Alcohol duty cut needed after ‘disastrous’ increase

Reducing alcohol duty is the only way to combat reduced revenue to the Exchequer following the ‘disastrous duty hikes’ in the UK last year, the Wine and Spirit Trade Association (WSTA) has urged.

On 1 August 2023, spirits duty in the UK rose by 10.1% as a new excise duty regime came into effect.

Earlier this week, trade body the Scotch Whisky Association revealed this duty hike means the UK government has lost out on almost £98 million (US$125m) in tax revenue.

The duty hike has also been blamed for fuelling inflation in the UK. In January 2023, alcohol inflation was 3.5% – but it has almost trebled, with spirits at 8.9%, wine at 7.8% and fortified wine at 18.7%.

Spirits drinkers haven’t seen a duty cut since 2015.

“Last year’s duty increases have had an immediate and negative impact on wine and spirits sales volumes,” said Miles Beale, chief executive of the WSTA. “Not only has this hurt British businesses, it has fuelled inflation and reduced excise duty receipts.

“Recent history has shown that cutting excise duty leads to increased sales, keeps price rises down for consumers and brings more revenue into the Exchequer. We are calling on the chancellor to check the records and take action that will benefit Treasury coffers, British business and consumers – cut duty rates and give everyone a much-needed boost.”

Government ‘needs to listen’

In a submission to the Treasury on Wednesday (24 January), the WSTA highlighted the importance of a lower tax environment and government support for small businesses to reverse declining sales.

It also noted how the price of an average bottle of gin is now more than £17 (US$22) – £1.50 (US$2) more expensive than last year.

Beale added: “The WSTA is fully aware that there are significant pressures on the public purse and significant pressure to reduce government debt. With the economic recovery so fragile, we believe that cutting duty at the budget would better support the government’s aim to reduce inflation, would stimulate growth and maximise revenue to the Exchequer.

“In fact, we are confident that the whole UK drinks sector is united in its support for this action by government.

“Making the wine easement mechanism permanent to prevent the impact of more red tape and higher running costs would bring relief and improve business planning certainty for the UK’s SME-rich wine industry. The prospect of losing the easement continues to be their single biggest concern.

“The government needs to listen and do the right thing.”