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  • Jancis Robinson
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  • Jancis Robinson
19 Mar 2007

Rob Malcolm, a relatively recent recruit to the wine trade (he runs the Summertown Wine Cafe, Oxford) sends the following:

 

As we [in the UK] approach another Chancellor's budget it got me thinking (again) about the whole iniquity of Excise in the UK.  The post you ran on the British being cheapskates also fed into this same area.  The more I thought about it, the more outrageous and wrong it all seems.   I wrote a 500 word rant for a local paper (see * below), but it is hardly going to raise awareness and change anything.  I really feel the wine industry needs to get serious in its political lobbying, otherwise the result will be catastrophic (forgive the hyperbole).  I am relatively new to the UK wine scene so perhaps there already are some good people doing good work behind the scenes? [the Wine & Spirit Association is the official lobbying organisation and is certainly doing its best.]  The following is a thought-starter, with some ideas being more radical than others, but all aimed at one thing: the reduction of Excise to a fair and just tax.
 
Excise - some facts

  • It is currently £1.30 per 750ml bottle of wine.
  • We drink something like 1.6 billion bottles of wine, so Excise on wine takes over £2 billion from our industry (on top of VAT which I have no moral objection to; we have to pay tax and that is a fair enough way of imposing one).
  • It seems to have risen pretty inexorably from 68p per 750ml in 1984 at an average of about 3p per year.
  • Not sure what the rise will be this year?
  • The following civilized European countries have an equivalent tax to Excise of zero or virtually zero: France, Italy, Spain, Portugal, Germany, Austria and Greece. 
  • Sweden, Ireland, Finland, Iceland and Norway have similarly barbaric Excise rates to the UK [these last two lists make pretty clear all you need to escape punitive excise duties: a massive wine industry].

 
Some ideas

(None particularly original, but worth restating)

  • The whole alcoholic beverages industry needs to work together on this.  Whilst we believe wine is the nectar of the Gods etc we will be picked off as elitist and foreign if we act alone.  Furthermore the beer and spirits industries have big budgets and as much political clout as we do.
  • Within the Alcohol Alliance (AA, clearly not the right name!  Some marketing genius can come up with something more appropriate) we need to put our house in order.  The Chancellor won't want to give up the majority of the £5b (inc Beer and Spirits) and his justification for the tax will centre on "Evil Alcohol". 
  • The AA should commission an economic/medical report on the true cost and benefits of alcohol.  The true economic costs of binge drinking, alcoholism and drink-driving must be balanced by the health benefits of moderate drinking.  Currently the downsides get massive publicity and the upsides get virtually none.  A properly commissioned work that provides facts is a vital part of the solution. 
  • We need to address the big issues in a responsible way within the AA.  The solutions to binge-drinking, alcoholism and drink-driving are not a high tax.  There is no correlation to those issues and the level of tax on alcohol.  Indeed there is probably a negative correlation because all the Scandinavians and Irish I know are massive drinkers!  Yet we risk being dealt with like the smoking industry i e taxed and harassed to oblivion by the Wowsers, Bureaucrats and Taxmen.

A better basis for Excise

(I’m not sure if this is an original thought or not?)

  • The challenge is to come up with a comprehensive package of actions to address the big issues and then to trade the cost of dealing with them for a reduction in Excise to a fair and reasonable rate that reflects the true cost of alcohol.  The industry is going to be lumped with dealing with these problems anyway, we should ensure that we get something back.  
  • As a first step Excise should be set as a reflection of the true net cost of alcohol to the public purse currently.  The alcoholic percentage of the beverage should drive the amount of the tax.  That makes it a "fair" tax [stiffer for Barossa Shiraz than Mosel Riesling?].  This should also mean that the tax is reduced massively from its current level.
  • Changes to Excise should be linked to changes in measurable standards.   For example, if accidents/damage/cost linked with drink-driving, alcoholism and binge-drinking are rising then Excise should rise proportionally, if they are falling then Excise should fall.  That means the AA has an economic incentive to come up with an effective set of measures. 

Political lobbying and PR

  • No one likes it, but it is unavoidable if we want to change the status quo.  As long as we are addressing something that is iniquitous (which Excise clearly is) and we are aiming for something that is "fair" then we shouldn't be lazy or timid about it. 
  • Important not to be too serious about it; utilise humour and appeal to the nation.  We could have some fun with this...
  • Make it uncool to be a Wowser... get Fleet St to have some fun with this attack on our booze...
  • Play politics.  Offer support to David Cameron in every marginal seat if he signs on to the fair solutions we design... Offer Gordon the chance to avoid this if he signs on first...
  • Imagine if every Licensee was asked not to serve a particular politician a drink until the measures were passed...[though alas they probably do most of their drinking in the House of Commons’ many bars]
  • I'm sure there are hundreds of other cunning ways to achieve to goal, get a few clever souls together over a few bottles of wine...

Having written all this I'm not sure why you should be lumped with it!  My apologies if it all sounds too much.   

*Wine riots and the tax on happiness

 

By the time you’re reading this Gordon Brown will have increased the Excise on wine by a few pence. So what? No big deal; hardly cause for a riot. Now take a look at the simplified economics of two bottles of wine – one selling for a tenner, the other for a fiver:

 

Retail price

£4.99

£9.99

 

minus VAT

£0.74

£ 1.49

Tax #1: 17.5% of the selling price

minus Excise

£1.33

£ 1.33

Tax #2: a flat £1.33 irrespective of the price 

minus Importer & Retailer margins

£2.00

£ 4.00

Simplified, but about 40% of the price

minus Transport & Packaging

£0.70

£ 0.70

Flat cost of bottle, cork, label, box and transport

Equals value of wine in the bottle

£0.22

£ 2.47

This is what is left to pay for the quality of the wine

 

Does it come as a bit of a surprise to realise £2.07 of your £4.99 bottle of wine (or 41%) goes to our dear Gordon in tax?

 

Does it come as a bit of a surprise to realise that a £4.99 bottle really contains just 22p of wine?

 

If every year Gordon adds another few pence to Excise here’s what really happens:

1.      The retail price remains the same – we consumers don’t like paying more and market research indicates that if a price moved from £4.99 to £5.02 we would buy a lot less.

2.      The importer and retailer do not reduce their margin (their costs have risen); the 3p must be absorbed by the last in the chain – the grape farmer.

3.      The grape farmer has a family to feed. He can reduce the quality by increasing his volume (by encouraging his vines to produce more grapes with fertilizers and not thinning out the poor quality ones). Note: if previously he was receiving 25p for his grapes and now he is receiving 22p he actually needs to produce 14% more grapes to make as much to feed his family. 

4.      Or, if he is a French grape farmer, he can riot. The French government placates the rioting grape farmer with an EU subsidy. And no prizes for guessing who ends up paying for that subsidy.

 

How does Gordon justify this? Ah well wine contains evil alcohol you see, so this tax is used to pay for helping alcoholics and for drink-driving campaigns. Oh really? So Gordon spends the billions of pounds every year raised by Excise on these wine-driven evils? No. And if the good versus evil health argument were being applied, what about all the evidence that wine in moderation is actually good for us? Gordon should probably be subsidising wine not taxing it.

 

No, Gordon increases the Excise every year by a few pennies because he knows we won’t riot. He can tax us more; the consumer price stays the same; and the French riot. Voila!