Hunt freezes duty after intense alcohol industry lobbying

Chancellor of the Exchequer Jeremy Hunt has frozen alcohol duty in the Autumn Statement, delivering a reprieve to the alcohol industry.

Hunt said in his opening comments of the Statement that the Treasury was about ‘reducing taxes’ and not ‘big government’, and putting downward pressure on inflation — with predictions it will fall to 2.8% by the end of next year.

As a result, he has decided to freeze all alcohol duty until after the Budget, and potentially an election in the spring or summer, next year.

“I have listened to defenders of the great British pint…and I have decided to freeze all alcohol duty until August next year”, he said.

The move stops what would have been the substantial rise in only a matter of months, following the biggest change to duty in 50 years in August. That change saw a replacement to the former alcohol duty system.

The previous reform, which was first proposed by Rishi Sunak in 2021 during his time as Chancellor, was met with a continuous backlash from industry bodies and professionals who claimed the new system treated wine and spirits unfairly.

After freezes on alcohol duty were implemented last year, there was concern of further hikes in the Autumn Statement. But that has now been axed.

Lobbying

The news follows drinks associations, including the Wine and Spirit Trade Association (WSTA) and the Wine Society and the Scotch Whisky Association (SWA), coming together in the past few weeks, with some of the UK’s largest alcohol producers, to try and persuade Hunt to change course.

It also comes as analysis by the same groups suggested that Hunt was about to lose cash. This is because the negative impact on sales from alcohol duty hikes means the Treasury will receive less tax revenue.

The associations pointed to recent sales figures since the August duty rise which revealed off-trade sales had showed a drop of around 20% in spirits in the last 28 days, and a double digit drop for wine in the same period.

It would now appear that Hunt has listened to the concerns, and in his Statement mentioned the work of the SWA and others on lobbying for the freeze.

Commenting on the Autumn Statement, Chief Executive of the SWA Mark Kent said: “With cost pressures hurting distillers large and small, the Treasury has provided some much-needed certainty and stability for the year ahead that will allow us get back to doing what we do best – making a world-class spirit, with a global reputation, which creates jobs and boosts growth here at home.

“Under the current duty system, Scotch whisky is still put at a disadvantage, based on a fundamental misunderstanding of how people consume alcohol and modern drinking trends. We want to continue the discussion with government about how the tax system can more closely reflect the number of units in a typical drink, rather than the strength of the finished product.”

Huge relief

Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said the freeze was a “huge relief” for the sector following a “worrying decline” in sales since the August changes.

He said: “The alcohol duty freeze comes as a huge relief to wine and spirit businesses and the hospitality sector who have taken a battering over the last few years. We are extremely relieved that the Government – and Exchequer Secretary, Gareth Davies in particular – has listened to our pleas not to hit wine and spirit businesses and consumers with another painful duty increase.

“Following the introduction of an entirely new alcohol tax regime and huge hike in August, the latest data shows a worrying decline in sales, which concerns businesses of all sizes and which would result in less revenue for the Exchequer. A second duty rise would have been disastrous.

“We are pleased that the frustrations of consumers, who are fed up with never ending price rises, and of businesses struggling with the cost and complexities of the new system have been heeded. These are ongoing concerns about the impact of the new regime, which need to be kept under review. We implore the Chancellor and his team to lock in the freeze until at least the end of this Parliament. This will keep people in jobs and mean consumers will still be able to enjoy a drink at a price they can afford.”

Fillip

Producers have also spoken out about the news, describing it as a ‘fillip for the industry’, although still describing the August huke as having a “clear and damaging effect on sales”.

Ed Baker, managing director of Kingsland Drinks, said: “At Kingsland Drinks, we are relieved that the Chancellor has decided to not hamstring the UK wine and spirits sector further by a further Excise increase. The August 1st increases are making the UK consumer pay some of the highest alcohol taxes in Europe which are now filtering through to higher pricing for them and lower sales for us; an additional rise would have damaged our industry even further.”

Kathy Caton, managing director of Brighton Gin, said:”What a great relief for us and our fellow craft distillers that duty has been frozen – we’re operating in such a challenging environment currently, but this is definitely a fillip to the industry.

“The August duty hike has had a very clear and damaging effect on sales. There have already been some very high-profile closures of businesses in our sector and a second duty rise could have seen more distilleries go bust.

“With the vast majority of our customers being within the hospitality industry and us being publicans ourselves, we’re really glad that the hospitality sector and its suppliers are being supported.”

Simon Doyle, general manager at Concha y Toro Europe, said: “In response to the Chancellor’s request to manage inflation, our industry has worked tirelessly to mitigate genuine material, transport, legislative and service charge cost increases to keep wine prices as affordable as possible. As a result of this hard work, the average price of wine has only risen by the 21% increase in excise duty levied by the Chancellor himself on 1st August.

“It is therefore a relief that the Chancellor has decided not to increase duty any further in his Autumn statement. We are grateful for this and the tireless efforts of the WSTA in representing the challenges that our industry faces to the Treasury.”

Carlsberg Marston’s Brewing Company also welcomed the move after “insurmountable pressure” from previous duty rises and changes.

Paul Davies, CEO of Carlsberg Marston’s Brewing Company said: “We have already seen insurmountable pressure on our industry, with brewers across the sector absorbing more cost pressures than ever before to try and ensure beer stays affordable.

“The Government’s acknowledgment today of these challenges comes as a relief, allowing businesses time to acclimate to the changes already introduced this year. The brewing industry is so deeply integrated into the fabric of the UK and continues to drive growth for the economy, so these policy decisions are a much-needed show of support, providing the stability the great British beer and pub sector needs during these uncertain times.”