, but since the mid Seventies every Chancellor of the Exchequer has set duty rates in order to help balance the books in a world where we lived inside the bubble and influence of the EU. Take the EU away and we are suddenly sitting down doing trade deals with not just some of the world's biggest economies, but from a wine perspective, the largest wine producing countries too. Boris Johnson has made it clear that high on the agenda in terms of trade deals are the US, Australia, New Zealand and South Africa. All of whom rely, to a bigger or less degree, on finding good homes for their wine exports. Are they going to take kindly to working with a country whose tax on alcohol is vastly higher than all the 27 countries left in the EU? It won't just be the removal of the current 6.5p to 8p a bottle tariffs that all wine from outside of the EU have to pay, they will surely be looking for a market with a fairer and more favourable duty tax regime to sell their wine in. Not one where 50p in every pound spent on wine bought to consume at home is tax, or 61% when VAT is thrown in. Will they take kindly to a country determined to only raise duties on wine, 98% of which it imports from all over the world, whilst giving tax breaks to beer and spirits that have such strong UK sectors? It might just be the year that the Chancellor is all ears to changes in duty for all drinks - including wine.