Cider Industry: Duty Changes

Ian Liddell-Grainger Excerpts

Wednesday 1st December 2021 Westminster Hall

[Bill Wiggin (North Herefordshire) (Con)]

I beg to move,

That this House has considered the cider industry and duty changes.

I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

I welcome the progress the Treasury is making on cider and alcohol duty. It will be helpful to hear what the Minister thinks the direction of travel is for the industry, and how the Treasury is helping. The announcements by the Chancellor in his autumn Budget on alcohol duty were largely welcome. His five-point plan will simplify the tax brackets. It is supposed to come at an overall cost to the Treasury of £555 million by 2027. The number of bands at which different duties are levied will be cut from 15 to six. That ambition is tremendous. However, I hope the debate will be helpful in ironing out some of the issues with the proposed changes.

I want to draw attention to the traditional small-scale cider makers, who make up roughly 80% of the country’s cider makers. I also wish to draw the House’s attention to the announcements on flavoured cider. My constituency of North Herefordshire is home to many small-scale and large-scale cider makers. The cider orchards of Herefordshire are said to produce more than half the cider consumed in the UK.

The call for evidence document in the Government’s alcohol duty review consultation sets out three objectives:

“a) Simplifying the current complicated system;

b) Making the basis of alcohol taxation more economically rational, with fewer distortions and arbitrary distinctions; and,

c) Reducing the administrative burden on producers when paying duty and complying with excise requirements.”

Alcohol duty was harmonised under EU law, but now we have left the EU and its onerous legislature, it is right that we consider how the duty system works. The stated aims from the Treasury are welcome, but why are the Budget announcements made only to have a consultation occur afterwards? Should it not be the other way around? On a positive note, I can report that the consultation has been managed in a way that cider manufacturers found very helpful. However, one cannot help but feel that all this could have been ironed out before the Chancellor rose to his feet.

UK cider producers sell to more than 50 countries over five continents, and that trade is worth more than £100 million a year to the economy. I hope that the duty reforms will encourage cider producers to go beyond the hobby level to become sustainable businesses and increase those figures.

What the Chancellor announced in relation to alcohol duty is welcome. However, looking a little further, there are some discrepancies, and I hope the Department will not mind me bringing them to its attention. In his Budget statement, the Chancellor proclaimed that this would be the

“biggest cut to fruit ciders in a generation.”

Fruit cider is currently treated as made-wine for excise duty purposes, and it is taxed at two and a quarter times the rate of apple cider. The proposed tweaks in the duty rate leave made-wine with a proposed excise duty two and a half times the duty rate for packaged ciders, and more than twice that of keg ciders. That is probably because flavoured ciders have a 22.8% market share of the UK’s £2.1 billion cider industry. Helpfully, the flavoured cider market is established at 4% ABV, or alcohol by volume. They are some of the lowest-alcohol ciders on the market—obviously, excluding the no and low-alcohol ciders—but they are charged a premium in excise duty.

Under current proposals, the duty on 4% packaged fruit cider bought from a shop will change from £91.68 per hectolitre to £90 per hectolitre. To put that in context, the duty on a hectolitre of apple-flavoured cider will move to just over £35. That is a difference of £55 per hectolitre. The higher rate of duty for fruit cider was introduced to protect apple cider made using British apples. However, many fruit ciders now simply have an apple cider base, made with British apples, with flavourings or colour added. The excise duty rates seem to be hampering innovation and growth in this sector—a sector that can offer much safer, lower-ABV ciders. Producers such as the ones in North Herefordshire want to increase innovation and diversity across the cider category.

At present, flavoured cider has not been included in the Government’s consultation. I hope that the Minister will agree that it can be added, as I am sure many producers would like to have their say. Helpfully, the anomaly was recognised in the Chancellor’s statement. Paragraph 2.11 of the consultation, under the heading “Anomalous and arbitrary”, notes:

“Larger cider makers felt that the duty differential between flavoured and non-flavoured cider impeded innovation in the market.”

However, paragraph 2.12 suggests that craft and small cider makers are supportive of a higher rate of duty for flavoured ciders. That is not right; in my frequent discussions with producers, I get a very different picture.

Fruit ciders, rosé ciders, mulled ciders, cider with honey, cider and elderflower and spiced cider are all treated as made-wine. Such ciders have been made for centuries, and there are records of them going back more than 400 hundred years. They are firmly part of the traditions of cider making. Many small and craft cider producers make such variants using traditional methods, and the market for them is increasing. Each household is reported to buy fruit cider an average of six and a half times a year.

