Hopes that the alcohol industry could secure a freeze in duty in the upcoming budget appear to be receding, sources have told The Grocer.
After alcohol trade bodies headed to Parliament yesterday (12 November) to lobby exchequer secretary Dan Tomlinson, the mood among suppliers is downbeat. An inflation-linked increase in duty is widely expected to be confirmed by Chancellor Rachel Reeves later this month.
“We’re fully expecting duty to go up from 1 February,” one source working in public affairs for a major alcohol supplier told The Grocer. “The exchequer secretary reiterated in Parliament again this week his belief that, with inflation at around 4%, anything other than an RPI increase would cost the exchequer around £440m a year.”
The sector was “still pushing hard for a freeze, but… realistic given public finances and politics”, another public affairs source added.
A freeze to alcohol duty would be equivalent to a 3.85% duty cut, accounting for inflation of around 4%, Tomlinson told MPs on Tuesday (11 November).
“It is right, therefore, that any decision on alcohol duty weighs the impact on overall revenues carefully,” he said. “That is what I am confident that the chancellor will do when she makes a decision in the budget in just a few weeks.”
In a joint statement issued after meeting with Tomlinson yesterday, industry bodies including the British Beer & Pub Association, the Scotch Whisky Association, the Wine & Spirits Trade Association (WSTA) and the UK Spirits Alliance reiterated calls for a duty freeze.
“By making the positive, growth-driven choice to not increase duties, the Chancellor can show she understands the pressures our industries face,” the statement read. “More than that, she can give our sector the confidence to invest, to create jobs, and to return to growth.
“Our members are committed to working with government to generate the revenues necessary to support vital public services. More investment, more jobs and more sales will do this, not more taxation.
“We hope the Chancellor will back our sector, and in doing so boost the economy.”
Sector ‘on its knees’
Last month, the APPG on UK Spirits, chaired by Labour MP Carolyn Harris, said a duty freeze was necessary to support what it described as “a sector on its knees”.
Far from raising revenues for Treasury coffers, duty increases had both a negative impact on the economy and government finances, Harris pointed out.
A 10.1% duty increase by the Conservative government in 2023 had brought about “the biggest contribution from alcohol to inflation in 17 years and led to £2.3bn worth of extra government borrowing,” said Harris.
Following the most recent duty hike, spirits revenue receipts fell by 7.1% in the first half of the year. September’s figures, meanwhile, were down 17.7% on the same month last year.
Further increases to alcohol duty would therefore be tantamount to “pouring away Treasury funds,” claimed Miles Beale, chief executive of the WSTA.
“Alcohol sales have been in steady decline since 2023, following the largest alcohol tax hike for 50 years,” Beale said. “Instead of bringing in more cash to plug the black hole in public finances, the government is reducing tax take and fuelling inflation, pushing up prices by a pound or more in a little over a year.”
With recent increases in National Insurance, the minimum wage and new EPR taxes that disproportionately hit wine and spirits suppliers, more duty misery would be “the final nail in the coffin for many businesses”, Beale claimed.
He added: “The only way to break the cycle of tax duty increases penalising cash-strapped consumers, depleting Treasury funds and fuelling inflation is to freeze excise duty on wines and spirits at the November budget.”
HM Treasury has been approached for comment.
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