Wednesday 7 March 2012

Budgets and Myths...

**As of 8th March, this is updated to more accurately reflect the current duty comparison**

And so we approach budget time once again - the only expectancy we can all have is that things are going to end up more expensive, whilst we're all taxed that little bit more.

And its always at around this time of year that those who would hit cider with extra duty under the guise (or pretence) of 'parity with beer' or 'giving beer a fair deal' crawl out from under their respective stones. I understand the point - beer has been knowcked about and played with by successive governments of late - and cider has seen a bit of a surge in popularity (although I don't think you can put the two things together).

So - first off, can I ask if you really want to know my response to this question? If the answer is no, don't bother reading this post (casting pearls unto swine n'all). I will give you a clue as to where it goes... cider and beer are not the same and should not be treated the same.

Now, I am a duty exempt small scale cider maker. In all common sense I should probably keep my mouth shut and be grateful for what I have (and I suspect there are beer drinkers or politicians who would probably think just that). Under the current exemption, I get to make 7000 litres (70 hectolitres or 70HL) and the moment I make a litre over that I am due to pay full cider duty on all of my production. Small brewers, on the other hand, have a sliding scale of duty, which starts as a 50% discount off beer duty up to a production of about 5,000HL and then gradually diminishes up to about 60,000HL

So why is beer and cider treated differently? Well, its fairly obvious why wine and beer are - they are different drinks - different strengths etc. etc. . However, cider and beer??? Whilst they may be percieved in the UK to be the same, they are not. Not made in the same way, or using the same ingredients, chemicals or processes... etc. etc. Its only in the UK that beer and Cider are sat next to each other in this way, in other european countries, cider is a low alcohol wine as opposed to a super strength beer (though I suspect that doesn't earn as much for the treasury!)

Today I saw a tweet (yep - catch me using high falutin technology... although I am not sure I really understand its purpose!!) from a Tory MP insisting that a brewer would pay 4 times as much in duty as cider of the same strength at 8.5%

What is wrong with that statement?  Well, technically possibly nothing (except for the fact that it is, in practice, wrong). However, apart from the obvious question - how many 8.5% beers do you get?... how many 8.5% ciders for that matter. The answer for cider is NONE. at 8.5%, cider is reclassified as 'made wine' (so Andrew Griffith's comparison is technnically very incorrect - the cider duty at the percentage would exceed the beer duty by about 22%)

The issues with this claim are compounded by the fact that this MP is sat on alcohol related committees... so he should really have a better grasp of things than to publically regurgitate verbatim propaganda from SIBA - who take it as a mission to campaign against cider.

So, assuming that we are daling with an average beer (about 4% vol) and an average cider (about 6.5% vol) - both produced by small producers (or even medium sized producers), the duty calculations are different but comparible: For the beer, the producer will pay (using 50% relief) £9ish per %vol. The cider maker however, once over 70HL will pay the full cider duty at £36ish flat. 

In all, the AVERAGE % beer will pay around 8 or 9% more in duty that an AVERAGE % cider. Not anywhere near the multiples proposed by some quarters! If you then bring into account economies of scale, cost structures, differences in carbon cost/mileage/sustainability etc. then the two are even more fairly balanced. See, not the same at all!

Bear in mind that the brewer at 5,000 hl a year only pays half the national rate of beer duty - so the difference is VIRTUALLY ELIMINATED AND ALSO, below 2.8% ABV, beer duty is REDUCED AGAIN BY HALF SO THAT AT THAT LEVEL BEER DUTY FOR THE SMALL BREWER IS HALF THAT on cider anyway.  

A fair deal for beer (as the politico claimed) does not mean do a bad deal for cider. You will just end up with a bad deal for both beer and cider! Simple parity would see the end of full juice ciders - as producers lowered the alcohol content by watering down (and hence paid less duty). Belgian ciders (and Irish ones too) which are already down to 4% or less would not be affected. The Tories would simply have just killed another traditional part of UK industry... and beer would still not get its fair deal!

One more thing to add (just to complicate things a bit more). In the last couple of years the government have recognised that not all ciders are equal. As a result a new definition was introduced which set the juice content lower limit at 35% Below this, the drink was not classed as cider but effectively as an alcopop. If the goverment are looking to close loopholes for cider, then might I suggest that this is the number to look at. Artisan and craft cider producers in the UK use much higher juice content than 35% (my own labels say 97%+). This is just my opinion and discimination may even ben against EU law, but if Andrew Griffiths wants to entertain himself by looking at cider, this may be the area:-)

Unfortunately, beer and pubs have been a bit of a cash cow for several governments now, which IS bad. Many cider makers (myself included) support the relaxation of the duty excalator to encourage enterprise and growth in this valuable and traditionally British market (i.e. what the government keeps saying it wants). However, unless they understand the differences as well as the similarities they will never make an informed judgement - and hitting cider is not the answer

And that is all I have to say about that!

To sign a petition to call for the scrapping of the beer duty escalator click here

1 comment:

  1. Congratulations on a very fair and useful coverage of the whole thing. As a professional brewer and amateur cider maker, I would agree with most of it. I only want to point out one inaccuracy. Beer duty is not reduced by half again for beers below 2.8%. This reduced rate is 9.29, which is the same as the lowest rate for small brewers. The only people who benefit from this reduction are the large brewers who then pay the same rate as the small brewers. An otherwise excellent article.