The Budget, the alcohol tax escalator & a hangover for the drinks industry

In his infinite wisdom the much maligned Chancellor, one George Osborne, announced in Wednesday’s Budget the continuation of the alcohol tax escalator which equates to a 5% increase in excise duty.
In an effort to please everyone aside from our poor pensioners, Mr Osborne has underwhelmed all and sundry, leaving the wine and spirit trade to licks its wounds once again and the makers of Wallace and Gromit as the Chancellor’s last remaining ally.
The alcohol tax escalator, which automatically increases tax on alcohol by two per cent above the level of inflation, has left the sector and more pertinently the CellarVie Wines team, nursing a nasty hangover. 
Although the levels of alcohol taxation had been expected, particularly when you consider the Prime Minister’s regular rhetoric regarding the effects of binge drinking, the industry’s pleas evidently fell on deaf ears as Osborne’s actions inevitably increase the pressure on wine producers and their importers.
From the 26 March the sector, which has already seen volume sales decline in the past year as consumers tighten the purse strings, must now contend with escalating prices that is likely to have an adverse effect on sales at 2012 London Olympics
For example, Spanish visitors to our fair city during the Games will pay triple what they normally would for an average bottle of wine in Madrid. Our French counterparts will have to pay 50 per cent more…Oh Mon Dieu! 
As The Wine and Spirit Trade Association’s (WSTA) Interim Chief Executive Gavin Partington said in a statement: “The Budget puts Britain on course for an Olympic record that gives no cause for celebration. Consumers and businesses are already paying the price for the excessive duty increases in recent years and today’s news means more price rises are on the way.
“Whilst we recognise the pressure on the public finances, the mounting duty burden on the sector is holding it back from contributing fully to the UK’s economic recovery.”
One only hopes Team GB fare better in the medals table at the end of the Olympics on August 12.
What does this mean for the consumer?
It means duty and VAT on a bottle of spirits will account for three quarters of the average price. For an average bottle of wine, the duty and VAT amounts to half the price.
In the grand scheme of things, a consumer will now pay 11p more on a 75cl bottle of wine, an additional 14p for sparkling wine, 41p more on a 70cl bottle of spirits and 3p more on a humble pint of beer.
It also means that the in just three years, tax on wine in the UK has increased by a third and certainly this is likely to have an effect on independent wine merchants who are struggling to compete with supermarkets, who often sell alcoholic beverages at a loss.
CellarVie Wines says: The main man himself, our very own Christopher Carson, believes the drinks industry continues to suffer at the hands of the government in this encouraged age of austerity. 
Christopher said: “While not as bad as last year, it certainly hasn’t gone unnoticed and one has to make the point, that duty has increased by an astonishing 43% on wine since 2007. It’s certainly very concerning when you consider there is the threat of tax being applied per unit of alcohol – but based on that this increase is mild.” 
Having said that, and with any luck, our loyal customers will not be put off by the increase, not least because they are investing in quality wines that still represent value for money.
['Share of tax in retail price' graphic courtesy of The Wine and Spirit Trade Association (WSTA)]   


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