Pulling the cork on the Single Market

Listening to David Cameron’s important speech on Europe last week, anyone at the sharp end of the UK wine business must have raised a quizzical eyebrow at his unqualified support for the Single Market. In contrast to his laudable vision, tax on wine in the UK is completely out of line with other countries in the EU, and the gap is widening.

So let me set out my vision for a new European Union, fit for the 21st Century,’ the Prime Minister said on 22 January.

’It is built on five principles.  The first: competitiveness. At the core of the European Union must be, as it is now, the single market. Britain is at the heart of that Single Market, and must remain so…

’It is nonsense that people shopping online in some parts of Europe are unable to access the best deals because of where they live. I want completing the single market to be our driving mission.

So why, then, is wine taxed so heavily in Britain compared to the continent?

 Duty on wine in the EU

As things stand, and it will be interesting to see what transpires when the Government’s consultation period on its alcohol strategy ends on 6 February, UK duty will hit £2 a bottle in the Budget on 20 March.

That’s 50% up from £1.33 in five years, whereas in the eight years before that it nudged up a respectable 15%. Duty on sparkling wine, including the now fashionable fizz made in England, will be around £2.55 a bottle. (We can bank on these figures, currently £1.90 and £2.43, because the Chancellor has persisted with the duty escalator that Labour introduced in 2008.)

Then there’s the double whammy of VAT on the duty as well as the wine, so the real duty cost will be £2.40 and £3 a bottle, for still or sparkling. And that’s without including the margin that retailers, merchants, pubs and restaurants have to add on top: believe it or not, duty costs more than the wine itself for the vast majority of bottles sold in the UK (that’s on anything under £7 retail – the average is a fiver – or £17 or so in a restaurant).

Meanwhile, and here’s the rub, there is no duty at all on still wine in 17 EU countries, including Germany, Italy, Spain, Portugal and Austria. In France, it’s 3p. To quote the Prime Minister’s fifth principle – fairness – how fair is this for Britain?

At the other end of the scale on the chart above, Ireland have just regained the lead from Team GB with a whopping €1 increase in wine duty in December. As one Irish wine importer remarked, ‘we’re just tax collectors now.’ The other high taxers, Sweden and Finland, adopt a different approach by controlling the sale of alcohol through state monopolies. The duty there, I suppose, could be considered a levy to cover the costs of all the work involved.

To be clear, the amount of UK duty on wine is entirely within the Government’s control. Far from Europe meddling in Britain’s affairs, each member state is allowed to enforce the taxes on alcohol it chooses. Consumers have to pay those taxes, unless they personally take wine from one EU state to another for their own use. The European Court ruled in 2006 against private individuals or clubs being able to order wines from another country, without paying the duty levied in the country where the goods were being delivered to. Perhaps it’s coincidence that Britain only began to charge higher alcohol duties once this decision was made.

So, UK wine drinkers will never be able to order a case for home delivery from overseas without paying UK duty. Not legally, anyway. That’s not a problem – bottles of wine are heavy and breakable, and shipping small volumes is expensive – but the UK ‘on’ and ‘off’ trade need a fairer deal for their customers. More so now as sterling has slumped against the euro to €1.17 to the pound, the lowest in a year:

Exchange rate (€ to £)

As the graph shows, the pound buys far less wine compared to six years ago, while duty has mushroomed.

To come back to Mr. Cameron’s point about it being ‘nonsense that people shopping online… are unable to access the best deals because of where they live‘: yes, it is frustrating for wine lovers in Britain and Ireland to use a price comparison website like wine-searcher.com, and see the prices being charged for the same wine across Europe. The differences can be staggering.

The question remains: why should those who enjoy wine responsibly in Britain be taxed far more than their neighbours on the continent?

Before too long, wine lovers will increasingly pop over to France to stock up, which is probably not the ‘driving mission‘ that Mr. Cameron had in mind. Beyond that, God help us if Britain decides in 2017 – in reference to his speech once again – to ‘pull up the drawbridge.’

 

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4 thoughts on “Pulling the cork on the Single Market

  1. Jonathan Hesford

    Very good piece Gavin. I've just plugged some numbers into my spreadsheet and the results are interesting.

    A bottle that I sell in France for 7,00€ retails for £10.50 in the UK. If duty were 50p (like the other northern european countries) the price would fall to £7.85, a reduction of 25%. For me to have a wine on a UK shelf at £5.50, I'd have to sell it for 0,50€. If duty was 50p, that wine would only cost £2.82, that's nearly 50% cheaper!

  2. Lucy Rutledge

    Hi Gavin,
    This has been shared around at The Vintner- very interesting blog. Hope to come out and see you all in the Summer sometime. Hope you are all well. I am going to treat myself to a bottle of Bauduc next week and do an official tasting note on it! lots of love xxx

  3. Barrie Hoar

    I remember back in 1978 visiting the Ministry of Agriculture where there were two civil servants from the Treasury present. The discussion was Duty and how to help English wine growers………………but as I left one of the Treasury people just said……"we always need to find expanding businesses where we can tax".

    That says it all!!!!

  4. Aston Lovell

    That’s not a problem bottles of wine are heavy and breakable, and shipping small volumes is expensive but the UK ‘on’ and ‘off’ trade need a fairer deal for their customers.