A £3bn tax giveaway is part of a huge overhaul of the UK’s alcohol duty system introduced by Rishi Sunak under the principle of “the stronger the drink, the higher the rate”.
The chancellor said in his budget this will include cutting the price of a pint in a pub by 3p as part of a new lower duty rate.
The Chancellor told MPs in his Budget speech that the planned increase in duty on spirits such as Scotch whisky, wine, cider and beer will be cancelled from midnight.
The new taxes based on the strength of the drink will see duties increase on some higher alcohol products, such as some red wine and white ciders.
However, consumers of some lower-strength products, such as fruit ciders, liqueurs, beers and wines, will pay less.
Sunak said this would result in the biggest beer tax cut in 50 years and the biggest cut on cider duty since 1923.
What is happening?
Sunak criticised the current system of alcohol taxes as outdated and too complicated, as he revealed a raft of changes.
The Treasury said it will slash the number of main duty rates from 15 to six as part of the sweeping changes.
As well as the “the stronger the drink, the higher the rate” policy, Sunak also specifically targeted the “irrational” duty level of 28% of sparkling wine, saying that the tax will be reduced on champagne, prosecco and other sparkling wines which are typically lower strength.
Pubs and bars will also benefit from a new “draught relief” which will cut duty on beer and cider sold in pubs by the most since 1923, the Treasury said.
A new Small Producer Relief was also announced, extending a similar tax subsidy to Small Brewers Relief across to those making cider and other alcoholic drinks of less than 8.5 ABV across the UK.
In his speech, Sunak claimed Brexit allowed him to make the sweeping changes.
“We are taking advantage of leaving the EU to announce the most radical simplification of alcohol duties for over 140 years,” he said.
“We’re taking five steps today to create a system that is simpler, fairer, and healthier.”
What did critics say?
The cuts will spare voters another hit to their income at a time when inflation is the highest in almost a decade and some people have suffered lower wages as businesses were forced to close last year during the pandemic.
Labour MPs argued the cuts would mean little compared to loss of income caused by not continuing the uplift in the Universal Credit benefit.
The Chancellor mentioned the word “wine” twice as many times as he did either “education” or “children”.
— Munira Wilson MP (@munirawilson) October 27, 2021
Spending a sizeable section of your budget speech on alcohol literally is the definition of “small beer” and “scraping the bottom of the barrel.” I doubt all those losing £20 a week Universal Credit and whose wages remain frozen or cut will be toasting Sunak.
— John McDonnell MP (@johnmcdonnellMP) October 27, 2021
Ian Mulheirn, executive director for UK policy at the Tony Blair Institute, said: “While the chancellor trumpeted newfound ‘Brexit freedoms’ to reform alcohol duties, what he didn’t mention was that Brexit has cut annual tax revenues by around £30bn. This means that without the Brexit shock most of the past year’s £40bn tax raid would have been unnecessary.”
What does it actually mean for drinkers?
The Treasury produced a visual breakdown of what the reforms mean for beer, cider, wines, spirits and other beverages.
The biggest savings in the pub were among fruit ciders – Strongbow Dark Fruits will see 13p knocked off a pint in duty.
But high-strength apple cider, such as a 2.5ltr bottle of Frosty Jack’s, would go up by as much as 45p when bought in a shop.
A 75cl bottle of Taylor’s port would also jump by £1.09.
What did the industry say?
Pubs in Britain have faced some of the strictest restrictions of any industry during the pandemic, including months of mandatory closures, curfews, and a requirement that drinkers only be served if they have ordered a substantial meal.
Miles Beale, chief executive of the Wine & Spirit Trade Association, said: “The decision to freeze wine and spirit duty comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers, giving everyone a much-needed break to help them recover from the pandemic.
“Chancellor Rishi Sunak should be commended for listening to our calls for support and understanding that punishing tax hikes are not the best way to reinvigorate the sector.
“By offering continued respite to the UK wine and spirit sector his actions will help save jobs and – in time – replenish revenues to the Treasury through growth in our potential-filled sector.”
Emma McClarkin, chief executive of the British Beer & Pub Association, said: “Pubs, brewers and beer drinkers will be toasting the Chancellor today for a range of business-boosting measures.
“Pub goers will also be toasting the Chancellor today for announcing a 5% lower duty rate on draught beer worth £62 million.
“This is great news for our local pubs and recognises the crucial role they play in our economy and society.
“However, the overall beer duty rate in the UK remains amongst the highest in Europe.
“It is vital for Britain’s brewers, a world class homegrown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs.”