Thursday, 8 April 2010

I'm still backing beer............

Sadly the Government have shelved plans for the "massive" cider duty hike in the run up to the general election no doubt making members of the NACM throw their flatcaps in the air with joy. Good news for cider producers and good news for drinkers too if their chair, Henry Chavillier, is to be believed who was quoted post budget saying,
"Depending on how retailers deal with the duty this will add significantly to what consumers pay for a pint of cider. We have no control over the retail price of cider, but it could mean up to 10p a pint."
10p a pint you say....that does seem like an awful lot.....supported by disgruntled of Taunton on Radio 5 the following morning predicting the death of the cider industry as a result of the budget hike because it would mean punters had to pay a whopping 15p per pint more at the pumps.

Blimey - just how "massive" was the proposed hike - actually not that massive at all when you compare it with beer duty. These being the facts.......

Beer                                                                    Cider
old duty per pint of 4.0% - 37p                old duty per pint (irrespective of abv up to 7.5%) - 18p
new duty - 39p/pint, increase of 2p           new duty - 20p/pint, increase of 2p

Now I've never laid claim to being any kind of mathematical genius but even I can work out that even at the 13% post budget level the duty rise on cider is 2p  per pint (at cost) which is equally to that of beer and still means that cider benefits from an 19p per pint benefit over beer - suddenly not so "massive" after all, making the planned drop to a 5% increase on the pre-Budget level even more frustrating.

But what of those small apple growers and artisan cider makers lovingly pressing apples by hand in the West Country, surely they'd all be out of work I hear you cry if cider duty increases - that's why cider has a  lower rate of duty, to protect craft producers surely? Well that may be why it's in place but  today's cider industry is very different, with the vast majority of UK cider sales now being efficiently manufactured by two multinational drinks companies, accounting for more than 8 in every 10 pints of cider sold in Britain's pubs.

Pringles made the headlines last year following a long running battle with the taxman to avoid paying VAT on Pringles by claiming that they are not a crisp but more like a cake or a biscuit because they are made from dough. Not a crisp? But they're in the crisp aisle, targeted at crisp eaters, priced the same as crisps, surely they must be a crisp, why would Pringles not want them to be called a crisp? Well here's the key issue,  foods are usually exempt from VAT, but one of the few exceptions is the humble potato crisp and Pringles did everything they could to stop themselves being classified as a crisp and therefore benefiting from an outdated tax system - sound familiar? Fortunately the court of appeal saw sense and Pringles are now subject to the same rate of VAT as their crisp counterparts.

And the same should happen to cider duty, this isn't about beer getting one better - it's about creating a level playing field. Similar products, targeting the same audience should be subject to duty at the same rate. Just like P&G, the big multi national cider producers are benefiting from an outdated tax system encouraging beer drinkers to switch brands and exacerbating the decline in beer sales. In fact, 70% of new cider volume in 2009 came as a direct switch from lager.

But what of those artisan producers? The Government should absolutely still support them as they do with smaller breweries. The Labour Government introduced Progressive Beer Duty in 2002 that allows smaller breweries to pay less tax on their product and this should be extended to include smaller cider producers while subjecting the bigger producers to the same duty rates as major breweries. Like I said, creating a level playing field.
As Brigid Simmonds from the BBPA very eloquently put, it's time the Government did as much to support the beer industry as they do cider makers. I am already tiring of the pre election hysteria and unlikely to maintain any degree of enthusiasm come polling day - let's hope whoever wins on the day sees sense  and addresses this out dated tax legacy of a bygone era.


Curmudgeon said...

I really don't think stirring up divisions between producers of different kinds of alcoholic drinks is going to help anyone.

There may be a case for a general review of cider duty, but slapping an indiscriminate 10% duty increase on all forms of cider is likely to disproportionately affect small cidermakers.

Kristy said...

It would help the beer industry!

There is a definite case for a review of cider duty - small cider producers need to be protected but the current system where the multi national producers are benefiting from a system to protect smaller producers is outdated.

HardKnott Dave said...

I'm afraid I agree with Kristy. Cider producers are complaining about a 2p a pint rise? They don't know they are born.

I'd like to see the same system for cider as beer. i.e. duty paid per HL% (which is actually the same as litres pure alcohol) and give small producers a 50% discount. What's wrong with that?

Cooking Lager said...

I agree with Mudgie. No taxation without representation!!!!

As cider is drank by underage kids and tramps, neither of which are either eligible or registered to vote, it is unfair to tax them.

Curmudgeon said...

See this comment by Karen and Mark of Rockingham Cider on the impact of duty rises on small producers.