Alcohol tax frozen in attempt to water down price increases

·3-min read
pub beer alcohol duty freeze
pub beer alcohol duty freeze

Drinkers will save 7p on the price of a pint and 38p on a bottle of wine under an alcohol duty freeze as pubs brace for a tough winter in the cost of living crisis.

The Chancellor said he had "listened to industry concerns" over changes to levies which had been due to come in next February and that "at this difficult time, we are not going to let alcohol duty rates rise in line with Retail Prices Index."

The Treasury said the freeze, which is worth £600m, would "support businesses and help consumers with the cost of living", and would also save 4p on a pint of cider and £1.35 on a bottle of spirits.

Despite this, drinkers could still see price increases over the coming months, as businesses battle steeper ingredients and energy costs.

One brewing insider said the rises they were experiencing on raw material costs, energy costs and labour and transport were "significant".

They said businesses may struggle to swallow all those costs themselves, even with the duty freeze.

The measure comes weeks after data company CGA cautioned that prices for pints could go as high as £8.50 next year.

They are up more than 70pc since the financial crisis, last year rising to an average of £3.95. In one pub in London this summer, pints were selling for an average of £8.06.

Jenny Hanlon, chief financial officer at leading brewer Adnams, welcomed the support from the Chancellor, saying: "It is encouraging that the Government is listening and acting to the challenges we and others face."

Wine bosses branded the step as a "sensible" one.

Smaller breweries meanwhile received a boost after Kwasi Kwarteng said separate changes to cut the duty paid on beer and cider coming from draught barrels would also apply to smaller kegs of beer, following concerns it would unfairly benefit larger businesses.

The draught relief, which previously only applied to large kegs, is set to come in from next August.

Nik Antona, chairman of the Campaign for Real Ale, said this latest change meant "smaller breweries, cider producers and pubs can all benefit".

"The announcement that the new rate of duty for draught beer and cider will go ahead from August 2023 is fantastic news for their great British local as the tax system, will recognise that beer, cider and perry served in a pub or social club should be taxed at a lower rate to alcohol bought in the likes of supermarkets."

Emma McClarkin, chief executive of the British Beer and Pub Association also cheered the news, saying: “We welcome the steps taken by the Government in the Chancellor’s fiscal statement. The measures announced today will mean a boost of £500m for our sector, enabling growth following successive crises and allowing us to thrive in the future."

The Treasury also published consultation documents on all its alcohol duty changes, in which officials signalled prices for alco-pops could also benefit.

They suggested draught, spirits-based, 'ready-to-drink' products would receive planned draught relief, if their ABV was below 8.5pc, after noting that there was a "small but growing market" for these drinks.

Whilst Mr Kwarteng's policy announcements were welcomed by brewers, pub chiefs were less upbeat. Kate Nicholls, chief executive of UKHospitality, which represents pubs and restaurants, said there were some "welcome" updates in the mini-Budget, including the alcohol duty freeze although noted alcohol duty was more a "tax on production".

She said: "There's certainly lots to welcome in there about the direction of travel of the Government in terms of targets of tax cuts. However, many businesses in our sector are still looking at survival, and there was little there that provides direct meaningful support in the short term."

Hospitality bosses had been pushing for larger changes to VAT and on business rates, with Steve Alton, chief executive of the British Institute of Innkeeping, saying: "Simply without further support many pubs will fail.”