Why this isn't the time for the trade to seek a cut in duty
Being a passive observer, rather than an active member, of the wine trade can bring into focus how slow it is to change. Viewed from the sidelines, its annual ebb and flow becomes all rather predictable.
January sees a slew of low-alcohol recommendations in the press, and merchants detailing how the latest Burgundy vintage promises high quality but low quantity, so best act quick. February? High street offers on rosé Champagne or – for the adventurous – the odd English fizz. March: critics say the latest Bordeaux vintage shows promise but châteaux need to price sensitively. April: the critics give all the first growths five stars and the châteaux don’t price sensitively.
Just as predictable is the annual moan, around now, about duty rises. Sure enough the ever-obliging WSTA has trotted out the standard letter, which the over-excited Tim Loughton, who can’t quite seem to believe his luck to be chair of the All-Party Parliamentary Wine and Spirit Group, has urged members to send to their local MP. Well I’ve got news for you. It won’t make a blind bit of difference.
This is not to undermine the argument that the trade is unduly penalised by the Chancellor.
The Chancellor is not interested in fairness or facts. He favours politics and perception. Back in 2009, I was an adviser to the All-Party Parliamentary Wine and Spirit Group’s report on the impact of tax rises on the wine trade. After a broad consultation, the group – a troupe of essentially well-intentioned MPs who liked the odd visit to a distillery – presented a cogent, coherent argument to the treasury against the 2%-a-year duty escalator.
It was duly ignored. The wily Peter Bottomley MP, one of its more experienced members (and a genuine wine lover), told me it took at least two and a half years to get such a message across to a Chancellor. In the case of the duty escalator, it took five.
It’s true that when, in 2014, the escalator was scrapped, it was largely down to the WSTA’s concerted Call Time on Duty campaign, widely supported by the industry – not least this magazine. But it’s also true that the move came from a Chancellor who had been in the job for four years, in a relatively stable government. This year’s campaign comes against a completely different backdrop and there is not a cat’s chance in hell of a new Chancellor, in his first Budget – the first since Brexit, with all the attendant political and economic uncertainty – bending to the WSTA’s demands to reduce duty.
More than just economics
Not that the trade doesn’t have a good case. Wine was the only alcoholic drink not to benefit from a freeze in duty in last year’s budget, a move that, when implemented in 2015, led to an extra £118 million in the treasury coffers. But Budgets aren’t just about economics. They drive home a political message. And much as we don’t like to talk about it, the pressure currently being exerted on the National Health Service is hoving squarely into the wine trade’s rear-view mirror.
There is no getting away from the evidence that suggests increases in the affordability of alcohol see increases in crime, violence and health issues. The government estimates the social cost of alcohol at £21 billion a year, which puts the £4 billion tax contribution into perspective. “Further cuts to alcohol duty, as the WSTA proposes, would be a damaging and irresponsible move,” says the Institute of Alcohol Studies.
“It would be prudent for the trade to be seen as mindful of its responsibilities to the nation’s health”
Given the calamity that befell the tobacco industry in the face of its resistance to the health lobby, wouldn’t it be more prudent for the trade to be seen as mindful of its responsibilities to the nation’s health (a subject to which, to its credit, the WSTA pays heed in its Budget submission)? Particularly when, as highlighted by Andrew Catchpole’s leader last month, a recent study found the alcohol industry guilty of making claims to government that contradict and subvert scientific findings in an attempt to prevent more stringent controls?
In the scheme of things, the odd duty rise, however arbitrary, is small beer. Most companies factor it into their budgets at the start of the year, and absorb it into their margins.
The best thing the trade could do if duty goes up this month is to actually pass it on to the consumer. Increasing the price of a £4.99 wine to a conspicuous and awkward £5.12 would have a threefold effect: drawing attention to how tax on wine has gone up by 56% in the past decade; emphasising how, because it is a fixed cost, consumers get better value the more they spend; and showing how the industry is doing its bit in terms of social responsibility.