Budget sparks criticism with new alcohol duty reforms

By James Bayley

Published: 30 October, 2024

The UK’s Autumn Budget, introduced by Chancellor Rachel Reeves, has announced significant changes to alcohol duties, drawing sharp criticism from the alcohol and hospitality industries.

Starting February 2025, the government will increase alcohol duty on non-draught products by 3.65%, aligning with Retail Price Inflation (RPI), while cutting duty on draught products served in hospitality venues by 1.7%. Industry stakeholders have expressed concerns over the policy, claiming that it will hinder growth, escalate consumer prices, and add operational burdens for businesses already contending with economic pressures.

Miles Beale, chief executive of the WSTA, led the criticism, calling the duty hike on non-draught alcohol “a real kick in the teeth for both businesses and consumers”. Beale argued that the decision contradicts government efforts to protect incomes, pointing out that previous duty increases have typically reduced Treasury revenue by depressing sales.

Read more: Chancellor announces pay rise, adding £1.9bn to hospitality wage bill

The WSTA highlighted a recent £500m drop in alcohol duty revenue following an August tax hike, a decline that many attribute to reduced sales in the face of higher costs. Smaller businesses face additional complications as the duty system introduces up to 30 new tax bands based on alcohol by volume (abv), creating a complex pricing structure. Beale stressed that this approach will disrupt trade and raise consumer costs, especially for wine, as businesses struggle to adapt to the changes.

The UKHospitality group echoed these concerns, with chief executive Kate Nicholls describing the Budget as “the latest blow for hospitality businesses”. Nicholls said that the sector is already facing a surge in operational costs, including rising employment expenses, scheduled National Insurance increases and new business rates. She warned these added pressures could impede growth within a sector still recovering from the economic impacts of Covid-19.

However, Nicholls welcomed the government’s decision to lower business rates permanently for hospitality venues, highlighting its potential to support high streets and local communities. Yet she cautioned that the implementation must consider the realities of small and medium-sized businesses to be effective.

While the draught duty cut aims to provide relief for hospitality venues, many small operators expect limited benefits. The increase in non-draught duty will likely elevate prices for customers, with some industry representatives calling for broader measures to address rising costs and prevent potential closures.

The Scotch Whisky Association (SWA) has also voiced opposition to the Budget, arguing that the increased duty on Scotch Whisky – a product already facing one of the highest tax burdens in the G7 – unfairly discriminates against Scotland’s national drink. The SWA pointed to an earlier tax hike, which it claims has led to lower Treasury revenue and hampered sector growth, urging the government to reconsider its approach.

As the industry braces for these changes in 2025, the call for government collaboration and support remains strong, with hopes for future adjustments that will foster growth rather than stifle it.

Printer friendly version