The price of alcohol is all over the news this week in the UK, with the wine trade – and the average wine drinker – feeling rather embattled by the rise in prices.
On Wednesday, the budget was announced, with the government adding 5% to alcohol duty and taking the level of duty paid on an average bottle to £1.90. As of Monday morning, once you add VAT to your bottle price, you’ll be paying £2.73 in tax on a £5.00 bottle of wine. Ouch.
As Gavin Quinney points out in his Bauduc blog , UK wine duty has increased 46% in just four years, and reminds us that the 11p duty rise in this budget is “more than the total duty on a bottle in France, Germany, Spain, Portugal, Italy and Austria put together”.
Tim Martin, chairman of the JD Wetherspoon pub chain, commenting on the duty rise this week, made a sobering observation: “the British people are now paying 40% of all the alcohol duties in Europe.”
Tim Atkin reasonably points out that if the government is using an increase in duty as a way of reducing binge drinking, rather than just raising revenue, then they should take a look at the 9 EU countries with 0% alcohol duty, where there appears to be no correlation between low taxes and alcohol-fuelled misbehaviour.
Duty rises are an appallingly blunt instrument being used to hit wine producers, retailers and consumers, since every increase in tax leaves slightly less of the bottle cost available for the actual juice inside. This comes just at the time when the industry is trying to re-engage meaningfully with the UK consumer and excite them about good wine: not a good combination of circumstances.
Just as we’ve had a day or two to get used to the duty increase, the government is now announcing its intention to introduce minimum unit pricing on alcohol in England and Wales – probably set at 40p. per unit, which would see an average bottle of wine start at £3.60 .
Of course, in Scotland we’ve already gone some way down this road – minimum pricing will come into force later this year, and other supporting measures are already in place (see my article for OLN from October here).
If you’re set on a minimum price strategy, to make it work you also need to stop retailers offering ‘buy one get one free’ deals and heavy multibuy discounts, which has happened in part already in Scotland, and will work more logically once minimum pricing arrives.
The wine and spirits trade has been quick to condemn the notion of minimum pricing, but I see it quite differently from a hike in duty. Duty goes straight to the government, while any extra cash from minimum pricing stays in the supply chain. If minimum pricing is combined with a curb on irresponsible, and unsustainable, deep price discounting on booze, then it might start restoring a public understanding of what a bottle of wine ought to cost, and a recognition of the value of the liquid inside.
(If you have an iPhone, you can check out the amount of tax paid on any bottle by using the UK Wine Tax Calculator – by way of declaring an interest, I should point out that I’m the publisher of that app: http://itunes.apple.com/gb/app/uk-wine-tax-calculator/id406308446?mt=8 )