Pubs toast ‘draught relief’ in alcohol duty shakeup (original) (raw)

Drinks with more alcohol will be taxed at a higher rate, while a planned increase in duty on spirits has been scrapped

Beer is set to see the biggest duty cut in 50 years, after the Chancellor announced cheaper pub pints, rosé and prosecco on Wednesday.

Rishi Sunak overhauled alcohol taxes in the Budget to create a “simpler, fairer and healthier” system, based around the principle “the stronger the drink, the higher the rate”.

He conceded it meant that tax would rise on stronger red wines, fortified wines like sherry and port, and high-strength “white ciders”.

They are “currently undertaxed given their strength,” he insisted, as he argued the move would help end the era of cheap high-strength drinks that “harm public health and enable problem drinking”.

A higher rate will apply to wine with alcohol content above 11 per cent.

However, drinkers will pay less for rosé, fruit ciders, liqueurs, and lower strength beers and wines under the changes.

The price of a bottle of rosé with 10.5 per cent alcohol content will fall by 23 pence.

Pubs and bars will, meanwhile, benefit from a new “draught relief” which will cut duty on beer and cider sold in pubs by the highest amount since 1923, the Treasury said.

It will cut the average price of a pint of beer by three pence, and will reduce the cost of beer with an alcohol content below 3.5 per cent, by as much as 25 pence.

Duty on draught fruit cider will be cut by 20 per cent, knocking 13 pence off a pint.

Mr Sunak also announced an end to the “irrational” duty premium of 28 per cent that is levied on sparkling wine.

Tax will be reduced on champagne, prosecco, cava, crémant and other sparkling products, which are typically lower strength than still wines.

Prosecco 'no longer the preserve of wealthy elites'

Noting the doubling of prosecco sales over the past decade and the 10-fold increase in English sparkling wine consumption, he said such drinks are “no longer the preserve of wealthy elites”.

In addition, the move is designed to boost the appeal of English and Welsh sparkling wines, which tend to be grown in conditions that favour lower strengths than imported wines.

Duty applied to fruit ciders will also be cut, following concerns that it can be as much as two or three times higher than the level applied to ciders made from apples and pears.

Sales of fruit cider have increased from one in a thousand ciders sold in 2005 to one in four today.

Lower alcohol content spirit drinks will also benefit from a duty cut, with nine pence knocked off the price of a pre-canned gin and tonic.

The raft of changes will be introduced from February 2023 and are set to cost the Treasury £555 million by 2027.

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. He said the move represents a tax cut worth £3 billion.

It marks the third Budget in a row in which duty rates for all alcoholic drinks have been frozen. Scotch duty rates will be at their lowest level since 1918 after accounting for inflation, according to the Treasury.

The Chancellor said his five-point plan amounted to the most “radical simplification” of the alcohol taxation system in 140 years, which could be enacted thanks to Brexit.

Previously the EU’s mandatory requirements on how alcohol is taxed limited the Government’s room for manoeuvre.

Delivering his Budget in the Commons, Mr Sunak said the alcohol duty system was “first introduced in 1643 to help pay for the Civil War” and was “outdated, complex and full of historical anomalies”.

A succession of think tanks had poured scorn on the old system, with the Institute of Fiscal Studies branding it as a “mess” and the Institute of Economic Affairs complaining it “defies common sense”.

The Chancellor’s moves were widely welcomed by Conservatives and the hospitality industry.

Shares in JD Wetherspoon, Marston’s and All Bar One owner Mitchells & Butlers all moved more than five per cent higher in value in response to the Budget.

Miles Beale, the 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.”

More than 105 Tory MPs had campaigned for lower duty on draught beer in pubs. Tory MP Richard Holden who led the charge on Wednesday welcomed the Chancellor’s decision to slash the by five per cent as a “positive move”.

Pubs and clubs stand “at the heart of our communities” and have “felt like they’re playing with one arm tied behind their back” during the pandemic, he said.