As Brexit looms, industry bodies had been calling on the government to support their sectors with a cut in duty. But in yesterday’s Budget announcement, Chancellor Philip Hammond said alcohol duty would rise with the rate of inflation as of March 13.
It is the first time in 25 years there has been an increase on alcohol duty by inflation across all alcoholic products – the last time was in 1992.
Yesterday’s Budget 2017 announcement also confirmed a UK sugar tax and the rates for the levy.
‘The government has decided to punish an industry that contributes so much’
The Scotch Whisky Association calls the excise increase ‘an unwelcome blow to a successful home-grown industry’ that supports 40,000 jobs and adds value of £5bn ($6bn) every year to the UK economy.
- Duty on a 750ml bottle of wine increases by 8p
- Duty on a 70cl bottle of gin increases by 30p
- Duty on a pint of beer rises by 2p
The total tax (excise and VAT) on an average priced bottle of Scotch sold in the UK will now stand ‘at an exorbitant 79%: four pounds in every five a consumer spends on whisky goes straight to the Treasury’.
Rosemary Gallagher, head of communications, SWA, said: “In other years, Chancellors have decided to freeze duty rather than impose the inflationary increase.
“In 2015, George Osborne went as far as cutting excise by 2%.
“And this year's increase isn't even in line with current levels of inflation - it's based on the OBR's forecast for retail prices inflation (RPI) to reach 3.9% in 2017/18, up from around 2% in 2016.
“It's puzzling to try to work out why the government has decided to punish an industry that contributes so much at home and abroad - with exports worth £4bn ($4.9bn) annually - especially as we prepare for the seismic changes heralded by Brexit.
“A fair and competitive domestic tax regime - providing a strong platform for investment and growth - is an important part of that Brexit jigsaw.”
‘Missed opportunity to back British businesses’
The WSTA says the wine industry is facing a ‘triple whammy’: historically high duty rates, higher inflation and the devaluation of the pound.
Miles Beale, chief executive, WSTA, said: “As a result of the 3.9% inflationary rises on alcohol, wine and spirit businesses and consumers will now feel the full force of the triple whammy.”
The duty rises by inflation means a bottle of wine will go up by 8p, sparkling wine 10p and an average priced bottle of spirits 30p. This is before VAT is applied, adding a further 20%.
“The failure to rebalance this unfair tax burden on the wine and spirits industry will stifle businesses’ ability to invest and grow, to sustain the 550,000 jobs it currently supports and to help successful British pubs, bars and restaurants where wine and spirits sales makes a significant and fast growing contribution.
“This is a missed opportunity to back British business and help out struggling consumers.”
However, the WSTA does welcome the equal treatment of all alcoholic beverages (in last year’s Budget, duty rates on beer, spirits and most ciders was frozen while duty rates for wine rose with inflation).
‘Beer taxes are 13x higher than Germany’
The British Beer and Pub Association (BBPA) says that beer tax in the UK has risen by 43% over the past ten years.
Brigid Simmonds, chief executive, BBPA, said: “This latest rise will mean 4,000 fewer jobs this year, mostly in pubs. Tax rises on all alcohol will add £125m ($152m) to the cost base of pubs.
“Britain’s beer taxes are three times the EU average, and an astonishing thirteen times higher than those of the largest producer, Germany.
“If we are to compete in the future and as we move towards the challenges of Brexit, action must be taken on tax to ease the burden on a beer and pub industry that supports around 900,000 UK jobs.”
From April, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year, a measure in this year’s Budget that the BBPA welcomes.
“We campaigned very hard for this and it is vital that this is extended in future years,” said Simmonds.