Darling hammers cider in UK budget

Alistair Darling was today accused of “piling on the misery” for UK drinkers and alcohol companies after confirming duty on beer, wine and spirits will increase as planned from midnight on Sunday, with the chancellor hammering cider by announcing a huge 10% above inflation duty increase.

The chancellor, who said he had been "guided by our values of fairness", also announced plans to introduce new definitions for cider and perry from September this year in an effort to differentiate “super-strength” white ciders from regular-strength ciders.

Darling also confirmed that the 2% above inflation annual duty escalator will continue until 2015, rather than ending in 2013 as had previously been the case.

Speaking of the 10% increase of cider duty, National Association of Cider Makers (NACM) spokesman Simon Russell told the drinks business: “It’s certainly more than we imagined.”

Russell said the NACM was “interested” in plans to introduce new definitions for cider, adding: “We would be pleased to work with the government over the introduction of definitions, as long as it is something that seeks to ensure the quality of cider and perry, but we will have to look at the specifics first.”

The cider industry has expressed concerns over the long-term impact of the announcement.

Henry Chevallier, chairman of the NACM, said: “We knew we were being singled out – the pre budget report told us that.
 
“We are at saturation point on the duty on alcohol – even for a success story like cider. This dramatic increase could well reverse the growth we have generated in recent years.

“The Chancellor has a big budget deficit to address and whilst it might appear obvious to increase the tax on alcohol, the reality is likely to mean reduced demand and therefore less cash in the Treasury coffers.

“What makes this so serious is that cider makers have invested millions to plant thousands of acres of new orchards in the last decade.

“Orchards take years to yield a return and the loss to the rural economy and the environment will be enormous if sales decline sufficiently and the demand for English apples falls. It is the major brands that use the vast majority of the UK fruit the industry buys every year.”
 
“When Gordon Brown then Alistair Darling left us alone for a few years our investment and innovation doubled the value of the cider market and doubled the contribution we made to government, all that might now be at risk.

“It is not just businesses crying foul because sales decline. It has the potential to undermine what businesses both large and small have done and the great contribution they are making to the rural economy and the communities they are part of."

The effect of the beers, wines and spirits tax on a typical item in pence will be as follows:

*       10 pence on a 75cl bottle of wine
*       36 pence on a 70cl bottle of spirits
*         2 pence on a pint of beer
*         9 pence on a 75cl bottle of cider 

The Wine and Spirit Trade Association (WSTA) warned the 5% increase in beer, wine and spirit duty will bring further unwanted price rises for consumers and threatens to cause more job losses in the drinks industry in the year ahead.

A WSTA statement said: "Today’s budget rise means taxes on wine and spirits have risen by over 25% and 20% respectively since March 2008. Since 1997 the government has taken an extra £4 billion from consumers in alcohol taxes."

WSTA chief executive Jeremy Beadles added: "Successive punitive tax rises on alcohol are taking their toll on household budgets and mean further job losses in the drinks industry are on the cards this year.

"The last year alone has seen business closures and 30,000 job losses and today’s Budget means higher prices for consumers and more misery in a sector that ought to be part of Britain’s economic recovery."

Commenting on the beer tax increase, Brigid Simmonds, British Beer & Pub Association chief executive, said: “This latest beer tax hike piles on the misery for Britain’s hard-pressed pubs and beer lovers.

“It is also a snub to voters, who by a majority of two to one wanted the chancellor to scrap the beer tax escalator.

"Since 2008, beer tax has increased by an eye-watering 26% – a £761 million tax rise – and we have seen the loss of 4,000 pubs and over 40,000 jobs up and down the country. Beer sales are down £650m in the last year alone.”
 
"The chancellor’s claims that this is a budget for investment and growth are hollow, considering he’s just hit the beer and pub sector with a £161 million tax rise.

“The extension of the tax escalator for an extra two years also means more pain. Recently, there had been some signs of improvement in our industry but this recovery will be threatened by Darling’s tax rise, which is putting hundreds more pubs and thousands more jobs at risk."

The Campaign for Real Ale (CAMRA), blasted Darling’s apparent lack of regard for community pubs and responsible beer drinkers following the punitive 5% increase in beer duty along with plans to increase beer duty above inflation for the next three years.

 
With nearly six pubs closing every day across Britain, CAMRA fears these latest rises will mark the end for many more community pubs, with beer prices set to rise in pubs by up to 20p a pint.
 
A CAMRA statement said: “Instead of freezing beer duty and helping to protect the nation’s well-run community pubs, the chancellor’s last act before the general election is to impose another duty hike that will lead to further wholesale pub closures. Beer duty has soared by an unprecedented 25% in the last two years.”
 
Mike Benner, CAMRA chief executive, added: “Today’s budget is a charter for the large supermarkets who irresponsibly promote alcohol as a loss leader at the expense of our nation’s community pubs, real ale and responsible pub goers.

“CAMRA is totally at a loss in understanding how a government that recognises the community value of pubs can impose such consistently draconian beer duty increases.
 
“Today’s duty increase has stamped down on the survival hopes of community pubs across the UK. This is a further tax raid on responsible beer drinkers and community pubs. It is however a tax raid that will yield little extra money for the government as any extra beer duty will be outweighed by job losses, pub closures and reduced business taxes."

CAMRA also expressed concern at the 10% above inflation increase in duty on cider and will be demanding government action to support and protect small real cider producers.
 
“Hitting small real cider producers with this hike will cause irreparable damage to one of the nation’s most historic craft industries,” said Benner. “The government must introduce a relief package to support the UK’s small cider producers.”

Peter Darbyshire, managing director of wine wholesaler PLB, said the budget did nothing to help the UK drinks market against a tough trading backdrop.

“This budget, aside from being highly damaging to cider producers, has really left us in limbo," he said.

"He hasn’t necessarily damaged the industry any more than he has already over the years, but neither has he made any commitment to helping us in the future, particularly in light of the pub closures.

"The only slight blessing is that there has been no talk of a minimum price on alcohol which I hope is because he has listened to the WSTA’s argument, but I still don’t consider him to be a friend to our business and we’re still in the position of seeing a fall off in revenue for our industry as price points will remain.

"There is a potential transfer of purchase to neighbouring countries especially if the exchange rate recovers (admittedly an unlikely eventuality).” 

Scotch Whisky distillers said the chancellor’s sums did not add up and joined calls for the abolition of the escalator.

They called for a change of policy to avoid further damage to Scotch whisky in the UK market.

Accoding to The Scotch Whisky Association, the budget increase means that spirits duty, which is already higher than the duty on beer, wine and cider, has risen 21.6% in the last two years.

The duty on a bottle of Scotch whisky is now £6.66. The budget adds 38p tax to the price of a bottle of Scotch whisky.

Gavin Hewitt, chief executive of The Scotch Whisky Association, said: “The chancellor’s duty escalator policy is totally misguided. The policy has failed.

"Revenue from spirits to the Treasury fell by £49m in 2009. Today’s duty rise by a Scottish chancellor will not secure the increased revenue that he is looking for and undermines an industry that brings massive economic benefit to Scotland.

"He has hit Scotch at home and set a bad example for duty regimes in our export markets. Today’s decision is worsened by
the announcement that the above inflation rises will continue for an extra two years to 2015.

“After the election the new government needs to take a long hard look at the excise duty regime. The escalator should be abolished, duty on spirits should be frozen and the duty discrimination faced by Scotch, which the chancellor has worsened again today, should be addressed through approximation of duty rates, and eventually duty equivalence for all alcoholic drinks over the life of the next Parliament.”

Alan Lodge, 24.03.2010