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Duty cut on low alcohol beers, no change for wines or spirits

Published:  30 November, 2010

The government will hike duty on beers over 7.5% abv but cut it on beers below 2.8% abv ? tax on spirits and wine will remain untouched.

The government will hike duty on beers over 7.5% abv but cut it on beers below 2.8% abv ? tax on spirits and wine will remain untouched.


The measures, announced today by the Treasury as part of the Review of Alcohol Taxation, are a sign that the coalition wants to "tackle problem drinking, without unfairly penalising responsible drinkers, pubs and important local industries".


A number of respondents suggested tax on spirits should be increased, but the Treasury concluded that "evidence about an increase in the relative level of duty on spirits is unclear as to the extent of potential benefits".

The review also stated: "A relative increase (on spirits) could also unfairly penalise responsible drinkers and important local industry and so will not be implemented as part of this review."


One of the other arguments put forward by campaigners was that all alcohol products should pay tax based on their alcohol content ? known as duty equivalence. Duty on one unit of alcohol would be the same, regardless of drink type. The report stated that if duty was aligned to spirits it would mean increasing cider duty by 250% and beer duty by 40%. "These substantial changes would significantly penalise responsible drinkers."



Trade reaction

A spokesman for the WSTA said: "We welcome the recognition that taxation is not the solution to tackling problem drinking and alcohol misuse."


Brigid Simmonds, chief executive, of the British Beer & Pub Association, welcomed the cut in duty on lower strength beer, but called for a "duty system that nudges consumers to choose lower-strength, pub-based drinks such as beer". "It would create a win-win situation ? a more balanced system of alcohol taxation that would bring in more revenues, and create up to 30,000 jobs in the UK," she added.


Simmonds described as "encouraging" the report's comments on how small retailers and pubs "do not have the same range of options as supermarkets", whose purchasing power and cross-subsidising strategies meant alcohol prices haven't risen as much as duty. 


At the June Budget the Chancellor confirmed it would continue with the duty escalator inherited from the previous Labour government which means an increase in duty by 2% above inflation each year to 2014-15.

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