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Wine to become top Treasury duty source

The UK Treasury will receive more money from wine duty than from beer as soon as 2014-15, according to the Chancellor’s Autumn Statement.

Figures contained in the report revealed that the Office for Budget Responsibility (OBR) expects wine to leapfrog beer and cider duty revenues in just three years time.

Beer and cider has been – and still remains – the biggest source of alcoholic drink revenue for the Treasury right now, bringing in £3.7 billion in 2010-11 compared to wine’s £3.1bn.

However, while the beer and cider figure is expected to hit £4bn in 2015-15, wine revenues are expected to overtake them for the first time that year at £4.2bn.

The OBR then expects wine to remain the most lucrative drinks category for the Treasury through until 2016-17, when it will hit revenues of £4.9bn while beer and cider will bring in just £4.1bn. Projections for later years have not yet been made.

Spirits will remain the lowest form of revenue for the Treasury in the alcoholic drinks sector, reaching £3.5bn by 2016-17.

While it remains unclear exactly how the OBR reached its predictions, the figures would suggest that the government is either expecting consumption of wine to rise significantly in the UK over the next few years, or the duty escalator, which is due to end in 2015, could continue, despite the fact the average price of a bottle of wine in the UK has broken the £5 barrier.

Elsewhere, the three pence hike in fuel duty will be deferred from January to August. The government has also cancelled a planned 2p inflationary hike on fuel set for August.

Phil Orford, chief executive of not-for-profit small business body the Forum of Private Business, said: “Scrapping January’s 3p fuel duty rise completely and reducing the increase scheduled for August is good news, but we wanted all fuel duty increases scheduled for 2012 to be postponed.”

For a full analysis of the Autumn Statement and what it means for the drinks industry, see this week’s Finance on Friday.

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