The UK government is to cut the duty on draught but its budget also set out plans for a hike on non-draught alcohol and changes to the levy on soft drinks.
Duty on draught products like beers will be reduced by 1.7% from February.
The move is expected to cut 1p off an average-strength pint of beer at pubs around the UK.
By contrast, from February, the UK’s alcohol duty for “non-draught” drinks like wine and spirits will rise in line with the Retail Price Index (RPI) measure of inflation, the Government said in its budget statement today (30 October).
The budget also committed to making Small Producer Relief “more valuable” and finding ways to make it easier for small brewers to enter the UK’s pub market.
There are also plans to support distillers by eliminating “mandatory duty stamps for spirits” and boosting investment in the Spirits Drinks Verification Scheme.
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By GlobalDataHowever, the temporary easement of taxes on wine is also to stop “as planned” from February.
Away from alcohol, in her budget statement, UK Chancellor Rachel Reeves also announced plans to increase the lower and higher ends of the country’s Soft Drinks Industry Levy.
The increases have been brought in “to maintain incentives for soft drinks manufacturers to reduce their sugar content”, the UK government said.
Industry reaction
The UK budget left brewers with mixed emotions, while representatives of the wine and spirits sectors expressed their disappointment.
Emma McClarkin, the CEO of the British Beer and Pub Association (BBPA) said: “The Chancellor clearly recognised the sector with some business rate relief – albeit at a lower percentage – and a cut to draught beer duty but it is hard to see how this budget will unlock growth and the critical investment needed to deliver it.
“The cumulative impact of today’s announcement means a £500m ($649.2m) increase to the cost of doing business for the industry putting pubs, brewers, investment and jobs at continued risk.”
Mark Kent, the chief executive of The Scotch Whisky Association, called the move “a hammer blow” for the sector.
Kent added: “On the back of the 10.1% duty increase last year, which led to a reduction in revenue for HM Treasury, this tax hike serves no economic purpose. It will damage the Scotch Whisky industry, the Scottish economy and undermines Labour’s commitment to promote ‘Brand Scotland’.
“The disastrous 10.1% duty hike last year has now been compounded. This further tax rise means the lessons have not been learned and the Chancellor has chosen continuity with her predecessor, not change.”
The Wine and Spirits Trade Association (WSTA) said it was “bewildered” by the duty hike, warning higher prices for consumers and would do little to help businesses grow.
Last month, the WSTA called for a two-year pause in alcohol duty hikes, in addition to permanent easement to wine taxes.
CEO Miles Beale said today the RPI duty increase was “a real kick in the teeth”. He added: “We are bitterly disappointed that Labour, despite their manifesto pledge to prioritise growth, has chosen not to listen to business – especially SMEs, which will be hit hardest of all.
“Raising alcohol duty and ending the wine easement will not bring in more revenue for the Chancellor, but it will mean businesses will now be obliged to tussle with more costly and complicated red tape. This will increase costs and push up prices for consumers and make economic growth unlikely or unachievable.”
The Soft Drinks Industry Levy was introduced in 2018, with the then UK government saying the tax would encourage manufacturers to change recipes and make healthier products.
In today’s budget statement, the Government said the tax will be uprated by the consumer price index measure of inflation, starting from 1 April every year to 2030.
UK charity Action on Sugar and Action on Salt said the decision was “a logical step”, but added it “should be a first of many measures to tackle the broader dietary health issues affecting communities across the country”.
The UK government added it also plans to assess sugar limits in place on the market as well as “the exemption for milk-based drinks”.
Just Drinks has approached The British Soft Drinks Association for comment.
