Stopping the introduction of the dreaded V1-1 form for EU wine imports to UK and exports of English wine to the EU has been a key success in helping the drinks industry start Brexit on the front foot. But there are still many snakes in the grass to look out for, warns Wine & Spirit Trade Association’s chief executive, Miles Beale.
Whilst the rest of us were just getting round to wrapping our Christmas presents, or doing some last minute shopping on Christmas Eve, Miles Beale and his team at the WSTA were suddenly faced with the prospect of getting their heads around the Brexit deal that had just been announced at 3pm that afternoon.
“It’s not as if we did not have any warning,” admits Beale. Nevertheless it did make what was already a very different Christmas even more surreal for those now tasked with making head or tail of some 1,000 plus pages of EU and UK negotiating jargon.
As it is there are only a relatively small number of sections that are of interest to the wine and spirits industry – and all the thousands of producers around the world that supply it.
Vitally the WSTA had succeeded in its number one goal, which was to have the potentially highly damaging introduction of VI-1 forms from EU wines being imported to the UK – a move it feared could add at least £70m in costs to the sector in the first year alone – removed from the final deal.
Not that anyone at the WSTA had delusions of doing a lap of honour around their front rooms on the back of that news, for that was just the first, albeit the most important, hurdle it needed to get over in order ensure as smooth as possible exit from the EU as it could.
It also does not remove the need for VI-1 forms for non-EU wine being imported to the UK, or for non-EU/non-UK wine bottled in the UK and then exported out to the continent. But that was never ever a victory that was possible at the end of 2020.
(Miles Beale on the Brexit deal and removal of VI-1 forms)
Relief – but so much more to do
After over four and a half years of almost constant lobbying and debate around Brexit, Beale admits the overriding reaction to the deal that has been agreed is one of “relief”. Not necessarily in terms of what is in it, but the fact a deal has been done and we are not having to cope with the consequences of a no deal.
“If you compare it to what we might have hoped for three or four years ago it’s probably pretty disappointing. But if you compare it to what we might have had two or three weeks ago then it’s much more than we expected,” he says.
The WSTA had certainly “narrowed its sights” in 2020 to there being either a “very thin” deal or a “no deal,” hence why it so relieved a deal has been, he says. But it was all “seriously last minute”.
“For our industry the good news is we have avoided tariffs and quotas – 7p to 10p on a bottle of still and more than twice as much for sparkling – would have been a real hit,” he says. “It’s avoided the worst, that’s why we are relieved.”
VI-1 form success
He is particularly pleased the considerable “noise” it was able to make around the economic folly of introducing VI-1 forms, including a perfectly timed feature in the Financial Times in mid December, “definitely landed” and the government had in fact “understood” an issue “they had refused to meet us about”.
Not introducing the VI-1 form for EU imports is one thing, says Beale, but there’s still the new ‘self-certified’ import certificate to get to grips with, as well as necessarily more complex movements and customs procedures.now that we are no longer in the Single Market or Customs Union.
(Miles Beale: how to trade with the EU now and what to expect from new certificates from July 1)
The “compromise” they have come to is effectively a list of agreed information that will need to be supplied by both parties, from January 1 for English and Welsh wine exports to the EU and from July 1 for EU wine imports to the UK, “that does not require a lab test which makes it significantly less expensive”. The issue now is just how that “information” is to be collated, shared and stored.
The WSTA will be pushing hard between now and July to make sure that information is collated electronically and does not involve some sort of convoluted paper trail.
In an ideal world even this information would not be required at all, says Beale, but suspects the EU has insisted on it as it will still require similar information, in a VI-1 form, for all third country wines coming into the EU.
It does, though, open the way for the UK, in its free trade negotiations with the likes of Australia and New Zealand, to include this agreed information in some sort of new electronic form, that does not go as far as all the lab tests and other costly procedures required by the VI-1 form.
The WSTA will also be doing what it can to cut down the amount of information – currently set at eight pieces – to make the whole process simpler and easier to implement.
