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Cheap wines to bear brunt of pre-Budget tax cut, warns WSTA

The Wine and Spirit Trade Association (WSTA) says the combination of a cut in VAT and the rise in duty on alcohol, announced yesterday by the Chancellor, will push up the price of cheaper wines.

The WSTA calculates that at the newly increased duty rate, a £4 bottle of wine will rise in price to £4.05 and £5 bottle will rise to £5.03.

As a result, it says, four out of five shoppers will be paying more for their wine this Christmas.

According to their figures, the vast majority of consumers, 82%, buy wine costing £5 or less, meaning it is they who will bear the brunt of price hikes.

Jeremy Beadles, chief executive of the WSTA, said: "It is staggering that a government which claims to act in the interests of the many not the few wishes to punish ordinary hard-working consumers who wish to spend the little cash they have left on a drink.

"The Chancellor has turned into Santa Claws, snatching scarce pleasure from millions of people."

But whilst the Chancellor's decision to cut VAT rates from 17.5% to 15%, and raise excise duty rates by 8% may have a proportionately greater impact on lower priced products, the combined tax changes will have less of an impact on the price of more expensive wines, said the WSTA. It calculates that a £6 will rise to only £6.01 at the increased duty rate.

The move could even make some more expensive bottles cheaper than they currently are.

The tax changes, which come into force on December 1, have been met with sharp criticism by the drinks industry. It is likely to force renegotiation of arrangements between retailers and suppliers; while duty must be paid immediately, VAT is payable quarterly.

Beadles added: "This is a double whammy for the drinks business - tax changes wreaking havoc during the busy Christmas trading period and another hit to small business cashflow. This is not what I call helping the British economy."

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