The Chancellor's spring budget announced duty across all alcohol categories is to rise in line with inflation, also announcing a consultation on a new rate for cider under 7.5% ABV in view of high strength white ciders. A potential duty change for still wine between 5.5% and 8.5% ABV will also be included in the consultation, though the rationale is less clear.
On the face of it, both industry groups calling for duty cuts and public health group calling for rises may appear disappointed, but health interests will hope the consultation results in action that will significantly curb 'pocket money' high strength white ciders. Alcohol bodies and other groups have called for an end to such drinks, often cited to be consumed mainly by those with alcohol dependency and reportedly sold for as little as 16p per unit of alcohol.
Industry bodies including the Wine and Spirit Trade Association (WSTA) and the British Beer and Pub Association (BBPA) though expressed dissatisfaction after running campaigns to cut duties, even jostling with each other in the run up. Indeed preceding budgets had found favour with industry calls. This year though they highlighted September's predicted Retail Price Index (RPI) inflation rate of 3.9% would add to a bottle of wine and 2p on a pint. The BBPA argue that the pub and beer sector contributes billions of pounds to the UK economy but is struggling, whilst the WSTA say wine duty rates are amongst the highest in Europe, with significant challenges posed by Brexit and a falling pound. The Scotch Whisky Association (SWA) also described the decision as a “major blow”.
However pubs with a rateable value under £100,000 were given a £1,000 discount on their business rates, affecting 90% of pubs, which the BBPA said they have long campaigned for. The WSTA also welcomed the inclusion of wine and made wine between 5.5 – 8.5% ABV in the forthcoming consultation, which Miles Beales described as 'a category which holds a great deal of potential for innovation, especially for lower ABV products'. Currently all wine between 5.5% to 15% ABV sees the same duty rate (277.94 pence per litre), thus the large volume of off-trade wines around the £5 mark are most likely to face price pressures.
The Exchequer predicts no economic impacts from the duty RPI rise which equates to no increase in real terms, though the analysis presumably excludes any potential changes following the consultation on targeted cider and wine bands. Indeed in the context of the whole alcohol market, white ciders and low ABV wines will account for a small fraction of the market. The impact of white ciders though has clearly been of concern to services working with dependent drinkers and those calling for pricing levers including minimum pricing. The potential for nudging a wider population of wine drinkers towards significantly lower ABV wines though is harder to assess, if indeed that is part of the reasoning for inclusion of low ABV wines in the planned consultation.