Wine Duty

Will Quince Excerpts

Tuesday 5th March 2024 Westminster Hall

[Gordon Henderson (in the Chair)]

I shall call Will Quince to move the motion, and I will then call the Minister to respond. There will not be an opportunity for the Member in charge to wind up, as is the convention for 30-minute debates.

[Will Quince (Colchester) (Con)]

I beg to move,

That this House has considered wine duty.

It is a pleasure to serve under your chairmanship, Mr Henderson. I am pleased to have secured this important debate the day before my right hon. Friend the Chancellor of the Exchequer delivers the Budget statement to the House. I am grateful to the Minister for responding. I know he will take very seriously the points I will make further to our correspondence on this issue. I would also like to thank the unusually great number of right hon. and hon. Members present for supporting this 30-minute Westminster Hall debate. I hope the Minister has noticed the strength of feeling on this important subject.

I applied for this debate as a result of meeting the chief executive officer of Majestic Wine, which is the UK’s largest specialist wine retailer, with more than 200 stores across the UK, including a large store in my constituency. They raised a number of concerns relating to wine duty that I felt were important for the House to hear and reflect on. The UK is a major global hub for wine and spirits. It is the world’s second largest importer of wine by volume and value, and the largest exporter of spirits. It supports over 390,000 jobs, £69 billion in economy activity and £8.6 billion in excise duty revenue.

Like all businesses, those across the wine supply chain have had to confront some tough trading conditions over recent years, but a number of the challenges they face are unique to the wine and spirit trade, and these were brought to my attention by Majestic. The challenges faced by Majestic and other similar businesses stem primarily from the new alcohol excise system, which was introduced last year. In particular I am referring to the impact of the historic duty increases and the changes to the way wine duty is calculated. The introduction of the new duty regime last August followed a review of the inherited EU duty rules. When the review was announced, it was welcomed across the drinks industry, which backed wholeheartedly the aims of the review, which were to make the new duty system fairer, simpler, less distortive and easier to administer.

Sadly, particularly for wine and spirit businesses, the new regime is not fairer. In fact, in many ways it has reinforced the existing market distortions. For wine businesses, the new system is anything but simpler to administer—in fact, it is exactly the opposite. The new system that was introduced on 1 August 2023 levies excise duty on all alcoholic products according to strength, but at different rates. This reinforces pre-existing market distortions by continuing to tax wine and spirits more harshly than other categories of alcoholic drink.

When introducing the new system, the Government recognised the impact it would have on wine businesses and rightly put in place a temporary easement mechanism that pegged the amount payable for wines in the range of 11.5% to 14.5% at the amount payable on a wine of 12.5% alcohol by volume. That amount is currently £2.67 per bottle. Wines falling within this easement mechanism account for 85% of the wine sold in the UK market. That is 1.1 million out of 1.3 million bottles sold. This easement is set to end on 1 February 2025.

[Stephen McPartland (Stevenage) (Con)]

I am grateful to my hon. Friend for securing this important debate. I represent the Wine Society, which is headquartered in Stevenage and is a large organisation struggling under this pressure. It will cost it £300,000 to £400,000 to upgrade its systems. It is being asked to price wine before the level of alcohol is known, as wine is an agricultural product, and it is having to re-evaluate the range of wines it is able to output, which is having a knock-on effect on the supply chain. Does my hon. Friend agree that this seems to be a difficult case of unintended consequences, and if the easement he refers to were to be made permanent rather than temporary, it could solve the problem?

[Will Quince]

I thank my right hon. Friend for his intervention. He is right to champion the cause of the Wine Society, which is based in his constituency. There is both a significant cost implication and an administrative burden for such organisations, so the impact of these changes should not be understated.

The easement that is set to end on 1 February 2025 will affect wine businesses ranging from major retailers such as the big supermarkets to specialist retailers such as Majestic. However, as my right hon. Friend has just alluded to, there are also thousands of independent wine merchants who have all said that having to implement fully the strength-based system would impose significant costs, running to many millions of pounds, both in the short term and once the necessary systems are established.

