Rachel Reeves, the Chancellor of the Exchequer, is contemplating an increase in alcohol duties for the upcoming Budget on October 30, 2024. This potential move has raised concerns within the drinks industry and hospitality sector.
The proposed tax hike on beer, wine, and spirits is part of the government's efforts to address what they claim is a £22 billion deficit in public finances. However, industry representatives argue that such a measure could be counterproductive.
Miles Beale, chief executive of the Wine and Spirits Trade Association (WSTA), stated:
"Last year's damaging reforms to the alcohol excise duty system, including the largest single duty hike in almost 50 years, have hit businesses, consumers and the Government purse."
Beale highlighted that the previous duty increase in August 2023 resulted in higher prices, decreased sales, and a significant reduction in duty income by over £1.3 billion.
The WSTA is advocating for a two-year freeze on duties, arguing that this would stabilize prices and optimize government income. Alcohol duty is applied to drinks exceeding 1.2% ABV, either during production or importation.
Official figures reveal that from September 2023 to August 2024, alcohol duty generated £11.8 billion, a decrease from £13.1 billion in the previous year. The most substantial decline was observed in spirits, with receipts falling by £750 million.
Emma McClarkin, chief executive of the British Beer and Pub Association (BBPA), warned:
"We know from experience that beer duty increases rarely raise expected revenues, especially when many consumers are facing the cost-of-living crisis and are increasingly sensitive to price."
The BBPA is urging the government to reduce beer duty to support pubs, which they consider vital to both the economy and communities.
This potential duty increase comes amid broader discussions about "sin taxes" on products deemed unhealthy, including fast food, sugary treats, tobacco, and vapes. A recent report by the Institute for Public Policy Research suggested raising taxes on these items to boost the economy by reducing long-term sickness absences.
During the election campaign, Rachel Reeves expressed a desire to "save the British pub," recognizing their importance to communities. However, the drinks industry fears that the Chancellor may use warnings about the state of public finances to justify an increase in alcohol duties.
A Treasury spokesperson stated that difficult decisions on spending, welfare, and tax would be necessary to address the inherited £22 billion deficit in public finances. These decisions will be made at the upcoming Budget, considering all factors.
As the October 30 Budget approaches, the drinks industry, hospitality sector, and consumers await the Chancellor's decision on alcohol duties, which could have significant implications for businesses, government revenues, and the broader economy.