Duty cuts slow alcohol price increases

UK off-trade alcohol prices have slowed to under half of last year’s rises since the Government scrapped the alcohol duty calculator (ADE), cut beer duty and froze duty on spirits in the 2014 Budget, finds research from the Wine and Spirit Trade Association (WSTA).

The report showed that the average cost of beer had fallen by 1% after two successive duty cuts. Wine and spirits grew by just 2% – less than half of the annual growth rate seen in the previous two years.

With nearly 80% of a bottle of spirits and 60% of a bottle of wine made up of taxation, the duty increases through the ADE had meant that alcohol prices were higher than other food prices.

This shows that the lower duty rates have been passed on to consumers and will be welcomed by the Treasury and consumers after the Government’s 2% duty cut for beer, spirits and cider and the freeze in wine duty was announced last week.

Miles Beale, chief executive of the WSTA said: “It’s welcome news for consumers that the Government’s decision to scrap the alcohol duty escalator and take the first steps towards rebalancing the duty regime is being passed on.

“The rates of price increase in the off trade are the lowest we have seen for some years. Whereas average prices for wine and spirits have been increasing by about 4% or 5% every year due to the escalator, what’s surprising is how quickly its abolition has fed through to help prices grow much more slowly.

But what’s most exciting is that these results mean that 2015 Budget measures announced by the Government last week should see price increases slowing further. The Chancellor can therefore have confidence that wine and spirit businesses are prepared to pass on that benefit to consumers. It’s also great news for our members and the wider hospitality trade that the Government has recognised the benefits of a more stable and supportive tax environment.”