Wine Duty

Gareth Davies Excerpts

Tuesday 5th March 2024 Westminster Hall

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure to see you in the Chair, as always, Mr Henderson.

I congratulate my good friend, my hon. Friend the Member for Colchester (Will Quince), on securing the debate and on the attendance that he has achieved. I recognise the strength of feeling on this across the House and in particular in this Chamber today. I completely share his support for our broader alcohol sector. Not only is it a significant contributor to our gross national product, but I would suggest that it pays a little towards our gross national happiness. It is part of our heritage. From Shakespeare’s plays to our modern British sparkling wines, we have long recognised how life’s triumphs and trials—weddings, wet weather and the working day—can be soothed or celebrated with a glass of our favourite tipple. I recognise that.

In the past few weeks alone, therefore, I have for example met the head of the all-party parliamentary group on wine and spirits, my right hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady), and the highly active Wine and Spirit Trade Association to discuss how this remarkable industry’s potential can be truly uncorked. My officials have engaged with businesses and representatives of the UK industry up and down this country as part of budgetary processes that one might expect, from the more well-aged players such as Majestic Wine to the younger vintages such as Ambriel Sparkling.

On behalf of the Government, I am proud to represent our alcohol duty reform package and to present it to the House. We have introduced the biggest reform of alcohol duties for more than 140 years. We introduced a new, simplified alcohol duty system based on the common-sense principle of taxing alcohol by strength to modernise the existing duties, to support businesses and to meet our public health objectives. This is the first time that public health objectives have been inserted into the alcohol duty system.

That reflects four key principles, which it might be helpful for me to set out: the duty system should be fair to the producers that make and grow the drinks we enjoy; it should recognise the importance of jobs, and of pubs and their role in our national life; it should tackle the problem of harmful high-strength products being sold too cheaply; and it should support innovation and modern drinking trends, in particular today’s trend of moving towards lower-alcohol products. Our reforms do just that.

As part of the changes, which came into effect in August last year, we have supported our wine sector. Let me set out how we have done so. First, we removed the sparkling wine premium. My hon. Friend the Member for Meon Valley (Mrs Drummond) rightly spoke about our domestic growers, a really important part of our wine industry. I recently met the chief executive officer of WineGB. I can tell her that we have removed the English sparkling wine premium. Since 1 August 2023, sparkling wines attract less duty than they did under the previous duty system. That is one of the points that I want to make today.

In such a reform some duty has gone up for some sectors in the alcohol industry and some has gone down. For our domestic growers of English sparkling wine it has gone down significantly, even with the retail price index increase that we saw last year. That is the right thing to do for our domestic growers. It will ensure consistency in our system and build success for British wines, which my hon. Friend and I want to see.

Secondly, as has been extensively discussed today—I will come on to this in more detail and address some of the points that have been made—we introduced a wine easement for 18 months until February 2025. As a result, all wine between 11.5% and 14.5% alcohol by volume will be subject to duty as if it were 12.5% ABV. That means we have effectively given the wine industry time to adapt to the new system and allow wine producers to adapt their systems. I recognise completely that a shake-up of a system that has existed for more than 140 years will raise some eyebrows and cause change for a number of businesses, but we should be confident that the bureaucratic burden under the new system is manageable.

Every other product is already subject to duty based on our strength-based system. We have included, as my hon. Friend the Member for Colchester rightly pointed out, the weather impact of wine, and included cider, which is also subject to seasonal variability challenges. We are mindful of unintended consequences, as several right hon. and hon. Members have outlined, but to make the wine easement permanent, as my right hon. Friend the Member for Stevenage (Stephen McPartland) has called for, would go against the principle of the alcohol reform to move to a strength-based system that brings in the public health element. As I have already said, although the impact on wine is clearly being felt, we have provided an easement over a period of time that was decided in consultation with the wine industry in four rounds of consultation before the reform comes into being.

I can commit to my hon. Friend the Member for Colchester that we will monitor the reforms and their impact. We have outlined that three years after they come into effect, which is enough time for us to be able to assess them, we will conduct an impact assessment, which will allow His Majesty’s Revenue and Customs to gather the relevant information to understand any long-term impacts in the alcohol market. That commitment complements the broader fiscal approach, because at the last autumn statement we announced tax cuts that supported the alcohol and hospitality industry.

We froze alcohol duty for six months until 1 August 2024. We also announced a package of business rate changes and tax cuts worth £4.3 billion over the next five years. My hon. Friend the Member for Tewkesbury (Mr Robertson) was right to highlight the difficult time that our hospitality industry has gone through in recent times. That is why we extended the retail, hospitality and leisure relief scheme—a 75% relief—up to a cash amount of £110,000 per business between 2024 and 2025. In addition to the work being led by my colleagues at the Department for Environment, Food and Rural Affairs on their package of wine reforms, which will increase flexibility and innovation, the Government have announced a freeze to the small business multiplier for the fourth consecutive year, for 2024-25, protecting over 1 million ratepayers from a multiplier increase. That builds on the unprecedented support that we should never forget we offered the industry during the pandemic—some £16 billion of business rate support. We have also held the tax rate steady over the last three years, which has protected businesses from inflationary pressures at a cost of £14.5 billion to the Exchequer.

This Government have never given the sector reason to doubt our commitment to it, because it has received many cuts or freezes to duty over the last decade. I can tell my hon. Friend the Member for Colchester that the wine industry has benefited from cuts or freezes to wine duty at five of the last 11 fiscal events. Compared with 2015, wine duty is some 12% lower in real terms. That is something we can all raise a glass to.

Finally, I will address the comments by my right hon. Friend the Member for Witham (Priti Patel), who, rightly, has consistently raised the issue of red tape for businesses in the House. She specifically mentioned labelling. Overall, these reforms to our alcohol system simplify our tax duty. That is a Brexit freedom. Under the last slight change to our alcohol duty system in 1996, we had to take duty from the European Union, which was incredibly complicated, completely inconsistent, and did not include any provision for public health. Our easement gives businesses time to adapt to the new system and put in place measures to be able to administer it. Wine can still be labelled to 0.5% ABV. DEFRA has introduced guidance and an option to label to 0.1%, but I want to be really clear that that is optional.

I thank my hon. Friend the Member for Colchester for raising this important sector and this important issue. It is right that the Government’s fiscal approach continues to be scrutinised in this way. I am confident that this policy is the right one, not just for the wine industry, but for the whole of the United Kingdom.

Question put and agreed to.