Businesses demand alcohol duty freeze

More than 400 UK businesses have written to the chancellor asking for a duty freeze on alcohol in the autumn statement on 22 November.

There are fears that the government will increase alcohol duty yet again following the 10.1% increase for spirits in August.

In an open letter, the Scotch Whisky Association (SWA), UK Spirits Alliance (UKSA), English Whisky Guild and Wine and Spirit Trade Association (WSTA) have warned Jeremy Hunt that a further increase in alcohol duty will damage British businesses, including those in the hospitality sector.

The organisations represent more than 400 drinks producers across the country.

The letter also details how the duty hike has impacted inflation, citing data from the Office for National Statistics (ONS) that suggests the increase caused the largest rise in UK inflation on record.

The letter can be read in full below.

Mark Kent, chief executive of the SWA, said: “Raising alcohol duty in August was a mistake the chancellor shouldn’t repeat in November.

“Distillers fear a further tax increase, the impact of which won’t just be felt by drinks producers but by the businesses they support and ultimately by consumers.

“Mr Hunt has promised to lower inflation and to help deliver on that promise he needs to rule out any further increase to alcohol duty.”

Recently, the SWA launched a campaign for fairer taxation on spirits, stating that August’s duty increase means that the tax on an average-priced bottle of Scotch whisky rose from 70% to 75%.

Miles Beale, chief executive of the WSTA, added: “After the largest tax rise in almost 50 years on alcoholic drinks in August, the chancellor should rule out any further rises in this parliament.

“Any further increase would undermine the government’s priority of bringing inflation under control.

“The damage done by August’s hikes is clear: they have stoked inflation, pushed up prices for cash-strapped consumers and damaged British businesses all across the hard-hit alcoholic drinks and hospitality sector, including distillers.

“A second alcohol duty rise would be self-defeating and could prove the final nail in the coffin for some British drinks businesses.”

Analysis by the SWA revealed that alcohol duty on Scotch in the UK is significantly higher than in other European and G7 nations.

Stuart Eke, chairman of the UKSA, said: “The chancellor should use his autumn statement to back a world-renowned domestic industry.

“But if that isn’t a good enough reason to freeze alcohol duty, then he should be reminded of what the ONS said about the duty increase in August and rule out a further tax hike that will simply stoke inflation and hurt business.”

Morag Garden, chief executive of the English Whisky Guild, said: “The government’s support is needed to help protect and boost the homegrown spirits industry that is creating jobs in regions throughout the UK, delivering investment into our communities, and taking brand UK across the world through our export lead growth agenda.

“We want the chancellor to deliver this support by using his autumn statement to freeze duty for spirits. A further tax hike will only hurt an industry looking to grow and households struggling with rising costs.”

The letter in full

Dear chancellor

We are writing on behalf of our members to urge you to freeze alcohol excise duty in your autumn statement.

Any increase in excise duty, especially following the 10.1% rise from 1 August, would be damaging to British businesses. It would run counter to the prime minister’s pledge to halve inflation by the end of the year. The Office for National Statistics has already said the change in duty from 1 August caused the highest contribution to UK inflation on record.

UK spirits producers — from small gin producers to established whisky makers — form an essential cog in the UK economy, employing tens of thousands of people directly and through an almost entirely domestic supply chain. They are critical to the wellbeing of country’s hospitality sector, with spirits generating a third of all alcohol sales in restaurants, pubs and bars. And distilleries are also tourist attractions in their own right – which generates vital revenue for other businesses in their local communities.

Prior to 1 August, the government had frozen alcohol duty on successive occasions with ministers pointing to this action as a sign of support for producers – and it was. Those freezes were something producers, consumers and the hospitality sector all welcomed. This had significantly benefitted the economy, with companies investing, creating jobs and boosting growth. In addition, duty freezes have generated more revenue for the public finances with spirits duty revenue increasing by 50% over the past decade – in comparison to beer receipts which have only increased by 9% over the same period, despite better tax treatment.

The 10.1% hike to alcohol excise duty from 1 August was the largest for 40 years. Producers and hospitality businesses alike not only fear a further increase on 22 November but a widening of the differential between categories through the so-called ‘Brexit Pubs Guarantee’ which the vast majority of spirits producers, and therefore consumers, are unable to access. A duty increase or further widening of the differentials between spirits with beer and cider in the on-trade would continue the imbalance in the duty system which discriminates against high-quality spirits in favour of high-volume beer and cider.

During a cost-of-living crisis and when inflation remains stubbornly high, all possible action should be taken to support the spirits industry which has driven revenue, boosted growth, and is a world-class UK sector.

We urge you to rule out any increase in alcohol duty on 22 November and back our spirits businesses – as they have continually backed Britain.

Yours sincerely,

Morag Garde, chief executive, English Whisky Guild
Mark Kent CMG, chief executive, Scotch Whisky Association
Stuart Eke, chair, UK Spirits Alliance
Miles Beale, chief executive, Wine and Spirit Trade Association