Chancellor Rachel Reeves considers raising alcohol duty in Budget - but drinks industry bosses say the move would be 'catastrophic'
21 September 2024, 13:56 | Updated: 21 September 2024, 13:58
Chancellor Rachel Reeves is considering increasing alcohol duties in next month's Budget.
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She has not ruled out increasing tax on beer, wine and spirits because of efforts to fill what Labour has said is a £22 billion hole in public finances, The Telegraph reports.
However, the drinks industry has cautioned that the move would be counter-productive, leading to lower revenues and that it would have a "catastrophic" impact on pubs.
Meanwhile, there are fears the government is contemplating more "sin taxes" on unhealthy products, such as fast food, sugary treats, tobacco and vapes.
Pubs and drinks producers are worried that Ms Reeves will use warnings about the terrible state of public finances to give justification for a rise in alcohol duties.
On Friday, figures were released which revealed that consumer confidence had decreased to levels seen at the start of the year.
The Chancellor has repeatedly stated that she will need to make "difficult decisions" on tax when she delivers her first budget on Oct 30.
Forecasts indicate that putting up alcohol duty would raise an extra £800 million next year.
However, leading drinks industry figures have stated that in reality it would cause lower sales which would cost hundreds of millions in lost receipts.
Official figures indicate that last time alcohol duties were increased in 2023, tax takings fell by £1.3 billion.
The loss in revenues was only £100 million less than Ms Reeves has said will be raised by reducing the winter fuel allowance for pensioners.
Hospitality bosses and producers have stressed that another increase could have a similar impact, in deterring drinkers from restaurants and pubs.
Miles Beale, the chief executive of the Wine and Spirits Trade Association (WSTA), said businesses were still reeling from the last increase in duties.
He told The Telegraph: “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.“
"Prices have risen, sales are down and so is duty income by over £1.3 billion.
"Increasing duty – which is the Government’s inherited policy – will serve only to reduce income to the Government further at a time it can least afford it.
”The WSTA is urging the Chancellor to announce a two-year freeze in duties, which it said would “keep prices stable while optimising government income”.
Alcohol duty is levied on all drinks that are more than 1.2 per cent ABV strength, either when they are imported into the UK, or at the point of production.
Every year it rises automatically in line with the Retail Price Index (RPI) measure of inflation, unless the Chancellor decides to freeze it.
RPI is set to be 2 per cent next year, which would theoretically raise just under an extra £200 million.
However, forecasts from the Office for Budget Responsibility in March, which are the most recent publicly available, predict an extra £800 million.
Industry sources have said they indicate a possible increase in duties of more than 6 per cent, and have added that according to evidence from the last time duties were raised, under Rishi Sunak, another increase would cost money.
