Industry figures have reacted to George Osborne’s latest Budget, which maintained duty escalator rises on wine, spirits and tobacco, but scrapped the rise for beer.
“This is a Budget for people who aspire hard and want to get on,” the chancellor said in his statement on Wednesday, while announcing further measures such as cancelling the planned rise in fuel duty in September and lowering corporation tax to 20%.
Unsurprisingly, the chancellor’s decision to ditch the beer duty escalator was given the thumbs-up by the brewing industry. “This cut in beer duty is a very welcome move to help get a great British industry back into growth,” said Simon Cox, UK & Ireland MD of Molson Coors. “We are pleased the chancellor has listened to Britain’s beer drinkers.”
Rob Theakston, MD of the Black Sheep Brewery, added: ““The 1p reduction in duty on beer is the unexpected icing on the cake. A reduction is something we have not seen in years and it vindicates our calls that beer served in the pub is both a responsible and controllable way of consuming alcohol.”
“This is an unfair and incomprehensible attack on the Scotch whisky industry in its domestic market, where it is a vital part of the Scottish and UK economy” - Gavin Hewitt
However, many observers criticised the chancellor’s decision to give beer special treatment. “This is an unfair and incomprehensible attack on the Scotch whisky industry in its domestic market, where it is a vital part of the Scottish and UK economy and where it supports many other businesses,” said Gavin Hewitt, chief executive of the Scotch Whisky Association.
“It penalises responsible drinkers who like a dram rather than a pint. There is no justification for spirits being taxed more heavily than beer.”
The Wine and Spirits Trade Association backed this view, pointing out duty on a 750ml bottle of wine is now £2 up by 10p, and duty on a 70cl bottle of gin at 40% is now £7.90, up 39p. “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 £9.4bn per year,” said WSTA CEO Miles Beale.
Tobacco duty, meanwhile, increased 2% above inflation: a total rise of 5.3%. “This excessive increase doesn’t make sense. Nearly a quarter of the cigarettes consumed in this country evade the already high level of UK duty and this will only make the illicit trade problem worse,” said Amal Pramanik, Imperial Tobacco’s UK MD.
“This will only make the illicit trade problem worse” - Amal Pramanik
“The chancellor could have made a stand against the criminals by implementing a duty freeze or, at worst, an increase in line with inflation. Instead, he has given them a helping hand.”
This view was backed by JTI’s Jorga de Motta: “The latest industry data shows that around one in five cigarettes smoked avoid UK duty and this represents a loss in revenue of £3bn. With proposals for plain packs being discussed we urge the government not to introduce such a measure, which will push us over the tipping point and lead to communities across the UK becoming swamped with smuggled and counterfeit cigarettes.”
Fuel rise cancelled
The cancellation of the planned rise in fuel duty on 1 September was broadly welcomed by motoring groups. “A September fuel duty hike would have been the last straw likely to break UK drivers’ budgets and would have led to a summer of discontent. Scrapping the fuel duty hike is a pragmatic move and will bring some relief at the pumps,” said AA president Edmund King.
“The fact the government hasn’t increased fuel duty since 2010 demonstrates the current model for the taxation of motoring has had its day,” said RAC technical director David Bizley. “Fuel duty revenue has declined as a result of motorists reducing their annual mileage, buying more fuel-efficient vehicles and driving in a more eco-friendly way.”
Business rates unchanged
Elsewhere, the Association of Convenience Stores singled out the lack of action on business rates. “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,” said ACS chairman James Lowman.
However, the ACS applauded moves to create a £2,000 per year Employment Allowance, which will reduce the National Insurance bill for small businesses: “We welcome the Employment Allowance which will help local shops to take on more employees.”