[Priti Patel (Witham) (Con)]

I thank my hon. Friend for giving way and for his great speech. We are constituency neighbours and he knows that it is not just wine merchants that will be affected but thousands of wine businesses across the UK. We have a strong and flourishing wine sector, but this regime has failed to meet one of the original key objectives that the Treasury sought to establish, which was to make the system easier to administer. Instead, unit labelling and ABV is putting a burden on producers and merchants, which means that they face pricing and cost implications. Does my hon. Friend agree that this is increasing red tape at a time when the Government should be doing much more to reduce it and ease the costs and the burdens of regulation for businesses?

[Will Quince]

My right hon. Friend and constituency neighbour is absolutely right to raise that issue, and she has long championed cutting the red tape and bureaucracy that British businesses face. As my right hon. Friend the Member for Stevenage (Stephen McPartland) said, this unintended consequence means that business faces not just extra cost but the significant administrative burden that comes with cost and time. My right hon. Friend the Member for Witham (Priti Patel) is right to point out that the new system is not simpler or fairer and that it has a huge cost implication.

[Jim Shannon (Strangford) (DUP)]

First, I commend the hon. Gentleman for securing this debate. James Nicholson Wine in Crossgar, which is in my constituency, is one of those excellent wine businesses that draws lots of people, not just because of the quality and wide variety of its wines but because it has also become a bit of a tourist attraction. It does lots of things. When it comes to the retention of jobs, does the hon. Gentleman share my concern that the Government’s proposed changes will undoubtedly—though I hope not—have an impact on job creation and job retention?

[Will Quince]

The hon. Gentleman is right to intervene on that point, because job creation and retention, including in his constituency, is important, as is our flourishing tourism sector. The growth in wine production across our country is something that we should celebrate; we should be proud of that and support it.

This debate is timely because we have some time on our hands. Obviously, the sooner we give notice to industry that the easement can continue, the lower the cost and administrative burden borne by industry. We have until 1 February 2025 to address this issue. I will have an ask for the Minister in a few moments, which I hope the hon. Gentleman will agree with.

I will just touch on one other element first, which is why wine is different. The easement recognises that wine is different from other categories of alcoholic drink. Wine cannot be made to a predetermined strength; the alcoholic strength of wine is determined by climate. I know that I do not need to teach anyone in this Chamber to suck eggs, but wine from warmer climates tends to be higher in alcohol than wine from cooler climates. Wine is not like beer or cider. And wine is subject to strict production rules, so in that respect it is also unlike beer and cider. As a consequence, there is very little that wine makers can do to lower the alcohol content.

It is estimated that there are over 100,000 different wines on the UK market. By comparison, there are less than 1,000 different ciders. Different vintages of wine can vary in strength, as is the case with some wines from the same year. Of course, that is one of the great pleasures of wine; wines from around the world are unique, while different vintages from the same vineyard can differ in strength and taste.

Taxing alcohol by strength, with lower rates for lower-strength products, might seem simpler on paper, but it takes absolutely no account of how different alcoholic products are consumed, including in what quantities and whether the product is diluted. This new system is much more complicated to administer for wine businesses and it penalises wine from warmer climates.

The differences between wine, spirits, beer and cider will remain if the easement ends. In practice, if the easement is abolished as planned, there will be 30 different payable amounts for wine in the 11.5% to 14.5% ABV range.

[Julian Sturdy (York Outer) (Con)]

My hon. Friend is making an important argument. I met with Liquid Indulgence, a small wine supplier in my constituency that supplies commercial businesses around York, as well as selling direct to customers. The point my hon. Friend is making is exactly what that small business said to me about the impact this change would have on that business and whether it could continue. It will surely have a massive impact on small wine suppliers across the country, and will potentially have a negative impact on what those businesses can bring in in tax, compared with what the Government are trying to achieve.

[Will Quince]

My hon. Friend is right to raise that point on behalf of the small wine supplier he represents in York. Of course, this change will have a massive impact. When Majestic originally brought this matter to my attention, it did so not just on its own behalf, but on behalf of the thousands of wine organisations and companies across the country, ranging from one-person bands through to small and medium-sized enterprises, all of which will bear the administrative burden of this cost.

