Last month's Budget brought a welcome surprise for our industry with a freeze on all alcohol products. With a tight financial settlement, worse than expected fiscal forecasts and built in RPI rises the prospect of a bit rise was looming large over the industry just 8 months after the last rise in March. However, in a welcome change in policy as a result of our efforts, the Government froze all duty “recognising the pressure on household budgets. And backing our Great British pubs”.
This was particularly welcomed by the wine industry as comparatively this is the best outcome since 2002 and it avoided being left out as it was when duty was frozen in 2013 and 2015 and cut in 2014. But it was also welcome for spirits which have received a freeze or better for only the fourth time in ten years. It was also very welcome as we move into the Christmas trading period. Inevitably though, the devil is in the detail and the small print in the Red Book provides caveats. Some are small, some potentially problematic and these are discussed below.
But first the good news: Philip Hammond announced that all alcohol duties will be frozen, meaning there will be no change in any duty rates, breaking with government policy of an annual rise indexed to projected RPI inflation. With the new implementation date (see below) as a result of moving the Budget from March to November, this means that all current duty levels implemented in March 2017 will remain for a further 14 months at least, meaning a full 22 months without changes prices at least. As a result of WSTA campaigning, the industry has saved an estimated £247m in new tax liabilities in 2018. This is compared to what would have happen if the Government increased duty by RPI which stood at 3.8% on Budget day based on the OBR’s new RPI inflation rate (this is higher than the 3.4% that the OBR projected in March).
What this means in real terms we can look at in a few ways. Compared to a rise being passed on in its entirety, consumers have saved an extra 8p a bottle in extra duty on still wine, 11p on sparkling wine and 31p on a bottle of spirit at 40% ABV. Overall, wine consumers are expected to save £125m in extra duty while spirit consumers save an extra £122m that could have been added to their tax bill in 2018. The value of this to Pubs for example is around £637 in additional wine and spirit duties in 2018 per pub. Or from a producer side, a wine importer releasing 1m bottles for sale in 2018 has been saved £87,140 in additional duty payments whilst a distiller producing 100,00 bottles has been saved £30,299.
A rise of this kind would therefore have been particularly unwelcome at Christmas. However, this brings me on to the next piece of good news, which is the implementation date. The move to November from March for the main financial statement meant that the usual implementation date – Midnight on the Sunday after the Budget – would have fallen just before the industry’s busiest trading period, Christmas. It is good news indeed that the Treasury listened to our concerns and delayed future rises until after Christmas and New year. The Treasury forecasts that any future increases in duty will now take effect from the 1st February.
The Chancellor also announced a new band for high strength ciders between 6.9% and 7.5% ABV to be implemented in 2019 ‘to allow producers time to reformulate and lower their ABV. The reason set out in the Red Book is to tackle issues of harmful drinking at low cost, in particular white ciders. However, the Chancellor was silent on the issue of a new lower abv band for still wine between 5.5-8.5% and we have since received confirmation that this policy has now been dropped.
There was a final point, buried deep in the budget book that simply stated the Government was going to review the practice of wine dilution in relation to duty. We are endeavouring to attain further details about this review and ensure that our members have the opportunity to feed into this.
We have learnt much during this campaign, notably what a clear, concise and targeted campaign can achieve with support from our members. We are very thankful to all the WSTA members that signed joint letters, wrote directly to local MPs and hosted events, and we look forward to working with them during next year’s campaign effort.