Chancellor Rachel Reeves has decided to cut tariffs on alcohol in a bid to provide the UK's struggling pubs and bars with a vital lifeline.
She said: 'Nearly two-thirds of alcohol sold in pubs is served on draft, so instead of raising the bar in line with inflation, I'm cutting the service charge by 1.7%, which means a penny off a pint in the pub.'
However, it has announced that alcohol duty rates on “non-alcoholic products” will increase in line with the Retail Price Index (RPI) from February 2025.
The Retail Price Index (RPI) is a measure of inflation published monthly by the Office for National Statistics, and is currently 2.7%.
This means that the tax on all wine and spirits sold in the UK is expected to rise by 2.7%, dealing a blow to wine drinkers and the wine industry.
During her Autumn Budget speech, Reeves revealed that average UK inflation will reach 2.5% in 2024, according to new calculations from the Office for Budget Responsibility (OBR).
The Office for Budget Responsibility also expects inflation to remain above the government's 2% target until 2029, so tax on wine and spirits is set to increase significantly in the coming years if inflation-linked duty increases remain in place.
Miles Bell, chief executive of the Wine and Spirit Trade Association, described the decision as “a real blow to both businesses and consumers”.
“Recent history has shown us that increased duties lead to higher prices for consumers, lower sales and, as a result, lower Treasury revenues,” he added. The loss of close to £500 million in alcohol duty receipts in the past six months could not make that clearer.
The government also rejected the opportunity to reverse complex changes to the way wine is taxed.
Last year, the Conservative Party announced a complex new system, which will impose different tax rates on still wines depending on their initial value. The wine trade had hoped the new Labor government would reverse this decision, but those hopes were dashed today.
Bell said this “will mean that companies will now have to deal with more expensive and complex red tape,” which will increase costs and raise prices for consumers.
He added: “It is puzzling that Labor chose to support Rishi Sunak-inspired tax complications when a long, desperate queue of wine merchants and businesses made their way to the new government’s door to explain why canceling the easement would add pointless cost and complexity.” It undermines economic growth.
“The decisions taken in this Budget are a bitter blow for everyone. They will stifle the growth of British businesses, drive another nail in the coffin of hospitality and lead to less choice and higher prices for consumers.
Stephen Russell, founder of Copper Rivet Distillery in Kent and spokesman for the UK Spirits Alliance, added: “Pubs are more than just pints – a third of all alcohol sold in the hospitality industry is spirits.” Today's decision will not stop thousands of pubs and distilleries from closing.
“The last government raised spirits duty by 10.1% and lost more than £300m, plus Treasury revenue. This decision will increase those losses in the future, cost jobs, reduce investment and harm growth.
Nuno Telles, managing director of Diageo GB, which produces brands such as Smirnoff, Johnnie Walker and Guinness, said he was “deeply disappointed” by the Budget decisions on alcohol duty.
He said: “During the election campaign, Keir Starmer pledged to 'support the Scotch whiskey industry to the fullest extent'. Instead, the government has reneged on that promise and imposed further spirits duties. This betrayal will leave a bitter taste for drinkers and pubs, while undermining jobs and investment across the world. parts of Scotland at risk.
Nicola Bates, CEO of WineGB, said: “We are very disappointed with today’s budget, as higher alcohol duties will not support our industry.”
The government has missed an opportunity to accelerate growth and help Britain's local wine producers succeed. We expect the decline of more than £230 million in wine excise duty receipts as a result of the sales decline seen last year to be repeated.
On a brighter note, shops and pubs in England have been given a reprieve after Reeves extended the business rates relief scheme introduced during the pandemic.
However, taxes will rise by £40 billion in total. Reeves accused the previous Conservative government of failing Britain before announcing various tax increases.
“Their austerity has crushed the NHS, their Brexit deal has hurt British businesses, and their tight balance sheets have left families paying the price with higher mortgages,” she said.
She added that Labor inherited “broken” public finances and deteriorating public services, which necessitated higher taxes. “Economic stability must be restored,” she said. “Any responsible advisor will take action.”
