By: Elliot Keck, head of campaigns
It’s currently English wine week. This has got me thinking of a wine bar, in the neighbourhood of Cedofeita, Porto. It’s an unassuming place, perched at a fork in the road, and with tables and chairs spilling out under a simple but elegant facade of large sash windows and sharp, serrated cornices, it’s most remarkable characteristic, at least for a Brit on a budget, is it’s list of about 30 different Portuguese table wines for 3 euros a glass (and a generous sized glass at that).
Now, none of these were particularly remarkable wines, although having sampled a few, I found that they were all pleasantly drinkable. What was remarkable was the price. Three euros is about £2.50, compared to the average price in England of over £5, for what is likely to be some cheap, mass produced-plonk. Anything local, from England, will cost far more. Why the disparity? Well, there is the obvious answer: average pay in Portugal is far lower than in the UK - roughly 60 per cent of what it is in the UK.
But why then is wine much cheaper in France and Germany, where salaries are the same or higher? The answer is simple: tax. In much of Europe, wine isn’t taxed at all. Spain, Portugal, Italy and Germany all have no excise tax levied on wine, joined by a host of other central European and eastern European nations. In France, it is so small that it is barely registerable - just 3 cents on a standard bottle. Compare this to £2.67 for a standard strength bottle, currently the rate in the UK.
But it’s not just the rate of the tax in the UK, although it is shockingly high. It’s the “costly and fiendishly complex new taxation rules” that will come into place in February 2025, as explained by Miles Beale, the chief executive of the Wine and Spirit Trade Association. These rules are not just a burden for wine producers but also for consumers, who will inevitably bear the brunt of the increased costs. Previously, wine was taxed depending on the quantity of wine (meaning a rate of £2.23 for all 750ml bottles of table wine, with separate rates for fortified and low-alcohol wines). Now, it is taxed based on the quantity of pure alcohol in the bottle of wine, with different rates based on strength.
On paper, this makes sense - treating the tax rate as measured by the quantity of alcohol it brings the system in line with that of other alcoholic beverages. But in reality, it increases the number of tax bands for normal strength wine (11.5 per cent to 14.5 per cent, accounting for 85 per cent of wine sold in the UK) from one to 30, as the tax paid will vary depending on its strength, in increments of 0.1 per cent at a time. And there are more bands for wine that don’t fall in this 11.5 to 14.5 per cent band.
Critically, wine is not like other alcoholic products. As an agricultural product, the strength of a wine can vary, sometimes significantly, from year to year. This variability is important, particularly because wine is often sold by year or vintage. Beyond that, the strength of a wine that is printed on a label is often only an estimate and a reasonably rough one at that. There is a leeway of +/- 1 per cent for almost all wine, meaning that a 12 per cent wine could be anywhere between 11 and 13 per cent, or twenty different tax bands. The government itself has recognised the extent of the problem. Until February 2025, all normal strength wine is treated as if it is 12.5 per cent by ABV. But having recognised this problem, they’ve put an end date on the solution. One wine merchant has claimed that the new rules will require checking and recording the alcohol content of 90 per cent of the bottles it bought, a seven-fold increase in workload for staff. The impact on prices will be significant.
Putting aside the complexity of taxing wine, there is a separate reason why much of Europe doesn’t tax the product. Wine is one of their proudest and most significant cultural contributions. Whether it’s the pinot noirs from Burgundy, the barolos from Piedmont, the port from Portugal, or the rieslings from Germany, to tax such sacred industries would be seen as almost unpatriotic. Given England hasn’t historically produced wine, although we have always consumed plenty of it, there hasn’t been a domestic industry to support in this way. On the other hand, despite the central nature of beer and pubs, we still have one of the highest rates of beer duty in Europe.
But whether or not we were historically known for producing wine, in the past decade, it’s taken off. We now have 943 vineyards and 209 wineries in the UK, and the production of wine has increased from 5.3 million bottles in 2017 to 12.2 million bottles in 2022 despite the impact of the pandemic. And it’s award-winning fare, with a UK wine featuring in the “Best in Show” selection of the 50 best wines for the Decanter Awards for five years running and featuring UK wines 186 times across all categories, including companies such as Chapel Down, Camel Valley Vineyard, Gusbourne and Ridgeview. Previous winners include Nyetimber.
It is time to speak up for the UK wine industry. This dynamic and diverse industry is being stifled by an excessively complicated tax and regulatory regime that has rates far higher than most of Europe. The new taxation rules, set to be implemented in February 2025, could lead to increased prices for consumers and reduced competitiveness in the global market. If you see any politicians celebrating English wine week, which runs until this Sunday (23rd), remember to ask them: do you want to help this industry or suffocate it?