Alcohol industry rages as duty set to go up in line with inflation

The booze industry has reacted furiously to plans by the government to increase alcohol duty.

Rates, which have been frozen since the Autumn Statement in September 2023, will go up in line with RPI inflation from next April, Chancellor Rachel Reeves confirmed in the budget today.

“The Chancellor’s increase in excise duty on spirits is a kick in the teeth to distillers, landlords and working people who will feel this in their pockets,” said Stephen Russell, spokesperson for the UK Spirits Alliance. “We need action not gimmicks, and we need a government to stop discriminating against the iconic British spirits industry.”

The decision to increase duty, despite the news last August’s hike had cost the Treasury £300m in lost duty receipts from spirits producers, showed lessons “had not been learned” and “commitments made to the sector during and since the election” had been broken, Russell added.

Draught duty cut

There was a sliver of consolation for brewers and cidermakers, as Reeves announced the rate of draught duty – a lower rate of alcohol duty for products sold on tap in on-premise venues – would fall by 1.7%. The move was equivalent to “a penny off the pints at the pubs”, Reeves said.

However, the overriding emotion from the industry was one of anger and disbelief.

The Scotch Whisky Association said the government’s decision was tantamount to it breaking a commitment previously made by prime minister Keir Starmer to the scotch industry.

“This duty increase on scotch whisky is a hammer blow, runs counter to the prime minister’s commitment to ‘back scotch producers to the hilt’ and increases the tax discrimination of Scotland’s national drink,” SWA chief executive Mark Kent said.

The tax hike served “no economic purpose”, Kent said.

“It will damage the scotch whisky industry, the Scottish economy, and undermines Labour’s commitment to promote ‘brand Scotland’,” he added.

Diageo GB managing director Nuno Teles went further still, describing the decision as a “betrayal” of the scotch industry.

“On the campaign trail, Keir Starmer pledged to ‘back the scotch whisky industry to the hilt’,” he said. “Instead, the government has broken this promise and slammed even more duty on spirits. This betrayal will leave a bitter taste for drinkers and pubs while jeopardising jobs and investment.”

Wine easement ends

Meanwhile, the government also confirmed the current temporary wine easement – which treats all wines between 11.5% abv and 14.5% abv as if they are 12.5% abv for duty purposes – would end as planned in February 2025.

A new banding system for wine-based products between 11.5%-14.5% abv will now come into force, with products being taxed according to their strength in 0.1% abv increments.

The Wine & Spirits Trade Association, said the move would “mean businesses will now be obliged to tussle with more costly and complicated red tape” and subsequently “increase costs and push up prices”.

“It is bewildering that Labour has chosen to support a Rishi Sunak-inspired tax complication when a long and desperate queue of wine retailers and businesses have beaten a path to the new government’s door to explain why abolishing the easement adds pointless cost and complexity,” said WSTA CEO Miles Beale.

Decisions taken in the budget would “stifle the growth of British businesses” and “result in less choice and price rises for consumers”, Beale predicted.