(Here is the information required on the certificate “in addition to standard imports information, details of exporter and importer, net quantity, means of transport etc”:
- sale designation, as it appears on the label, i.e. wine/sparkling wine
- name of producer
- wine-growing region
- name of the country of production (Member State of the EU or UK)
- name of the GI, if relevant
- total alcoholic strength by volume, (but no need to have this verified by a lab)
- colour of the product (state ‘red’, ‘rosé’, ‘pink’ or ‘white’ only)
- Combined Nomenclature code (CN code).
The WSTA’s ultimate goal is to get rid of all import certificates – whether they are VI-1s, simplified VI-1s or self certified certificates as agreed by the EU and UK – “for all trading across the world and that goal is still all to play for”. But again that will need a “solution” based lobbying campaign, so rather than simply saying it will be a “disaster” show the government that “if you did it this way there would be some significant advantages for the UK wine industry in the future”.
Will the systems cope?
Between now and July it means effectively any business done between the UK and the EU will be handled through different electronic systems. Traders will have to use separate EU and UK iterations of the EMCS platform on either side of the customs border, and use CHIEF (Customs Handling of Import and Export Freight system) to make export and import declarations. Some traders will also use the transit system. VAT accounting methods will also change.
“The new systems are in place, but they are largely untested,” stresses Beale, and it will be over the coming weeks where we see just how fit for purpose they are – with hauliers and distribution companies already warning of major delays and issues of the wrong paperwork, forms and systems starting to be stretched.
Then there is the “capacity issue” and just how many HMRC officers there are to be able to handle all these new checks and ways of working.
So whilst the “formal” deal aspect of Brexit might be over the process of actually leaving and trading “never ends”. “We are now into how do you trade with the EU,” he says.
New ways to lobby
(Miles Beale on new ways of lobbying government during Covid-19New ways to lobby)
We all had to find new ways of working in 2020, but what was it like for a trade body organisation trying to galvanise and bring an industry together on such vital issues where you are all working from home, and you were cut off from having face to face meetings with your usual political contacts within Westminster and Whitehall?
Beale says it has certainly changed the usual rules of engagement where the WSTA would either heavily target MPs to act as its voice to present its case to ministers and key figures within government, or go direct to government officials to do the same. Or if that does not work, turn to back bench MPs or members of the Opposition parties. But with so few MPS and officials in the House of Commons for much of the year it had to change tack.
“We’ve used all the same [lobbying] methods, but in completely different percentages,” he says, which has involved relying “far more on the indirect ones than we usually do,” he says.
Its real breakthrough in 2020 came through the Wine & Spirit All Party Parliamentary Group which produced a hard hitting report on the impact of VI-1 having taken evidence from a wide number WSTA members.
It was the first time the WSTA had worked with the group in that way and it proved, says Beale, to be a “pretty effective” route right through to ministers and officials when its usual routes to them had been cut off.
In fact he goes as far to say he does not think the wine sector “would have achieved the result it has had [on VI-1 forms] without it”.
It was also very clear, with the huge pressure that Covid-19 and Brexit was placing on government resources, that any communication with ministers, officials and MPs had to be as much about providing them with “solutions” to issues such as VI-1 forms, as it was raising concerns, says Beale.
It has long been a key part of its lobbying efforts to “raise issues, questions, problems, and bring answers at the same time” but that was even more crucial in 2020.
So without having any direct contact with Defra ministers, for example, what they have “come out with is a lot better than we expected at this stage of the game”.
He also believes a key factor in Defra ministers not wanting to talk to the WSTA on this issue – which was a “first” – was they realised the VI-1 issue gave them a useful negotiating tool to use with the EU.
Strength in numbers
(Miles Beale on working with different parts of the trade particularly fine wine to make its case)
This is where the WSTA is only as strong as its membership base, says Beale. It needs its members to be as wide and varied as possible, and to cover as many aspects of the wine, spirit, retail and hospitably sectors as it can. Only then can it get to hear first hand the problems, the challenges – and the breakthroughs – that companies are having.
