The spirits industry has been “treated as a cash cow” leaving a sector “on its knees”, suppliers have complained.
Speaking on the eve of a third inflation-linked rise in duty in less than three years, a coalition of suppliers raged that tax hikes were resulting in slower growth for businesses, fewer jobs across manufacturing and hospitality, and higher prices for consumers.
A fresh 3.66% increase in duty from next month is set to reinforce the UK’s position as the country with the highest rate of excise duty in the G7.
The tax burden on UK spirits – now equivalent to around 70% of a typical bottle of gin or whisky – “penalises consumers, constrains investment and puts pubs and distillers under severe pressure”, the UK Spirits Alliance claimed.
Instead of linking future duty rises to inflation, chancellor Rachel Reeves ought to use an upcoming duty review to “put an end to spirits discrimination and put in place a long-term approach that gives businesses the confidence to plan and invest”, it said.
“UK spirits face some of the highest excise duties in Europe – rates that put our distillers at a serious disadvantage both at home and abroad,” said Greville Richards, director of Saint Sithney Distiller in Cornwall. “How does that make any sense when British spirits are one of our greatest export success stories?
“If this government genuinely wants to support hospitality, protect British jobs and keep pubs open, we need to see a proper, comprehensive review of the entire duty system.”
Braden Saunders, co-founder of Doghouse Distillery in London, added: “The spirits industry has been treated as a cash cow by consecutive governments, and the sector is on its knees.
“We need ministers to take us seriously and help us thrive. If not, they risk losing an industry that offers jobs and growth to local economies up and down the country.”
‘Doom loop’
By continuing to add to the duty burden facing suppliers, the government risked creating a “doom loop” where higher prices caused falling sales and dwindling duty receipts for the Treasury, the Wine and Spirits Trade Association (WSTA) said.
Between April and December last year, total alcohol duty receipts had fallen by 1.4%, while spirits receipts were down 2.4%, the trade body pointed out.
Projecting this figure out for the remainder of the financial year would result in a £180m shortfall in Treasury finances compared to last year, it added.
“Despite the OBR at last acknowledging higher prices lead to a decline in receipts, the government fails to recognise that its own policy is benefiting no one,” said WSTA CEO Miles Beale.
And other spiralling costs including National Insurance contributions, business rates and EPR fees meant businesses had “no choice but to increase prices in order to keep afloat”, Beale said.
As a result shoppers would “take the hit once again”, he added.
A spokesman for HM Treasury said: “Alcohol duty plays an important role in ensuring public finances remain fair and strong and funds the public services people rely on every day.”
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