Next week, the biggest overhaul of Britain’s alcohol duty in living memory will come into force. The so-called “radical simplification” of the tax system governing alcoholic drinks will see the total number of brackets dramatically reduced, with the overarching principle based on taxation according to litres of pure alcohol contained in the finished drink. 

As typically is the case with taxation changes, there are winners and losers. Still wine producers are up in arms about the proposals. One maker said the average retail price of a bottle of wine would increase from £7 to £7.53.

Perhaps the most significant development, however, is the introduction of a newer “lower alcohol” duty band for products below 3.5% abv. This change is aimed at reducing the total alcohol consumed in Britain, which could have some serious ramifications for the country’s beer sector.

Significant savings for lower alcohol brews

The savings for reformulated drinks that fall into this new duty band are significant. A 3.4% beer will be taxed at £9.27 per litre of pure alcohol, compared with £21.01 per litre of pure alcohol for beers between 3.5% and 8.4%. So it’s little surprise to see Britain’s brewing behemoths move swiftly to take advantage.

Earlier this month Carlsberg Marston’s Brewing Co announced it would drop the strength of its flagship Carlsberg brew to 3.4%, exclusively for the UK market. Meanwhile, just this week, Damm revealed a new 3.4% version of its Rosa Blanca lager to UK shores.

Smaller producers are getting in on the act and have already launched a plethora of sub-3.4% session bitters, table beers and radlers in recent weeks. Moor Beer in Bristol said it would drop the abv of two flagship beers to save on duty. However, it added, due to 0.5% abv tolerance for packaged beers up to 5.5%, it was unlikely the consumer would notice. But is that really what Westminster had in mind for its new alcohol duty scheme?

It’s possible to argue an influx of lower-strength session beers will be good for society. Tax changes create positive and negative incentives, and does such a small (un?)intended consequence really matter, if public health benefits come to fruition as a result? Arguably not.

Alcohol-related harm costs the UK an estimated £25bn annually, according to the Department for Health & Social Care. An attempt to coax the 10 million people in England who regularly exceed the Chief Medical Officer’s low-risk drinking guidelines into better habits is laudable.

Double IPAs consigned to the dustbin?

However, the flipside is products over 8.5% will be taxed at an eye-watering £28.50 per litre of pure alcohol. That has serious ramifications for some of Britain’s smaller, innovative brewers, that have developed a reputation for hop-heavy, double IPAs and boundary-pushing imperial stouts.

The result? These beers will be more expensive to make, which is bad news for any brewer that has made them the backbone of their business. Moor said such businesses would have to “seriously rethink their business model” in light of the changes.

But it is absurd a brewer producing an 8.5% double IPA, designed to be savoured or shared among friends, faces the same tax burden as mass produced low-cost, high-abv drinks. Moderation shouldn’t come at the expense of innovation.

So it’s potentially bad news for the consumer. We’ll likely see less variety of styles on shelves, and potentially fewer brands to choose from if more of the smaller brewers go under.

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