Autumn Budget: Alcohol
All change with radical reform of alcohol duty
Duty on alcohol is set for a radical overhaul under plans announced by Chancellor Rishi Sunak in his Autumn Budget.
Describing the current set-up as “outdated, complex and full of historical anomalies”, Mr Sunak outlined a number of steps to simplify the system which will see the number of main duty rates cut from 15 to six.
In an attempt to “end the era of cheap, high-strength drinks”, drinks are to be taxed in proportion to their alcohol content, meaning lower-strength drinks will cost less than stronger ones.
Mr Sunak said he wanted to “modernise the system to reflect how people drink today,” after a rise in demand for sparkling wine, light prosecco and English sparkling wine.
A new draught relief will apply a lower rate of duty on draught beer and cider, served from draught containers over 40 litres, the move providing a boost to community pubs who do 75% of their trade on draught. The cost of a pint will reduce by 3p as a result of the new rate.
“That’s the biggest cut (5%) to cider duty since 1923. The biggest cut to fruit ciders in a generation. The biggest cut to beer duty for 50 years,” commented Mr Sunak, who said this is a tax cut worth £3bn.
There will also be an end to the “irrational” duty premium of 28% on sparkling wines, which will instead pay the same duty as still wines of equivalent strength. There will also be a lower duty rate for craft producers.
The reforms will not come into effect until February 2023.
Mr Sunak said the new system will be based on a ‘common sense principal’ of ‘the stronger the drink, the higher the rate’.
He said: “This means that some drinks, like stronger red wines, fortified wines or high strength white ciders will see a small increase in their rates because they are currently undertaxed given their strength.
“That is the right thing to do and will help end an era of cheap high strength drinks which can harm public health and enable problem drinking.”
The Chancellor also told the House of Commons that a planned increase of duty on Scotch Whisky, wine, cider and beer, will, from midnight tonight, be cancelled.
Miles Beale, chief executive of the Wine and Spirit Trade Association welcomed the decision to freeze duty, saying the move “comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers.”
Colin Wilkinson, managing director of the Scottish Licensed Trade Association, said it welcomes the first steps taken by the Chancellor with the announcement of ‘draught relief’ measures cutting duty on draught beer and ciders served from containers over 40 litres.
“However, this is only a small step forward and we are disappointed that this did not go further to include spirits and wine sold through the on-trade.
“His comment that ‘alcohol duty taxation is a mess’ should have led him to do more and help sustain the licensed on-trade as it fights back from the pandemic.
“His announcement that this will equate to a 3p cut in the cost of a pint is certainly most disingenuous, most unwelcome and unrealistic.
“With increased costs to business including staff costs, crippling increases in utility supplies and with inflation of over 4% next year, and no doubt brewery price increases, this will soon be swallowed up with operators having to explain potential rises of 30p a pint to offset all the increased costs the industry is facing.”