Budget 2013: Osborne axes beer duty escalator

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Drinkers will pay a penny less on the price of a pint of beer, the chancellor George Osborne announced in the Budget today.

“We are taking a penny off the pint. The cut will take effect this Sunday night and I expect it to be passed on to customers,” the chancellor said.

Osborne also announced that he would be scrapping the beer duty escalator. “We will now scrap the beer duty escalator altogether. Instead of the 3p rise planned for this year, I am cancelling it altogether,” he said. “That’s the freeze people have been campaigning for.”

The industry has long campaigned for the government to scrap the alcohol duty escalator, which automatically increases tax on alcohol by 2% above inflation. Although this has now been removed from beer, the escalator will remain on wine and spirits.

Duty on tobacco will continue to rise by two percent above inflation.

Osborne also announced that the fuel duty increase planned for 1 September has been cancelled. “Petrol will now be 13p per litre cheaper than if we’d not acted over the last two years to freeze fuel duty,” he said.

Other measures include a further 1% cut in corporation tax to 20%. “This is the lowest business tax of any major economy in the world,” the chancellor said.

At the start of his speech, the chancellor said his Budget was for “our aspiration nation”. “This is a Budget for people who aspire hard and want to get on,” he said.

Beer measures welcomed

The brewing industry reacted favourably to today’s Budget. “In abolishing the Beer Tax escalator, the chancellor has ended a hugely damaging policy that would have made Britain’s beer the most heavily taxed in Europe,” said Brigid Simmonds, CEO of the British Beer and Pub Association.

Michael Turner, chairman of Fuller’s brewery, said: “I would like to congratulate the chancellor on this initiative. It will be excellent news for British manufacturing, British farming, British pubs and British jobs.”

The Wine and Spirit Trade Association (WSTA), however, condemned the chancellor for extending the alcohol tax escalator on wines and spirits for the fifth year in a row. “This is bad news for the UK wine and spirits sector, with year-on-year duty increases hitting consumers and businesses hard. It makes little sense to single out beer,” said Miles Beale, WSTA chief executive.

“The chancellor has ended a hugely damaging policy that would have made Britain’s beer the most heavily taxed in Europe” - Brigid Simmonds, BBPA

“If this was designed as a measure to support pubs it seems misplaced: over 41% of drinks sold in pubs are wine and spirits, contributing £9.4 billion per year. The chancellor’s decision ignores the growing value of the English wine industry and the UK spirits industry, which accounts for 18% of all jobs in the EU spirits industry.”

Diageo said: “This move is disappointing. Cutting duty on beer while increasing it on spirits punishes the UK spirits industry for its success in this harsh economic climate. Scotch is the UK’s biggest food and drink export. This move risks that success.”

The Association of Convenience Stores welcomed action to reduce duty on beer and also the cost of national insurance, announced elsewhere in the chancellor’s speech. “The Budget does not include any radical changes that will transform confidence amongst everyday entrepreneurs, like local shop owners, but action on national insurance, card payments and beer duty are positive steps that will make a difference,” ACS chief executive James Lowman said.

“The chancellor has failed to act on business rates and missed an opportunity to undertake the radical reform needed to encourage investment in high streets up and down the country.”

Responding to the two-percent above-inflation rise in tobacco duty, JTI’s Jorge da Motta said: “The UK government’s excessive tax on tobacco products puts the UK at the top of the criminals’ list of destinations for illicit tobacco. Today’s announcement of an increase of 5.3% will further encourage lawbreakers both large and small who will continue to deprive the government in the UK of millions of pounds every day in uncollected duty.””

Simon Clark, director of smokers’ lobby group Forest, said: “Increases in the cost of tobacco hit those who can least afford it the most.”

Minimum pricing dropped

The cut in the price of a pint follows the government’s move to drop plans to introduce minimum unit pricing on alcohol last week, saying it could hit responsible drinkers on low incomes. “Responsible drinkers and our pubs should not pay the price for problems caused by others,” the chancellor said, in reference to the move. He cited figures that 10,000 pubs had closed in the last 10 years.

Prior to today’s speech, there had been concerns in the industry that Osborne would clamp down on cheap deals on alcohol in supermarkets, but such a move was not announced in the Budget. However, the chancellor said: “We’re looking at plans to stop the biggest discounts of cheap alcohol at retailers.”

A report published last week by the WSTA found that total volumes of wine sold in the off-trade has fallen 2% over the last year. Volumes sales of spirits fell 1.5% and RTD volumes were also down 9%, with value declining by 3%.

Last year’s Budget saw the announcement of the so-called ‘pasty tax’ on hot food items, which was later rolled back by the chancellor following an outcry from consumers.

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