The self-defeating folly of the alcohol duty escalator

February 27, 2013 • Nik Darlington

The self-defeating folly of the alcohol duty escalator

Politicians have always liked to tinker with taxes on alcohol. In 1895, the Liberal Chancellor of the Exchequer, Sir William Vernon Harcourt, even tried to balance the entire budget on the back of an increase in beer duty. Thank heavens Mr Osborne doesn't appear to have that up his sleeve.

We Britons have thirsty tendencies, and these, according to the powers that be, must be managed. Sometimes, as in 1895, it hurts the drinks industry. Sometimes it doesn't - or at least not all of it. In 1860, for instance, another Liberal Chancellor, William Gladstone, lessened the duty on foreign wine in order to bring wine to the masses. Punitively high duties on wine, said Mr Gladstone, "stood like a wall of brass between the poor man and a glass of wine."

If only today's politicians shared the sanguineness of Mr Gladstone. The Alcohol Duty Escalator is set to cause yet more drink price inflation, with another increase expected in next month's Budget. The escalator mechanism has increased duty by 2 per cent above RPI every year since 2008. Taxes on wine have mushroomed by 42 per cent over that period and on those trends by 50 per cent after the Budget, according to the WSTA.

British wine drinkers and merchants are operating on an uneven European playing field, with the highest wine taxes in the EU. More than half of the cost of your average bottle of wine is taken by the taxman, compared to 17 per cent in France and merely 15 per cent in Spain.

If there is a moralistic and abstemious streak in politics then further hammering the on-trade (bars, pubs and restaurants to the layman) is catastrophically self-defeating. More than 26 million people drink wine regularly in wine bars and pubs; many million more drink beer too. Over £4 billion is spent every year on wine in these premises. Yet ever-higher alcohol duty, accompanied or not by a new MUP, will continue to drive drinkers into their homes with (relatively) bargain booze from supermarkets.

How sensible is that as a public health policy? There are no interested publicans - strictly regulated by licensing laws - standing over you as you guzzle a cheap bottle of Buck Fast on your sofa at ten o' clock in the morning.

Campaigners are already lobbying the Chancellor to act on 'beer duty' (a misnomer of sorts because there is no such singular thing), the WSTA is doing its bit to speak up for wines and spirits. Let's get behind them.

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