Tipple whammy

Tuesday 19 June 2012

With "alcohol cheaper than water" and available for "pocket-money prices" to use two of Nicola Sturgeon's favourite soundbites, booze in Scotland has never been more affordable, so we are told.

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Tom Bruce-Gardyne

To back this up the price of basic supermarket vodka, currently around £9, and a two litre bottle of dry cider is always quoted. The latter is on offer in my local Lidl at £1.65 which does seem quite cheap.

By next autumn such deals will be long gone thanks to minimum pricing. When it comes to wine however, you probably won't notice much difference because the tax-man has already got there, pushing the price of the cheapest bottle over the £5 threshold. Every wine gets hit three times – first with duty, then with VAT on the duty and finally with the VAT on the actual sales price.Leaving aside the last part, the duty plus VAT on a bottle of wine increased steadily from £1.36 in 2000 to £1.56 in 2008. Then came the crash, the bailout of the banks and regime change at Westminster. Liam Byrne, the outgoing chief secretary to the Treasury, left his notorious note to apologise that "there was no money left" which explains why his cash-strapped successors turned to drink. Duty rates have been going through the roof ever since and, after the latest hike in the Spring budget, we are now paying £3.28 in tax on any £5 wine. How much does that leave for the actual juice in the bottle? Well according to Juel Mahoney of Bibendum, one of the UK's leading importers, once you have deducted the standard retail margin, packaging and transport, the amount stands at just 11p. Or 1p for those non-EU wines subject to a further import tax known as CTT. If Bibendum's figures are correct it is incredible that the wine in question is remotely drinkable. With such big fixed costs, the solution, as any wine merchant will tell you, is to trade up.At £7.50, based on the same margins, you will be paying £1.46 for the wine itself. "When you buy a £10 bottle," says Mahoney, "it is 25 times better than a £5 bottle." Of course this is pretty subjective and impossible to prove. Besides, the whole notion of value has been woefully undermined by deep discounting on the High Street. With prices pinging back and forth it is hard to know what any of it is really worth.Few styles of wine have kept pace with the rise in duty and, with retail margins relatively fixed, the quality is bound to have suffered. With the so-called duty escalator which adds 2% to the inflation rate every budget, duty rates will be pushing £3 by 2014.This has provoked much consternation within the wine blogosphere, though few predict a riot. "As Anglo-Saxons we're on chronically bad terms with drink, thirsting after it while at the same time feeling shame at our desire," declared the Sediment blog recently, adding that "Governments have always exploited this guilty inner conflict".Meanwhile the Scotch Whisky Association reckon winos are getting off lightly and have told the Treasury they could raise another £1 billion by equalising duty according to alcohol. If it happens you know who to blame. n

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Tipple whammy

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