FAB duty fight goes to Parliament

The debate over the Budget increase in duty for flavoured alcoholic beverages (FABs) has been taken to Parliament.

Drinks firm Bacardi-Martini has joined forces with opposition MPs to table an amendment to the Finance Bill which contains the detail of proposals to remove the concession that meant FABs were liable to lower rates of duty than spirits - effectively increasing duty on FABs by 65 per cent.

The company wants the government to reinstate the concession and investigate the effects of raising duty on FABs.

Drinks companies have said the increase in tax - which could add up to 12p on a 275ml bottle - will harm the market and discourage innovation.

Chris Searle, executive chairman of Bacardi-Martini, said he objected to the government bringing in the increase without consulting the industry.

The concession on duty for FABs was introduced in 1998 as an incentive for drinks companies to develop lower strength alcoholic drinks.

Mr Searle said: "The concession achieved its objectives and on that basis Bacardi-Martini has made sustained investment of £10m, creating 200 jobs.

"This shock measure is a tax on innovation and threatens the viability of ongoing product development."

Although the Commons committee defeated the amendment by 16 votes to nine, Mr Searle said he would not give up.

The Bill will be debated again in six weeks. "The industry will continue to work constructively with government to ensure the harmful consequences of this measure are fully understood," Mr Searle said.

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PPSs hit by 65 per cent duty rise (18 April 2002)