I want to reiterate one point. If this easement ends—I hope it is “if”, as I very much hope the Minister listens and it will not end—there will be 30 different payable amounts for wine across the 11.5% to 14.5% ABV range. Prices will range from £2.45 to £3.10 per bottle. The practical arrangements that would need to be made as a result of this change are countless, including the reality that two wines from the same independent vineyard in France, say, would have to be labelled differently.

[Mrs Flick Drummond (Meon Valley) (Con)]

Other right hon. and hon. Members have mentioned wine merchants, but what we have so far not discussed are the wine growers in the UK. I had better declare an interest, being the chair of all-party parliamentary group for wine of Great Britain. Wine production is one of the fastest growing agriculture sectors, employing about 2,300 people, with a predicted 50% growth in jobs by 2025. Last year, 2023, was an absolutely vintage year, with an estimated 25 million bottles. This easement affects not just wine merchants, but a very important and fast-growing agriculture sector.

[Will Quince]

My hon. Friend is absolutely right. It is not just about wine merchants, of course; it is also about the growers. It is a boom industry in this country, and not just for tourism, as the hon. Member for Strangford (Jim Shannon) said, but because English wine, and wine from across our four nations, is being consumed far more frequently than ever before. It is something that we should encourage as a country. I know the Chancellor is keen, in particular, to encourage sparkling wine.

I want to reiterate a point made by my hon. Friend the Member for York Outer (Julian Sturdy) and my right hon. Friend the Member for Witham (Priti Patel). I am sorry to labour this point, but it is important. The abolition of the easement would introduce massive ongoing red tape costs that concern supermarkets and large retailers, which, of course, we are concerned about. However, what I am more concerned about, as my right hon. and hon. Friends have eloquently pointed out, is the disproportionate costs for smaller wine businesses in constituencies across this country.

As I have said, wine has far more stock keeping units, or SKUs, than other alcohol categories. It is estimated that there are in excess of 100,000 wine SKUs on the UK market. A specialist SME wine retailer, for example, will carry more than 2,000 SKUs at any one time, while larger wine retailers may carry up to 10,000 SKUs. If the easement ends, the duty will have to be calculated individually for each SKU; this will have to be done on an annual basis, as alcoholic strength can vary between vintages.

[Mr Laurence Robertson (Tewkesbury) (Con)]

My hon. Friend is making a very good case. I speak on behalf of Direct Wines, which is based in my constituency. It has pointed out that now is not the time to remove the easement because the hospitality industry is still struggling to recover from the pandemic. Just over the weekend, we read that a number of pubs are closing regularly. Now is surely not the time to bring about more cost pressures to the industry.

[Will Quince]

My hon. Friend makes a valid point about time. Arguably—I agree with my right hon. Friend the Member for Witham on this—there is no time to impose additional red tape and bureaucracy on SMEs across this country. My hon. Friend the Member for Tewkesbury (Mr Robertson) is right, however, and as I said at the outset, businesses are coming out of what has been a difficult economic situation. We need to support them as much as we can. As a constituency MP, it sets off alarm bells when I hear that a large organisation such as Majestic—in fact, the largest in the UK—informs me that it will struggle with the additional bureaucracy and cost. We can therefore only imagine how difficult it will be for the tens of thousands of smaller UK wine businesses in constituencies across our country.

As I said at the outset, the UK is the world’s second largest importer of wine by volume and by value. In 2022, we imported the equivalent of more than 1.7 billion bottles of still and sparkling wine. I know that the Minister—a good man and a great Minister, whom I respect hugely—recognises the economically significant contribution that the wine industry makes to the United Kingdom. I invite him to commit today to visiting the Majestic Wine headquarters in Watford before the Easter recess, because I think that will allow him to understand—as I have by meeting people from Majestic—the full implications for wine businesses of ending the easement.

For all the reasons that I, and right hon. and hon. Members have set out, I genuinely believe that there is still time to do the right thing. The more notice that we give business, the better. I hope that the easement will continue—but I hope that that decision can be made soon—that we will do the right thing and that we will make the easement permanent. It is a simple fix, which would benefit business and consumers, and make very little difference, if any, to Treasury receipts.