Distillers, brewers and pubs have said the Government’s decision to scrap plans to freeze alcohol duty is a “huge blow” amid pressure from soaring costs and softer consumer sentiment.
New Chancellor Jeremy Hunt confirmed on Monday that the Government will reverse a raft of tax cuts promised by predecessor Kwasi Kwarteng in the mini-budget last month.
This included a commitment to freezing alcohol duty, which was due to come into force in February 2023.
The cost of doing business is completely out of control for pubs and brewers and the failure to act today to reduce pressures on businesses will hit them extremely hard
It is understood that plans to increase the duty in line with retail price index (RPI) inflation will save the Government around £600 million a year.
Most recently, RPI inflation struck 12.3% in August.
A similar increase to alcohol duty would be the equivalent to a roughly 39p increase on a bottle of wine.
The Government has stressed that the next steps of its lengthy review into alcohol duty will continue as planned despite the policy reversal.
Mark Kent, chief executive of the Scotch Whisky Association, urgently called on the Chancellor to reinstate the planned freeze.
“Business can only work on the basis of certainty and stability,” he said. “That has been stripped from the Scotch Whisky industry following the Chancellor’s decision to U-turn on the duty freeze for Scotch Whisky announced just over two weeks ago.
“With the average-priced bottle of Scotch Whisky already taxed at 70%, a double-digit rise in spirits duty will now seriously reduce the industry’s ability to support the UK economy through investment, job creation and rising revenue to the Treasury.
“It will add to pressures in the UK hospitality industry and household budgets as costs inevitably increase.”
Emma McClarkin, chief executive of the British Beer and Pub Association (BBPA), said: “The Chancellor’s decision today to reverse the alcohol duty freeze is a huge blow to brewers and pubs.
“The freeze would have delivered a £300 million saving to our industry at a time when we desperately need any relief we can get, to help to keep a lid on spiralling costs and keep the price of pint affordable for pub goers this winter.
“The cost of doing business is completely out of control for pubs and brewers and the failure to act today to reduce pressures on businesses will hit them extremely hard.”
As Mr Hunt set out plans to scrap the duty freeze in the Commons, MPs warned about the uncertainty the move would cause for alcohol producers.
Liberal Democrat MP Christine Jardine (Edinburgh West) said: “I am sure the Chancellor would agree that certainty is key to stability for business.
“So, as has already been mentioned by one or two other members, the Scotch whisky industry and spirits industry generally is now facing uncertainty because of the U-turn that the Chancellor has done on freezing duty.
“They have no certainty about whether it will now go up, or when it will go up, or when they will even know.
“Can the Chancellor commit to letting them know at an early date, as soon as possible, what actually is going to happen to a vital industry for so many of our constituencies?”
Mr Hunt replied: “We will conclude the decisions on what we are going to do in terms of excise duty reform generally as quickly as we can, but for now I am afraid the difficult decision that I have announced today stands and we are not going to be able to proceed with the freeze from next February.”