The demand is also there to support local, small-scale producers, many of whom would like to tap into the fruit cider sector. Those small and craft cider producers still use traditional fermentation processes to create fruit cider, and then work with other local fruits to produce their local version of fruit cider. What does stifle innovation is the fact that when making cider through the natural process, rarely does a product come in at under 6.5% ABV. Fair enough—that changes slightly each year, depending on how much sugar is in the apple crop. Because of the way the fermentation process works, unless the cider is diluted, it will probably come out at above 6.5% ABV. My own cider, when I made it myself, was above 7%. The benchmark ABV is 4.6%, so someone wishing to make a fruit cider using traditional methods, without dilution, is likely to be hit with an excise rate too high to justify that diversification. Traditional cider makers using natural fermentation from apple juice could see upwards of a 40% increase in duty, and it could be even higher if they venture into fruit versions.

The proposed changes to flavoured ciders will only truly benefit the makers of large, mass-produced flavoured cider in the established 4% ABV market, selling in 50-litre kegs. That is Kopparberg, which is Swedish; Heineken, which is Dutch; and Aston Manor, which is French. Those manufacturers, with their foreign-owned parent companies, are destined to benefit the most from the excise duties at their current levels—the same duties that are meant to be championing the local little guy.

Would the Treasury not see benefits in bringing fruit cider in line with the apple cider rate, which is better known as notice 162? If the fruit cider market is opened up and brought into line with its apple-only equivalent, growth will occur. Flavoured ciders lead many global cider markets, so encouraging the growth of lower-ABV flavoured ciders can help the rejuvenate the industry and expand our global reach in the sector.

The changes to alcohol duty rightly address concerns about problem drinking. A recent survey asked 20,000 people about alcohol consumption in 2019 and 2020, and it found a spike in high-risk drinking following lockdown, from around 25% to 38%. According to the World Health Organisation, alcohol consumption contributes to 3 million deaths each year globally.

It is no secret that white ciders—the type sold in 2.5 litre bottles at a cheap price—have exploited the current duty system. A report by the charity Thames Reach found that of the 8,096 people found sleeping rough by outreach teams in the capital, 43% had an alcohol problem. Of those, an astounding 98% are primarily drinking high-strength cider and super-strength beers. Popular brands include the 7.5% Ace cider, which comes in a three-litre bottle and contains 24 units of alcohol, but retails at only £3.99. This is clearly wrong and dangerous, so I understand the Government's commitment to increasing the duty on this type of cider.

However, there are concerns that such products are conflated with those made by the producers I am championing today. I will quote a company in my constituency called Little Pomona, which has visits to its cidery during the tourist season:

“With over 1,000 visitors over the last year, we have never had any instances of over-drinking. We don't serve our cider in pints. Purely as thirds, halves of pints, and wine glass measures. Our ciders are served in restaurants, from modest bistros to Michelin starred establishments”.

The point is that the consumer who indulges in a craft, artisanal, small-batch cider is different from the consumer who buys a £4 bottle of white cider. I hope that my hon. Friend the Minister can point the industry to how it can best maximise its potential safely, and tell us how the Government see the industry progressing.

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

I declare my interest as the chairman of the all-party parliamentary cider group, and I support my hon. Friend in his argument. I know that the Minister takes a keen interest in this issue, and my hon. Friend is absolutely right that cider is an incredible, world-beating British product. He has laid the case out beautifully. Does the Minister agree that we, as a Parliament and as a Government, need to do much more to highlight the benefits of responsible cider drinking? We have Glastonbury in Somerset, and we do not get drunks on Glastonbury. It is not cider that causes the problem; it may be other things, but it is not cider.

[Bill Wiggin]

I will have to take my hon. Friend’s expertise on that matter at face value, but I agree with all the good things he said and I thank him for his work as the chairman of the all-party group.

The cider industry in this country is unique. Family-owned companies such as Westons in Much Marcle, which has 240 employees, contribute so much more than just delicious cider from local apples. People such as Helen Thomas, to name just one of many, ensure that my constituency leads the way. That spirit of innovation and history needs to expand as we forge new relationships with nations around the world. Fruit ciders produced by a craft cider maker in North Herefordshire should be in stock behind bars from Armenia to Zimbabwe, in a truly global British fashion.

From my discussions with relevant local stakeholders in the cider industry, I know that most of their concerns could be addressed via the consultation. I hope that any additional points are taken as constructive and that the Minister will be able to provide reassurance to cider makers in Herefordshire, and indeed nationwide, that their historic and significant craft will be nurtured and given the boost that the recent announcements have set out to achieve.