Alcohol duty freeze plus system reform - the Autumn Budget and the drinks industry
Chancellor Rishi Sunak has scrapped the planned duty increase on spirits, wine, cider and beer. The announcement was made in today’s Autumn Budget statement.
The chancellor also outlined some major changes to alcohol taxation, set to come into effect in February 2023. In a nutshell, here’s what he said:
- The current system of alcohol taxation is outdated and “full of historical anomalies”
- The main duty bands will be cut from 15 to six
- The system will be based on a higher tax for products with a higher alcohol content
- There will be a lower duty rate for craft producers
- The duty premium for sparkling wine will be cut to be in line with still wines of equivalent strength
- Draught beer and cider will enjoy lower duty rates
- The system for registering and paying for alcohol duty will be simplified
Wine and Spirit Trade Association chief executive Miles Beale welcomed the decision to freeze duty, adding that the news “comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers”.
Beale also welcomed the reduction of sparkling wine “super tax, which is long overdue”.
However, he said that while simpler, the proposal for the overhaul of a new alcohol taxation system "does not make the regime fairer, which was a fundamental aim of the review".
"We are mystified by a proposal that embeds unfairness between products meaning that beer will be taxed between 8p -19p per unit, wine increases to 26p per unit and spirits remains at 29p per unit.”
There will now be a consultation on the chancellor’s proposal for a complete overhaul of the UK’s alcohol taxation system, setting out six new steps to simplify the regime. The consultation will close on January 30, 2022.
While Matthew O’Connell, director of Bordeaux Index and CEO of LiveTrade was pleased to see the reduction of duty on Champagne, he also questioned the tax per unit measures.
“It is still difficult to justify the premium per unit applied to wine vs beer - fixing the specific anomaly that people were overtaxed for celebrating with fizz rather overlooks the broader issue that both wine and Champagne should be brought level on a per unit basis with beer,” he said.
Meanwhile, English sparkling wine producer Chapel Down hailed the news around sparkling wine. CEO, Andrew Carter said: "The duty saved will enable the industry to create jobs, support families, and bring even more young talent into this exciting, developing sector as it recovers from the pandemic. The English wine industry – comprising of 3,800 acres under vine, 800 vineyards, 178 wineries – is expanding rapidly and governmental support provides the opportunity to build English wine on a global level.”
The Budget also includes measures to introduce lower duty rates for draught beer and cider. Some have also questioned whether this will create confusion. James Lowman, chief executive of the Association of Convenience Stores (ACS) said: “On one hand, the chancellor is implementing reform of duty rates to make the system simpler, but on the other, the new ‘draught relief’ will make the system more confusing. As the line between on-trade and off-trade becomes increasingly blurred, duty should be applied at the highest point of the supply chain. We urge the Government to focus on tackling the billions of pounds worth of non-duty paid alcohol that is damaging responsible retail businesses and the communities that they serve.”
Elsewhere, Sunak confirmed a 6.6% rise to the national living wage – taking the hourly rate up to £9.50.
The increase was mooted on Monday and at the time, the Federation of Independent Retailers (NFRN) said the plans will be a “bitter blow to small businesses that are already struggling to survive”.
NFRN national president Narinder Randhawa said: “Rather than boosting many shop workers’ incomes, the proposed increase will have the opposite effect of threatening jobs in the sector.
“We would all like to pay our staff more, but the headline increase in the wage rate does not include the increase in National Insurance and pension contributions that employers also have to pay.
“Given that many of the items on sale in our 11,000 members’ stores – particularly newspapers and magazines – are price marked, retailers are unable to increase their prices to cover these additional payrolls costs.”
ACS's Lowman echoed some of these sentiments, adding: “This will bring a pay rise for many of the 392,000 people working in local shops, but significantly increase the costs of those running these stores, who are working longer and longer hours to keep their businesses afloat.
“We now need to see an Employment Bill to tackle the burgeoning shadow labour market based on avoiding paying the national living wage and other costs, using gig economy practices to undercut the flexible and secure work offered by local shops,” he said.
Business rates were also on the agenda and Lowman welcomed the chancellor’s action to support businesses through green investment incentives.
Sunak said that green investments such as solar panels and heat pumps would be exempt from business rates. Additionally, investment in improvements to businesses will not be subject to business rates for 12 months after that investment is made.
The ACS said that subject to confirming eligibility, local shops will also benefit from a 50% reduction in their rates bills for 2022/23.
Lowman said: “It was great to see the chancellor announce action to incentivise investment through the business rates system, something we have been calling for in our discussions with ministers for many years. The 50% relief on 2022/23 business rates is a significant step towards our recommendation for a full exemption for premises under £51,000 rateable value. While these measures are welcome in the short term, they must be supported by long term reform of the business rates system that ensures that retailers can focus on driving growth, efficiency and productivity. Convenience stores have kept Britain going through the pandemic and are at the heart of our recovery and future growth.”