Budget 2011: Initial reactions

The chancellor’s budget this afternoon may have revealed some pleasant surprises in terms of fuel cuts but the beer and cider wing of the drinks industry have reacted angrily to the retention of the duty escalator.

George Osborne announced that he would make: “No further changes to rates of alcohol duty put in place by the previous government.” The increases will come into effect at one minute past midnight on Monday 28 March.

The duty escalator will remain untouched and additional duty on beer over 7.5% abv will be increased by 25%, coming into effect in October, conversely tax on beers at  2.8% and lower will be halved.

The Campaign for Real Ale (CAMRA) has criticised the decision to go ahead with the duty escalator, which will add a “damaging” 7.2% increase to beer duty and drive the average duty and VAT on a pint of beer to over £1.

Mike Benner, CAMRA chief executive, said: “It is incredible to consider that Britain’s beer drinkers are forced to endure the second highest rate of beer tax in Europe, particularly when the Prime Minister promised a ‘pub friendly government’ with the pub at the heart of the Big Society.

“By penalising the vast majority of responsible pub goers, the government is not getting to the root of the problem, which remains cheap alcohol sold in an irresponsible manner in the off-trade.

“While it is welcome to see the government introducing measures to recognise the benefits of beer as a low alcohol drink, we hope the government will work with the EU and the wider industry to secure a change in EU rules to increase today’s threshold to 3.5% abv to further benefit Britain’s beer drinkers.”

The Society of Independent Brewers (SIBA) also criticised the duty increase labelling it “ruinous” and a kick in the teeth”.

Henry Chevallier, chair of the National Association of Cider Makers (NACM), commented on the above inflation increase of 2% in cider duty: “Though not entirely unexpected this decision puts at risk the progress the industry has made in recent years to be more sustainable, to increase consumer choice, to address misuse and grow government revenues,” he said.
 
“There are immediate deficit issues to address and that is understood. However, for an industry with an investment cycle measured in decades it is vital that we quickly return to a stable and sustainable duty regime. This will ensure that the cider industry can continue to again invest at a level that supports the rural economy and brings a return to growth for a very British success story.”

The WSTA warned that the budget alcohol tax hike would hit families, growth and jobs". The WSTA claimed that the tax increases would squeeze family budgets and businesses, putting jobs at risk.

The duty escalator will add 15 pence more to a 75cl bottle of wine and 54p to a 70cl bottle of spirits, respective increases of 56% and 74%.

WSTA chief executive Jeremy Beadles said: "The escalating price of alcohol adds further pressure to stretched family budgets at a time when inflation is already taking its toll and will damage the opportunities for jobs and growth in the drinks industry.

"With close to two million jobs supported by the sector, the chancellor has missed an opportunity to help it play its part in the UK’s all-important economic recovery."

The Scotch Whisky Association also lamented the escalator but took solace in the cuts to corporation tax, fuel duty and help for manufactured exporters.

Gavin Hewitt, SWA chief executive, said: "The changes promised to corporation tax and increased support for manufactured exports will allow distillers to invest for long-term growth in overseas markets. Given that distilleries are often in remote rural communities the cut in fuel duty is very welcome." 

Meanwhile, the tax relief on Angostura bitters and black beer will be abolished after 2012.
 
Rupert Millar, 23.03.2011