UK

Alcohol industry calls for cut to ‘punishing’ duty rates

Last year’s increases hurt businesses, fuelled inflation and significantly reduced excise duty receipts to the Exchequer, the industry body said.

Alcohol for sale in an off-licence shop
Alcohol duty Alcohol for sale in an off-licence shop (Jane Barlow/PA)

The wine and spirits industry has called for a cut in alcohol duty at the Budget, claiming last year’s increases had an “immediate and negative impact” on UK businesses.

The Wine and Spirit Trade Association (WSTA) called on the Chancellor to take action to recover almost £600 million in losses to Treasury coffers, arguing that a duty cut would prevent further inflation-fuelling price rises, support business and boost revenue to the Exchequer.

WSTA said latest HMRC data published on Wednesday suggested the Treasury lost £436 million in excise duty receipts for wine and spirits between September and January compared with the same period a year earlier.

This increased to £600 million once losses from beer and cider were added, WSTA claimed.

Alcohol duty hikes in August last year were the largest in almost 50 years, adding 20% to excise duty on more than 85% of all wines on the UK market and more than 10% to duty paid on full strength spirits.

WSTA’s soon-to-be-published Market Report will reveal that in the 12 weeks to December, volume sales of spirits were down 7.1% on the previous year, while wine sales were down 4.1%.

According to ONS data, the average price of a bottle of red wine is up 8% to £7.85 on last year, while a bottle of gin is up 6% to £17.11 and fortified wine has risen by 17% to £11.67.

WSTA chief executive Miles Beale said: “Last year’s punishing duty increases have had an immediate and negative impact on the amount of wine and spirit sold in the UK.

“Not only has this hurt British businesses, it has fuelled inflation and significantly reduced excise duty receipts to the Exchequer.

“Recent history has shown that cutting excise duty can lead to increased sales, prevent further price rises for consumers and bring in more revenue into the Exchequer.

“We are calling on the Chancellor to do himself, and everyone else, a huge favour by cutting alcohol duty.”

Philippa Strub, the UK chief executive of retailer Laithwaites, said: “It is no surprise that August’s 20% increase in wine duty has led to the Government receiving less duty revenue.

“We, along with many other wine merchants, have seen sales volumes decrease since the duty hike as consumers react to higher prices.

“Wine drinkers across the UK face yet higher prices from August this year if the Government increases duty at the spring Budget.

“Worse still for consumers, UK inflation and the Exchequer, the Government currently plans to unleash the full extent of the new duty system on wine next year, a system so fiendishly complicated that even Laithwaites, a business with over 50 years of experience, will struggle to operate across our range of 2,000 wines.

“With duty-fuelled wine inflation already running much higher than UK inflation, we call on the Chancellor to cut duty at the spring Budget and make the wine duty easement permanent.”

A spokesman for HM Treasury said: “Just this month the alcohol duty freeze through to August 1 came in, and this is on top of other tax saving changes we’ve made for alcohol, including tax cuts on lots of popular products in shops like sparkling wines and ready-made drinks.”