It also needs to “find the right people” to make the right sort of “noise” to get the key points and evidence across. Which in the VI-1 debate turned out to be the role of the fine wine sector, lead by James Miles, co-founder of Liv-ex.
In fact, Beale admits, up to 2020 the WSTA had very little to do with the fine wine sector, but it was because of the huge potential damage that VI-1 forms could do to the UK fine wine market, that they came together with a common cause. It was absolutely thanks to the insider knowledge and information provided by Miles and the Liv-ex team, amongst other, that it was able to strengthen its argument and case for VI-1 forms to be removed by the UK negotiating team, he adds.
It also meant it made sense for fine wine players, and the likes of Liv-ex to become members of the WSTA, mostly for the first time.
What to expect from the budget and alcohol review
The WSTA will be pushing the Chancellor Rishi Sunak for a cut on alcohol duty in his March Budget and making the case that this is not the time to be raising taxes
It goes to show the extraordinary times we are living in when the forthcoming Budget in March is only the third most important issue to be talking about – behind Covd-19 and Brexit.
But what can we expect from the Chancellor this time round when it comes to duty increases – or freezes? Beale says there is clearly going to be enormous pressure on Rushi Sunak to raise taxes at some stage in order to pay back the huge deficit built up trying to support the country through Covid-19. That time, though, is not now. Not for alcohol, not for most industry sectors.
At least it would not be if the Treasury listens to the loud calls from all sides of the drinks, retail, restaurant and pub sectors about how damaging any duty increases would be. Particularly the impact they would have on hospitality which is likely still be shut when the Chancellor gets to his feet to deliver his Budget on March 3.
Ideally the Chancellor would be looking to help the sector by cutting duties across alcohol, says Beale, and the issue of wine having been disproportionately burdened with additional duties over the last 10 years “and that needs putting right”.
“For March we are saying there should be a cut…it is the wrong time to put up taxes. The government really needs to be supporting businesses to survive so that they can stay in business and the tax base does not shrink.”
Beale says the sector has also needs to work hard to put right “some of the nonsense” that has been written about binge drinking during lockdown when the reality is that consumption of alcohol has fallen again over the last year – 5-10% across all products. Yes, there has been an increase in spend on drinks in supermarkets and specialist retailers, but this has been off-set by the collapse in sales in the on-trade.
All up for review
Then there is the issue, adds Beale, of the Alcohol Review, which understandably has been rather lost with all the other noise and distractions going on. But when the dust settles, the government is adamant, he says, it will push through a much needed, and over due Alcohol Review, that looks at how different alcoholic drinks are taxed, handled, sold and distributed in the UK.
“That review needs to re-set alcoholic taxation,” says Beale and he hopes it is both “ambitious” and “fairer” in how it is implemented.
Beale is very much a fan of the process and believes with the right wind behind it, the review could actually be good for the drinks industry as a whole. It is likely, though, it will be still some time before any review is implemented, which is potentially good news, he believes, as it will give the industry more time to come together, when it can, and make a coherent, credible and practical case for the government to follow, says Beale.
An initial call for evidence from the industry took place in the second half of 2020, but it could not have been at a “worse” time for the sector to respond as they wrestled with Covid-19 and the upcoming Brexit. The expectation is there will be a call for a second consultation period once that initial evidence has been assessed.
“It is unlikely the Treasury is ever going to propose something that brings less money into the exchequer, but what it can do is do it a lot more fairly.”
He adds: “I think they have to be bold and we have some views about how they can be bold. They need to respect international definitions and how we trade because wine and spirits businesses bring in a lot to the UK economy. You’ve just got to do it in a fairer way than it is now.”
Particularly in how wine is treated and it is not a fair argument to claim because we make less wine in the UK than we do beers and spirits that it should somehow have more a tax burden placed on it.
Where there certainly needs to be movement is the duty imposed on sparkling wines and spirits, currently the two biggest duty levels, says Beale.
One ‘fairer’ approach being discussed is to “tax per degree” of alcohol, which could see more duty being placed on beer, and less so on spirits at the top of the range, with wine around the same. Which could be a difficult political move to make, says Beale.
