Chancellor expected to announce second duty hike
The UK government is expected to announce a rise in duty — the second in only four months — at next week’s Autumn Statement, which would raise the overall increase in wine duty to 30% since the summer.
The rise, which is expected to be announced at the Autumn statement next week (Wednesday 22 November), according to The Times, in likely to be line with the retail price index, which currently stands at 8.9%.
According to the Wine and Spirit Trade Association (WSTA), if the Chancellor chooses to increase duty by RPI this would result in pushing the average price of a bottle of red wine to £8, up from £7.72 now (according to ONS data).
It comes after the largest hike in alcohol tax for almost 50 years came into effect on 1 August, which saw alcohol taxed by strength for the first time (read db‘s guide to the duty rises here).
“When added to the increases on 1 August this would result in cumulative excise duty increases of 68p on a bottle of wine, £1.50 on a bottle of spirits and £1.67 on a bottle of port… a 30% increase in wine duty and 20% increase in spirit duty in the space of six months,” the WSTA said.
The average price of a bottle of gin or vodka is also expected to exceed £18 for the first time.
The latest ONS data gave the average price of a bottle of vodka at £16.80 in September 2023, up 14% on last year, gin is £17.01, up 10% on last year, and a bottle of fortified wine is £11.53, up 17% on the same time last year. However, it should be noted that these prices don’t include the full impact of the August duty rises, as not all of the stock sold during August and September would have included the new duty rates.
The WSTA’s chief executive Miles Beale has renewed calls for a freeze on duty for the remainder of this Parliament to help budget-conscious consumers as well as producers trying to stay afloat.
“Consumers are still in the grip of a cost of living-of-living crisis and cannot afford to keep stretching their budgets just to be able to enjoy some of life’s little luxuries,” he said. “Wine and spirit businesses need a breathing space to stay afloat in the current economic climate, which continues to combine lethargic growth with persistently high inflation.”
Beale argued that a further rise on top of the August hike “would make a mockery of the Government’s priority is to cut inflation as further prices rises will lead to reduced sales and less revenue to the Exchequer.”
Earlier this week, he argued that the damage done by August’s hikes were clear. “They have stoked inflation, pushed up prices for cash-strapped consumers and damaged British businesses across the hard-hit alcoholic drinks and hospitality sector, including distillers,” he said. “A second alcohol duty rise would be self-defeating and could prove the final nail in the coffin for some British drinks businesses.”
The WSTA has written to the Chancellor to highlight the unfair approach to taxing alcohol, noting that wine and spirits have been treated more harshly by successive Conservatives Chancellors since 2010. It pointed out that while beer duty has gone up 21% over that period, spirits duty has increased by 32%, still wine duty has gone up 58% and the duty on Port has increased by a whopping 90%.
“Wine businesses have repeatedly raised their concerns that the new tax rates unfairly target wine drinkers and will make the UK market a less attractive place to sell wine,” Beale said, adding that “History has shown that freezing duty tends to increase Treasury revenues, not the opposite.”
Hunt has also come under fire for making it harder to retailer to invest in the high street due to high taxes.
Majestic’s chief executive John Colley told The Sunday Telegraph that while the empty units up and down the high street were “a challenge for the government”, they were not making it easy for retailers to invest in business.
Meanwhile 200 of Britain’s most senior hospitality chiefs have written to the Chancellor calling for a freeze in business rates, arguing that some businesses will be forced to close without intervention. Such a rise would put even more pressures on prices at a time when businesses are still grappling to bring inflation under control. They are reportedly asking Hunt to extend the relief scheme that was brought in to help retail, leisure and hospitality businesses with inflation.