Duty hikes: Details of government consultation revealed
The alcohol duty hikes on 1 August 2023 were the biggest the UK has seen in nearly fifty years and the changes will impact all wines across the country.
Once the temporary admin relief is over (which, in itself, could be perceived as the government conceding that its duty hikes aren’t 100% practical), all wines between 11.5% to 14.5% abv will increase by 20% or £0.44 per 75cl bottle (53p incl VAT).
The rise will have huge implications for the wine industry, particularly bottles sold under the £10 bracket, which, according to Nielsen, is 96% of all wine sold in the UK.
- Read more: Over the line on duty
In a press release published on the day of the hikes, the HM Treasury said, “The new alcohol duty system will be based on the common-sense principle of taxing alcohol according to its strength”.
As a result, sparkling wine will now be taxed in the same bracket as still wines and according to its abv strength. In addition, the duty changes would end the “premium rates on sparkling wine”, and lower the duty in shops and supermarkets on English sparkling wine.
However, few, if any in the wine trade supported a move to taxation by abv degree, primarily due to the administrative burden of calculating duty for every wine on the shelf and the way it would discriminate against wines produced in hotter climates which naturally produce higher abv.
So, how did we reach this point? Who exactly did the government consult prior to the duty changes and how did stakeholder responses inform the outcome of the March Budget when the quantum of the hikes were first announced?
By way of background and going back to first principles, there were two elements to the duty hikes which came into effect on 1 August. The first is the introduction of the new duty system and the second is the new duty rates announced in the 15 March Budget.
On the former, even before the March Budget, the new duty system was set to increase wine duty by about 10% (all still wine 11.5% abv and above was set to see duty increase, which is about 90% of all still wine and nearly 80% of all wine). When originally proposed, the new system maintained the existing rates for beer and spirits (which were previously being taxed by degree).
In October 2020, the government launched a ‘Call for Evidence’ to seek the views of stakeholders on how alcohol duty could be reformed. This closed in November 2020 with 106 respondents (listed at the bottom of this article) including the Wine and Spirit Trade Association (WSTA), Wine GB, Treasury Wine Estates, E&J Gallo Winery, C&C Group and Accolade Wines.
In parallel with the Call for Evidence, the government also undertook a series of roundtables with groups of stakeholders, including public health groups, trade associations and economists.
The government responded to the Call for Evidence in the Autumn Budget 2021, setting out its proposals for the creation of a new alcohol duty system, which coincided with a government consultation on the proposals, to seek further input from industry and other stakeholders. This consultation received 353 responses.
In its consultation response in September 2022 the HM Treasury stated: “Broadly, respondents welcomed the new structure and the principles underpinning it as a considerable improvement on what went before. One distiller said that the new system ‘brought clarity and common sense to a chaotic mess’”.
Under ‘wine producers and retailers’ the official government doc summarised: “Wine producers strongly welcomed the reduction in duty rates for sparkling wine and for wine-based drinks below 8.5% abv. One producer stated: ‘The decision to equalise the duty between still and sparkling wines is welcome, and sensibly does away with an anomalous and illogical difference’”.
However, the government did go on to acknowledge some opposition from the wine industry, stating: “In contrast to other parts of the industry, wine producers and retailers were less positive about the overall new regime. Most wine producers and retailers expressed concern that the new duty rate for products between 8.5% and 22% abv would lead to unfair increases in duty for most still and fortified wines. These concerns were also reflected in a number of letters the government received from members of the public.”
The government also accepted that still wine businesses in general felt the consultation proposals had not met the review’s intended aims of being simpler, fairer and less administratively burdensome, highlighting that, “by taxing wine by abv, depending on their systems, businesses could have to use 27 or more tax codes compared to three previously”.
Despite the overwhelmingly negative response, the document only cited comments from one wine retailer which read: “I fear we'll see a huge new market for 'wine-based drinks' watered down with sweet grape juice, available at low prices in supermarkets and people will think merchants selling real wine are overpriced.”
To address these concerns, according to the HM Treasury, wine producers tended to favour one of two, “contradictory, solutions”. The first was to impose a flat strength-based rate across all products. The second was to revert to a series of bands which were not linked to strength. A large range of proposals were put forward for this second option, including:
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A single rate on wines between 8.5-15% abv at a rate equal to the estimated average strength of a wine on the market (12%), with a single rate for wines between 15-22% abv based on 18% abv. This was the most popular option.
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A single rate for wines between 11-15% abv, with reduced rates for wine below 11% abv, and a higher rate for wines above 15% abv.
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A rate for wines under 12% abv and a higher rate for wines above 12% abv.
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A rate for wines between 7.5-10.5% abv (based on 9% abv strength) and an 11-15% abv rate at £19/litre of pure alcohol (lpa).
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Six rates for wines between 8.5-22% abv: 8.5-11% abv, 11-13% abv, 13-15% abv, 15-18% abv and 18-22% abv.
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A series of 1% abv width bands from 8.5% abv to 22% abv.
