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Short and sharp or long and tedious

Would the drinks industry prefer a larger duty rise frozen over a number of years, or the traditional smaller increases inflicted on an annual basis?

THE BLAIR/BROWN saga reached full frenzy last month as the chancellor’s three yearly spending review was announced.

General media attention was caught by Brown’s performance, speculating on his leadership pretensions and the promised 84,150 civil service posts to be cut by 2008, which should, along with other efficiency measures, free up an impressive £21.5bn a year – if all goes according to plan.

However, the exercise turned the minds of the drinks industry to pending taxation issues. We were all left wondering if the economy will deliver the growth and tax revenue to fund the announced spending plans or if it would again be the drinks industry paying for increased public spending through increased duty?

While nearly all of the industry would like to see no duty rise for alcoholic beverages in next year’s budget, we can all see this is an unlikely outcome.  However, we also wondered what measures would the industry actually like to see the next time the chancellor whips out his red briefcase for the benefit of the cameras?

So, here at the drinks business (never ones to shirk a journalistic challenge) we decided to find out.  We contacted some of the luminaries of our industry to ask, "What would you like to see in the government’s next budget?"

Insider opinion

Allan Webb, head of beers, wines, spirits and tobacco, Sainsbury’s

"We would like to see no increases in duty on any category.  In fact, we would like to see a decrease in sparkling wine duty to bring it into line with table wine.  The additional duty is discriminatory against the category and it could be argued that a reduction could further encourage the English sparkling wine market, which is where our strength lies.

It would also be nice to see a reduction on spirits duty, which would generate revenue. Should there be a reduction in table wine duty, we feel this would boost the market and therefore overall tax take.

Alcohol sales in the grocery sector are not a contributory factor to anti-social behaviour in our town centres and the supermarket trade prides itself on its approach to social responsibilities, associated with retailing alcohol.  We would also like to see a reduction in the duty on RTDs, boosting both the market and overall tax take." 

Angela Mount, head wine buyer, Somerfield

"Obviously we would like to see overall harmonisation for the category as the longer we have disparity, the longer illegal imports will continue. Realistically though, we would like to see strip-stamps scrapped for the spirits category since this move is likely to put a huge strain in terms of administration on both the producers and the retailers.

In view of wine, if there is to continue to be increases in duty then we would like to see this implemented in a long-term, five year plan. So, for example if we know that 20p is going to be put on a bottle of wine in two years, but then nothing for another three years, then we can plan accordingly to implement the change.

If there must be tax rises on beer, doing it in one go over five years will be far better for everyone involved."

Gavin Hewitt, chief executive, Scotch Whisky Association

"Since the Budget and the disappointing decision to introduce duty stamps on spirits from 2006, we have had intensive discussions with the government aimed at the delivery of workable arrangements that cause the least possible damage to distillers and their trading relationships.

We are working to ensure that the government honours its commitment to implement a package of measures that keep the industry’s compliance costs down.  As part of that package, the chancellor has said he will freeze spirits duty for the lifetime of this parliament.

If you believe the pundits, that should mean one more spirits duty freeze – the eighth consecutive – before an election in mid-2005.

Deb Worton, marketing and PR director, HwCg

"Duty harmonisation across Europe would really benefit the trade as consumption isn’t changing dramatically, but we can change where consumers buy their wine.  We really don’t want to see the drinks trade hit again by duty increases.

It’s easy for the government to constantly increase duty on alcohol, as voters see it as a good thing: drinking is a luxury and, in excess, is detrimental to health.  What the public fail to see is that the industry is hit every year and the increases are rarely passed on to the consumer or the retailer, although this is changing.

What happens is that the suppliers are forced to make even smaller margins in a climate where margins are, well, marginal."

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