Alcohol duty hikes will ‘fuel inflation’

The Wine and Spirit Trade Association (WSTA) has urged the UK government to scrap alcohol duty tax hikes and avoid ‘prohibitive price rises’, which will ‘fuel inflation’.

In March, the trade body calculated how much spirits will cost in the UK from 1 August, when alcohol duty is set to increase. The WSTA previously warned this would double the tax for wine. Spirits, the highest-taxed alcoholic drink, would also be affected. For example, a 10% increase would add a further 75p to a bottle of vodka.

Today, the trade body has responded to the Treasury ‘ploughing ahead’ with the biggest single alcohol duty increase in almost 50 years – particularly during the midst of the cost-of-living crisis.

Miles Beale, chief executive of the Wine and Spirit Trade Association, said: “We are careering towards an extremely tough period for wine and spirits businesses with tax hikes and other costs, including a prolonged cost-of-living crisis for their consumers, persistently high inflation – especially for food and drink – and rocketing prices for glass, leaving little room for many businesses to turn a profit. Inevitably some won’t be able to stay afloat, with SMEs most at risk.

“Amongst all this pressure the government has chosen to impose more inflationary misery on consumers on 1 August, with the biggest single alcohol duty increase in almost 50 years. But it’s not too late to scrap these crippling duty hikes.

“Ultimately, the government’s new duty regime discriminates against premium spirits and wine more than other products. Wine from hotter countries will be penalised most of all, because the grapes grown in hotter climates naturally produce higher alcohol wines. And, at the same time, you cannot reduce alcohol in wine like you can for some other products. Making wine isn’t an industrial process; reducing wine’s alcoholic content is limited, changes the product and is costly to carry out.

“Nor can the alcohol in full-strength spirits be reduced for products such as gin, vodka and whisky where a minimum strength prescribed by law.”

Beale predicted that following the tax hikes, a £1 (US$1.27) increase can be expected on spirits and wine, when added VAT is 20%.

“Wine and spirits businesses are looking to find ways to keep their products affordable, but there is no quick fix,” he continued. “And there are too many tax and cost increases, and too few options – especially for wine and full-strength premium spirits where reducing ABV simply isn’t realistic.”

Vodka (37.5% ABV, 750ml) is set to see a 10% rise in cost following the duty changes from 1 August, while Port and Sherry are set to rise by 44%.

Yet, pre-mixed gin and tonics (5% ABV, 250ml) will drop in price by 14%, a difference of £0.05, according to the WSTA.

‘Handbrake to growth’

Kathy Caton, co-founder of Brighton Gin, said the government should be “promoting and supporting ‘brand Britain’”, which was once a ‘“booming sector”.

“The stifling duty costs act as a handbrake to growth for businesses like ours,” Caton added.

“This is also incredibly unfair on consumers who should not be facing higher prices for their favourite drink, especially while the cost-of-living and inflation crises put ever-increasing pressure on household budgets.”