Chancellor's Budget speech met with joy and fury

20 March, 2013

While the beer industry raises a glass to its new best friend George Osborne, who today scrapped the duty escalator on beer, wine and spirits trade groups are enraged.

The Chancellor cut 1p from the price of a pint in a bid to help hard-up beer drinkers and boost pubs.

But all other BWS categories will continue to be hampered by further increases from the escalator – which keeps duty increasing at a rate of 2% above inflation – after Osborne singled out beer alone to receive the tax break.

WSTA chief executive Miles Beale said: “This is bad news for the UK wine and spirits sector, with year on year duty increases hitting consumers and businesses hard.

“It makes little sense to single out beer, particularly as there is a legal precedent to suggest Government is unable to do so. If this was designed as a measure to support pubs it seems misplaced: over 41% of drinks sold in pubs are wine and spirits, contributing £9.4 billion per year. 

“The Chancellor’s decision ignores the growing value of the English wine industry and the UK spirits industry, which accounts for 18% of all jobs in the EU spirits industry.”

Gavin Hewitt, chief executive of the Scotch Whisky Association, added: “This is an unfair and incomprehensible attack on the Scotch Whisky industry in its domestic market, where it is a vital part of the Scottish and UK economy and where it supports many other businesses.

“It penalises responsible drinkers who like a dram rather than a pint. There is no justification for spirits being taxed more heavily than beer. It also damages all the good work done to create fairer tax regimes overseas to provide a fairer playing field for Scotch Whisky. It hinders the government’s ambitions for an export-led recovery.”

But the beer industry, which has arguably lobbied harder than anybody to have the duty escalator dropped, called it “a momentous day for Britain’s beer drinkers”.

Mike Benner, chief executive of CAMRA said: “[We] will tonight be raising a glass to the Chancellor for axing this damaging tax escalator and helping keep pub-going affordable for hard-pressed consumers.”

Brewers naturally reacted with delight to the news.

Tony Jennings, chief executive at Budvar, said: “It is the first tentative step to repairing the horrendous economic damage  that successive governments have done to the pub trade and the brewing industry. I think the Chancellor finally realised that he was in real danger of killing the goose laying the golden eggs.”

Fuller’s chairman Michael Turner added: “I would like to congratulate the Chancellor on this initiative. It will be excellent news for British manufacturing, British farming, British pubs and British jobs.”

Stefan Orlowski, managing director of Heineken, said: “The end of the beer duty escalator and a cut of 1p a pint will go a long way to helping secure jobs in our industry and preserving the pleasure of a hard earned pint at the end of the day. We will pass this duty saving on to all our customers as soon as it becomes effective."

Gerald Michaluk, managing director at Arran, said: “This is good news for the industry and great news for the responsible beer drinker, and it is above all equalling out the playing field which has for far to long been loaded against beer relative to other beverages.  Beer is a relatively lower alcohol product, with health benefits when consumed in moderation, and contains no fat. It supports around 350,000 jobs in the UK and generates £8bn in tax revenue with a total contribution to the UK economy as a whole of some £21 billion.” 

The Federation of Wholesale Distributors welcomed the announcement on the abolition of the beer duty escalator but added that the Government missed “a real opportunity” to tackle the growing problem of beer fraud which is costing the taxpayer £550m a year.

Chief executive James Bielby said: “While we welcome the duty cut, the duty differential between the UK and other EU States means today’s announcement won’t change the current level of fraud. The cut in duty created the perfect moment to introduce preventative measures to stamp out fraud. The Chancellor has missed a golden opportunity to reduce the revenue deficit and promote growth by cracking down on the fraudsters.”

Elsewhere the Chancellor increased the price of a packet of cigarettes by 26p as part of a 5% increase in duty. Five smalls cigars are up 9p, 35g of rolling tobacco is up 26p and pipe tobacco up 14p.

Amal Pramanik, Imperial Tobacco’s UK General Manager, said: “This excessive increase doesn’t make sense. Nearly a quarter of the cigarettes consumed in this country evade the already high level of UK duty and this will only make the illicit trade problem worse.

“The Chancellor could have made a stand against the criminals by implementing a duty freeze or, at worst, an increase in line with inflation. Instead, he has given them a helping hand.

“As a result, the Treasury will continue to lose billions of pounds each year to the counterfeiters and smugglers. This cannot be acceptable, particularly in the current economic climate.”




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