According to the government, treasury ministers and officials have engaged extensively with the wine sector regarding its alcohol duty reforms, including the L-day in July 2022, 23 September Growth Plan, reversal of the Growth Plan on 17 October, Autumn Statement 2022, 19 December extension of alcohol duty freeze and Spring Budget 2023 in the past year.
An HM Treasury spokesperson told Harpers: “For the first time in over 140 years the UK’s alcohol duty system has started making sense as a drink’s tax now reflects the amount of alcohol in it, making everything easier to understand.
“This simplification cuts tax in three ways, firstly on draught drinks in the pub, including wine-based, secondly on lots of popular drinks in shops like white wine, sparkling wines, liquors and ready-made drinks, and thirdly to help small craft producers innovate new lower strength products.”
The government line has undeniably focused on the benefit the duty changes pose to pubs and draught beer as illustrated in its 'Brexit Pubs Guarantee' campaign, but the issues around still wines have been largely ignored.
So while the wine trade is clearly not happy with the outcome of the duty review, consultation was indeed carried out and in some detail. However, there is still a question to answer regarding how exactly the consultation informed the government’s final decision on the hikes.
Respondents to the call for evidence October 2020:
1 Accolade Wines
2 Alan Powell Associates
3 Alcohol Change UK
4 Alcohol Focus Scotland
5 Alcohol Health Alliance UK
6 Aluminium Packaging Recycling Organisation Ltd
7 Amber Beverage Group
8 Association of Convenience Stores
9 Association of Directors of Public Health
10 Aston Manor Cider
11 Australian Vintage Ltd
12 Bacchus Wine Auctions Ltd
13 Balance
14 Beer Counter Ltd T/A Ridgeway Brewery
15 Bevisol Ltd
16 Black Sheep Brewery
17 British Beer and Pub Association
18 British Distillers Alliance
19 British Liver Trust
20 British Medical Association
21 British Society of Gastroenterology
22 Brothers Drinks Co Ltd
23 Budweiser Brewing Group UK and Ireland
24 C&C Group plc
25 CAMRA (the Campaign for Real Ale)
26 Cancer Research UK
27 Casella Family Brand (Europe) Ltd
28 Cellar & Co Ltd
29 Centre for Ageing Better
30 Cider of Sweden Ltd T/A Kopparberg UK
31 Club Soda
32 Concha y Toro UK
33 Cotswold Cider Company Ltd
34 County Durham Council
35 Cranborne Case Cider
36 Crime and Security Research Institute, Cardiff University
37 Darley Ltd
38 Diageo
39 Direct Wines Ltd T/A Laithwaite’s Wine
40 Downton Distiller
41 Drinks Ireland
42 E&J Gallo Winery
43 Federation of Wholesale Distributors
44 Fell Brewery Ltd
45 Fine & Rare Wines Ltd
46 Ganley and Naish Cider Ltd
47 Gateshead Council
48 Global Brands Ltd
49 Greene King
50 Halewood International Ltd
51 Hayman Distillers
52 Heineken UK Ltd
53 Hogs Back Brewery Ltd
54 Home Farm Gin
55 Institute for Fiscal Studies
56 Institute for Alcohol Studies
57 Institute of Economic Affairs
58 Lambswick Drinks Co Ltd
59 Laurent-Perrier UK Ltd
60 Long Live The Local
61 Milton Brewery
62 Moet Hennessy UK Ltd
63 Molson Coors Beverage Co Ltd
64 National Association of Cider Makers
65 Newcastle and North Cumbria Integrated Care System
66 Newcastle City Council
67 North Tyneside Council
68 Northern Ireland Drinks Industry Group
69 Northumberland County Council Public Health Team
70 Pernod Ricard
71 Perry’s Cider Ltd
72 Public Health Durham
73 Public Health England
74 Ridge & Furrow Cider
75 S H Jones Wines Ltd
76 Sanford Orchards Ltd
77 Sazerac Co
78 Scotch Whisky Association
79 Scottish Grocers’ Federation
80 Scottish Health Action on Alcohol Problem
81 Sheffield Alcohol ResearchGroup
82 Small Independent CidermakersAssociation
83 Social Market Foundation
84 South Tyneside Alcohol Alliance
85 South West of England CiderMakers Association
86 Spectrum Community Health CIC
87 Thames Distillers Ltd
88 Thatchers Cider
89 The Ciderologist
90 The Cotswold Distilling Co Ltd
91 The Drinkaware Trust
92 The Royal College of Physicians And Surgeons of Glasgow
93 The Society of IndependentBrewers (SIBA)
94 The Somerset Cider BrandyCompany
95 Thornborough Cider
96 Three Counties Cider and PerryAssociation
97 Tibbits Productions Ltd T/AArtistraw Cider and Perry
98 Titanic Brewery
99 Treasury Wine Estates
100 Tricky Drinks Ltd
101 UK Hospitality
102 UK Spirits Alliance
103 Vranken Pommery UK
104 Wine and Spirit TradeAssociation
105 Wine Drinkers UK
106 Wine GB
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