“It is going to be a very interesting discussion and I do not know where it is going to end up.”
In terms when an actual review might come into force, Beale believes it could be later rather than sooner, and there is certainly no reason to be rushing the sort of fundamental changes in policy that only take place every 50 years. It might also not all come in one go, but be phased in over time.
His expectation is that the review could be announced in the Autumn Budget 2021 or spring or autumn budgets of 2022 but with a delay before it is fully implemented. “We will be encouraging them in that direction.”
Results in a different way
(Miles Beale on WSTA having to lobby differently and how national press has played its part)
Looking back on all the different actions it had to take in 2020, just to keep up with the extraordinary circumstances, has made the WSTA “more match fit” in terms of how it deals with complex and difficult issues in the future. “We’ve had to do it a different way.”
Media coverage has also been critical and he certainly would not have predicted VI-1 forms “in all the eight years he has been at the WSTA” would have been the issue that would have got it so much detailed coverage across the national press, culminating in the spread in the Financial Times in December. “That has been by far the most reported on wine issue that we have been able to get into the media. The FT producing a full page on VI-1 forms is pretty extraordinary. That has been very effective, particularly when bandwidth with government is narrow.”
Long term lobbying
Beale is also keen to give praise where praise is due and says the work being done by the
Department of International Trade, under Lizz Truss, should be recognised, particularly in the number of continuity free trade agreements it has already announced and is still working on.
That’s where the day-to-day work of the WSTA over the last two to three years has really been borne fruit, and been “praised” by the government in “providing really effective, timely, useful information for them to use in continuity trade agreements and in trading rounds, discussions with Australia, New Zealand and Japan”.
But again that has only been possible, says Beale, because the WSTA team has worked so hard to build relationships with the DIT, and its predecessor department, in the years since the EU referendum.
(Miles Beale on building on an effective Brexit lobbying campaign but being focused on the next steps)
He says there is certainly some satisfaction that all the work it has been doing behind the scenes over the last few years to “avoid” some “disastrous consequences” and provide a more effective route forward is now coming to the fore. But we are only part way through the process and there are lots of battles to be won yet. “We need to be focused on the next improvement,” as he puts it.
Beale is also aware that many in the trade will quickly point to all the additional red tape they are having to cope with as hardly being anything to celebrate about. He quickly points out leaving the Single Market and Customs Union was always going to result in more administrative costs. Its what its work has all been about minimising those burdens and continuing to work with the government for better, more effective solutions.
It has also been about making sure it is at the heart of what are already quite advanced free trade talks with Australia and making sure it can influence that as much as possible. “We have managed to do that without dropping the ball on things like VI-1 forms and whether trade could continue.”
Then there is all the work that then needs to be done to explain all the “nuts and bolts” of these changes to its trade members so they can understand what they now need to do. Hence why it has held so many webinars with the industry over the last 12 months so that companies can understand not just what their new responsibilities are, but also their suppliers and businesses they rely on like logistics, couriers or packaging companies.
“Everyone as a result is better educated even if they initially a bit more worried about the amount more that needs doing. And, of course, some of these systems are not yet tested…and could definitely be improved.”
When it comes to trade its next big task is to play its part in ensuring the needs of the wine and spirits industries are fully understood and accounted for in what is going to be the government’s major challenge over the next five years to implement its 2025 Border strategy and build what it claims will be the “most effective” border in the world.
The drinks industry’s first priority is to ensure all its requirements under this new all encompassing border control are electronic, says Beale.
In any normal year much of the WSTA’s work would rest on the outcome of the budget, but in 2021 there is, as there was in 2020, so much more to be worried about and focused on.
* In part two of our major interview with Miles Beale we look at: the WSTA’s role in shaping the environmental agenda for the drinks industry; how it is playing its part in ensuring diversity and inclusion is tackled in a meaningful and effective way; how it hopes to widen its membership base, and why independent merchants, in particular, can help it achieve even more of its targets.
