UK freezes spirits duty in Budget

Chancellor Philip Hammond has announced a freeze on wine, spirits and beer duty in the UK in his autumn Budget.

Chancellor Philip Hammond has frozen spirits, wine and beer duty in the UK

Hammond announced in today’s (22 November) Budget that duty will rise on “cheap, high strength, low quality products – especially so-called white ciders”.

But recognising household budget pressures and backing pubs, he says duties on other ciders, wines, spirits and beer will be frozen.

He said: “This will mean a bottle of whisky will be £1.15 less in 2018 than if we had continued with Labour’s plans”.

The previous government policy was that alcohol duty would increase by RPI inflation each year for the full term of parliament unless otherwise stated.

In the lead up to the Budget, Hammond has repeatedly faced calls to freeze duty leading into the Christmas period.

The Wine and Spirit Trade Association (WSTA) has called for Hammond to once again freeze duty on wine and spirits, claiming that a further 3.4% duty rise in line with RPI inflation could add 26p to a bottle of spirits and 7p to a bottle of wine.

Research carried out on behalf of the Scotch Whisky Association (SWA) predicted a tax cut for Scotch whisky could also boost the Treasury’s income by £200 million (US$263m) over the next five years.

The UK alcohol industry is one of the most heavily taxed in Europe, with British drinkers paying 68% of all wine duties and 27% of all spirits duties collected by the 28 member states of the European Union.

After the announcement, the WSTA tweeted: “We are pleased that the chancellor has found his festive spirit and listened to the call from the WSTA and its members and has frozen wine and spirit duty. He has shown the government is in touch with what consumers want and is supporting an industry, which is a real asset to British business.”

Following the duty increase in April, the level of tax on a bottle of Scotch whisky currently stands at 80%, meaning that of an average bottle sold at £12.77 (US$16.79), more than £10 (US$13) goes to the Treasury.

The SWA recently released HMRC data showing that sales of Scotch had fallen by one million bottles after the tax hike on spirits earlier this year.

While the SWA welcomes the freeze, a cut would have “provided a bigger boost for consumers, the industry and public finances”.

Karen Betts, SWA chief executive, said: “We welcome the freeze in excise duty on spirits, which helps support the competitiveness of Scotch – a major UK export – in uncertain times. My thanks go to all MPs and MSPs who have supported Scotch and helped convince the Chancellor that a second duty rise in 2017 would have hurt the industry and consumers.

“But tax on Scotch is still very high. £4 in every £5 spent on Scotch goes to the Treasury, and we believe this is a missed opportunity.  We believe a cut would have delivered more revenues to the government as well as underscoring government support for an important UK manufacturing industry, which supports 40,000 jobs across the UK.”

Charles Ireland, managing director, Diageo Great Britain, said: “The duty freeze provides some respite for Britain’s drinkers, although taxes on spirits remain amongst the highest of any major economy in the world. We have been greatly encouraged by the fantastic support of Parliamentarians from all parties, especially Ruth Davidson, David Mundell and the other Scottish Conservative MPs, who have called for a fairer deal for Scotch and spirits: an industry that generates £5 billion of exports and employs 50,000 people.

“We now repeat our call for a review of the alcohol duty system to deliver fairness for Scotch whisky, which is exactly the kind of unique British product the UK needs to thrive after Brexit.”

This piece will be updated throughout the day with further industry comment.