Budget News Blog: Drinks industry split as duty escalator cut on beer but not wine and spirits

By Richard Siddle

Published: 20 March, 2013

Whilst the beer industry celebrates the "brilliant news" that the Chancellor is to scrap the duty escalator on beer, the wine and spirits sector is faced with further increases under the controversial measure, with wine duty now up to £2.

In a much trailed announcement, Chancellor George Osborne has looked to play to the popular press, the average beer drinker and strong trade lobbying by cutting beer duty by 1p.

The move was mistakenly leaked in today's Evening Standard prior to the Chancellor's statement with the front page headline, Things Can Only Get Bitter.

2.20pm

But it is less good news for the rest of the drinks industry as the Chancellor has confirmed the 2% duty escalator will continue for wine and spirits. Wine duty will now go up by 10p to £2, despite many of the national media channels reporting the alcohol duty escalator has been scrapped completely.

The escalator, which has increased taxation by 2% above RPI inflation each year since 2008, will add another 10p to a bottle of wine and 53p to a litre bottle of spirits after the 5.3% rise announced today, said the WSTA.

It said: "The latest rise means that consumers will have seen wine duty increase by 50% and spirits duty by 44% since the escalator was introduced in 2008 putting an additional 67p on a bottle of wine and £2.38 on a 70cl bottle of vodka. This comes despite many consumers struggling with stagnating wages and the rising cost of living."

In a statement, Miles Beale, WSTA's chief executive, said: "This is bad news for the UK wine and spirits sector, with year-on-year duty increases hitting consumers and businesses hard. It makes little sense to single out beer, particularly as there is a legal precedent to suggest government is unable to do so.

"If this was designed as a measure to support pubs it seems misplaced: over 41% of drinks sold in pubs are wine and spirits, contributing £9.4 billion per year. The Chancellor's decision ignores the growing value of the English wine industry and the UK spirits industry, which accounts for 18% of all jobs in the EU spirits industry."

In a comment seen as a response to reports that the government has scrapped the idea of a minimum pricing of alcohol, the Chancellor said: "Responsible drinkers in our pubs should not pay the price for problems caused by others."

Bordeaux winemaker Gavin Quinney responded to the increase in wine duty by tweeting: "10p is more than all the duty in France, Germany, Italy and Spain combined."

1.45pm

Brigid Simmonds, chief executive of the British Beer & Pub Association, reacted to the news in the following statement:

"This is absolutely brilliant news, and it will make George Osborne the toast of Britain's pubs today. By cutting the tax on beer, he has moved to boost jobs in Britain's pubs at a time when it is most needed.

"In also abolishing the Beer Tax escalator, the Chancellor has ended a hugely damaging policy that would have made Britain's' beer the most heavily taxed in Europe.

"This will protect thousands of jobs this year, and will allow us to create many new jobs in this brilliant industry.

"I want to pay tribute to the hundreds of thousands of people who have supported this campaign. This has been a broad and persuasive campaign uniting the industry and consumers. I hope this heralds the start of a long-term change that recognises the benefits of beer and pubs, for the economy and for society."

The beer duty escalator is being scrapped, said Osborne, as it is a "sad fact" the sector has already lost 10,000 pubs. "We'll now scrap the beer duty escalator and cut beer duty by 1p," he said. The move will come in to force from Sunday.

Elsewhere the Chancellor announced that the fuel escalator has been scrapped, raising hopes that the alcohol duty escalator could follow suit in later Budgets.

It means a 3p-per-litre increase in the fuel duty scheduled for September is to be cancelled.

Growth forecasts are as follows:

2013: +0.6%, down from 1.2%

2014: +1.8%, down from 2%

2015: +2.3%, no change

2016: +2.7%, no change

2017: +2.8%, no change

The Chancellor said the 2% inflation target is being maintained.

? The national debt will hit 85% of GDP and will not start falling until 2017-18 (a year later than expected)

? Whitehall spending cuts will reach £3 billion, not £2.5 billion as expected, to fund a capital expenditure programme.

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