Inflation-linked drinks duty rise from August
There has been trade dismay at the news that duty rates on alcohol will increase in line with the retail price index on August 1, coinciding with the introduction of a new duty regime, which will see products taxed according to alcoholic strength rather than drink type.
The Budget increase is a blow to industry campaigners who had hoped for a further freeze in duty to minimise the impact on producers and importers of those products hardest hit by the regime change.
The Wine & Spirit Trade Association said the duty hikes, combining regime change and the RPI increase, would bring a rise in shelf prices of around 44p for a bottle of wine, £1.30 for port, 97p for sherry and 76p for vodka at 37.5 abv.
A bottle of sparkling wine at 12% abv will drop in price by 19p.
Cream liqueurs and pre-mixed cans of G&T will see small decreases, while packaged beer and cider will increase slightly.
Miles Beale, WSTA chief executive said: “The Government’s decision to punish wine and spirit businesses and consumers with a 10% duty hike for spirits and a massive 20% for wine is staggering. It is the largest increase in wine duty since 1975.
“This Budget directly contradicts what this Government claims it is trying to tackle. It will further fuel inflation. It will heap more misery on consumers. And it will damage British business, especially those in the hospitality supply chain, who are still trying to recover from the pandemic.”
There was good news for the on-trade with the Chancellor, Jeremy Hunt, freezing duty on draught beer to make it 11p a pint cheaper than packaged beer.
Emma McClarkin, chief executive of the British Beer & Pub Association, said: “The cut to draught duty as part of the alcohol duty reform is positive and we hope that it will result in a boost for our pubs this summer.
“However, the fact is, our industry will be facing an overall tax hike not a reduction come August.
“Duty on non-draught beer will rise and the measures introduced today won’t rebalance the catastrophic impact soaring inflation and unfair energy contracts are having on both pubs and the breweries that supply them.”
Nuno Teles, managing director of Diageo GB, said the overall Budget duty package was bad news.
“Today’s decision is a hammer blow for pubs, drinkers and for Scotch, a UK homegrown industry supporting tens of thousands of jobs,” he said. “We urge the Chancellor to reverse this punitive and inflationary tax hike.”
The Scotch Whisky Association similarly said the duty increase was “an historic blow” for the industry.
Chief Executive Mark Kent said: “The largest tax increase for decades means that 75% of the average priced bottle of Scotch whisky will be collected in tax, reducing already tight margins for an industry which employs tens of thousands of people and invests hundreds of millions annually across the UK.”
Andrew Carter, chief executive of English winemaker Chapel Down said: “The duty increases are unwelcome news for producers, hospitality businesses, retailers and ultimately consumers across the country.
“However the proposed new system which sees drinks taxed according to their strength rather than category, is a sensible and positive step.”