Coalition reviews pricing

25 June, 2010

Alcohol pricing faces an uncertain future – despite an immediate freeze on duty in this week’s Budget.

The government has said it will undertake a comprehensive review of tax and pricing in the autumn, which will almost certainly see it fulfil its commitment to hit superstrength beer and cider hard, and take steps to ban below-cost selling in some form.

Retailers then face a busy post-Christmas period of repricing to accommodate the Budget increase in VAT to 20%, which will come into force on January 4.

Chancellor George Osborne said the government remained committed to the 2%-above-inflation per-year increase it inherited from Labour, until 2014/15, which will mean more duty rises in 2011.

In the Budget, the across-the-board increase in cider duty rates of 10% above inflation announced – and then postponed – by Alistair Darling, will be permanently reversed.

Many independent retailers will benefit from a reduction in small profits corporation tax from 21% to 20% – instead of the planned increase to 22% – from next April. The main rate of corporation tax will drop from 28% to 24% over four years.

The Wine & Spirit Trade Association welcomed the short-term duty freeze – the first since 2001. Chief executive Jeremy Beadles said: “The announcement provides some relief for a sector that has faced substantial tax increases in recent years.

“Repeated tax hikes have produced less revenue for the Treasury and punished responsible drinkers, while failing to tackle the problem of binge-drinking.”?The National Association of Cider Makers said the Budget introduced “stability and sanity” to the category.

Chairman Henry Chevallier said: “We have recent history to show that stability on duty and policy creates a virtuous circle that means everyone wins.

“In 2002 there was a very modest reduction in cider duty – in recognition of our value to the rural economy – followed by duty being frozen for four years. This supported the innovation and investment already under way in the industry.”?Chevallier said it would be a mistake for certain ciders to be singled out for future tax rises. “There are no problem drinks, rather problem drinkers,” he said. “It is essential we do not simply displace the problem from one form of alcohol or substance to another.” British Retail Consortium director general Stephen Robertson said the VAT increase would hit “jobs, consumer spending, the pace of recovery and inflation”.

He added: “The start date, in the middle of the crucial post-Christmas sales period, will be difficult, but retailers would rather have more notice than less.”?James Lowman, chief executive of the Association of Convenience Stores, said the review on alcohol prices needed to look at duty fraud too.




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