Budget 2016: Duty freeze for beer, cider, whisky and other spirits

Chancellor George Osborne has unveiled a tax on the makers of soft drinks to tackle childhood obesity, but for producers of alcoholic drinks the 2016 Budget held no nasty surprises.

He also revealed some good news for smaller companies, whereby he planned to "more than double" the small business rate relief. 

Beer and cider

Osborne said the duty for beer, cider, whisky and other spirits would be frozen but others will rise by inflation. 

Naturally, brewers welcomed the news.

Frederic Landtmeters, managing director, Molson Coors (UK & Ireland), said: “Molson Coors welcomes today’s announcement that beer duty will be frozen, and we applaud the government’s recognition of the important contribution the beer and pub industry makes to the UK economy. 

“Whilst the freeze is welcome, there is still some way to go and we urge the Government to continue working closely with brewers and publicans to secure the long-term sustainable growth of an industry that contributes £22bn to the UK economy and supports almost 900,000 jobs.”

And at Heineken UK managing director David Forde, also welcomed the duty freeze for beer and cider, although he added: “Whilst we would have liked to have seen a cut in these duties; it’s good news that we haven’t had an increase”.

Wine and spirits

But while duty has been frozen on many drinks, wine duty will rise with inflation.

Commenting on this aspect of the Budget, Miles Beale, chief executive of the Wine and Spirit Trade Association said: “We are delighted that the Government has listened to consumers and taken action to address the UK’s excessive spirit duty rates. This small drop in duty will result in a big cheer for the UK’s 24 million spirit consumers.

“We campaigned for a cut in duty across all products and are disappointed that the UK’s 30m wine consumers did not receive a duty cut too. We would also have liked to see greater support for the burgeoning English wine sector.

“With UK consumers paying almost 80% tax on an average priced bottle of spirits and 60% on an average priced bottle of wine, today’s announcement of a 2% cut in spirits duty and a freeze in wine duty will be particularly encouraging for consumers right across the UK.

Beale added that the UK’s alcohol tax rates remain much higher than those of its European counterparts, “so the Chancellor’s decision is another step in the right direction to rebalancing this, following the abolition last year of the Alcohol Duty Escalator”.

Spirits producers also added their views.

Denis O'Flynn, managing director, Pernod Ricard UK, said: "This is good news for the spirits industry and for spirits consumers."

He added: "As one of the major wine suppliers in the UK, we regret that the Chancellor has increased duty on wine."

And Andrew Cowan, managing director, Diageo Great Britain, said: "Scotch, as a home grown industry, flies the flag for the UK abroad and the alcohol industry as a whole generates billions for the UK economy. This year's freeze on beer and spirits will help to continue this. We have already seen the positive impact that last year's duty cut had on industries such as Scotch whisky and so tonight, people across the nation will once again raise a toast to the Chancellor."

Tobacco, fuel and soft drinks:

Meanwhile, tobacco duty will rise by 2% above inflation, said Osborne, with hand-rolling tobacco up by an additional 3%.

And fuel duty will be frozen for the sixth year in a row, Osborne announced. He said it would result in a saving of £75 a year for the average driver.

To the surprise of many, Osborne also announced the introduction of a sugar tax on soft drinks, as part of the government’s ongoing measures to tackle childhood obesity. Money from the sugar tax will go towards after-hours primary school sports.

This ‘sugar tax’ will be introduced in two years time to ensure companies have time to make efforts to reduce the sugar content of drinks and promote low sugar brands.

Osborne stated that this was a “perfectly reasonable step” towards protecting children’s health.

The tax is expected to raise an estimated £520m a year. Pure fruit juices and milk-based drinks will be excluded and the smallest producers will have an exemption from the scheme.

Business rates:

Separately, the Chancellor announced he was “more than doubling” the small business rate relief; he said he was raising the threshold from £6,000 to £15,000 and from £18,000 to £51,0000 for the higher rate.

The outcome, he said, is that 600,000 small businesses would pay no business rates at all from next year, saving them £6,000.

The Association of Convenience Stores (ACS) has welcomed the announcement.

ACS chief executive James Lowman said: “The increased small business rate relief threshold will be a welcome measure for thousands of local shops who are facing rising costs in other areas of their business. This measure will also significantly reduce the burden on the VOA, as more stores are taken out of paying rates altogether. We welcome the move from RPI to CPI for annual business rate increases but urge the Chancellor to cap rates increases in line with the Government’s two per cent inflation target.”

The rate of corporation tax will be reduced to 17% by April 2020, Osborne added. It was 28% at the start of the last parliament and 20% at the start of the current session.

“Britain is blazing a trail, let the rest of the world catch up,” Osborne said. 

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