In the first Budget of the new Labour Government, off-trade alcohol duty was kept in line with RPI inflation.
To support pubs, Draught Relief was increased. This means that alcohol sold on draught (under 8.5% and in containers of at least 20 litres) will have rates reduced by 1.7%. This increases the value of Draught Relief from 9.2% to 13.9% for qualifying beer and cider products and from 23% to 26.9% for qualifying wine, other fermented products, and spirits. This will cost the Treasury £465 million over the next six years.
The temporary ‘easement’ for most wine products will end as planned on 31 January.
IAS welcomes the Chancellor’s decision to increase alcohol duty by inflation, while increasing draught duty relief.
Our statement:
We welcome the decision to specifically target cheap, supermarket alcohol in the budget, by raising off-trade alcohol duty by inflation. This will help narrow the widening gap in affordability between pub and supermarket alcohol. With nearly 80% of alcohol now consumed off-trade, we are no longer a nation of pub drinkers. This has contributed to the devastating rise in chronic harms from alcohol, including deaths from alcohol-related liver and heart disease.
Dr Katherine Severi, Chief Executive, Institute of Alcohol Studies.
There are both public health and economic reasons to move people back to drinking in pubs and not at home. In many areas, pubs are central to community life, promoting social cohesion in ways that solitary, home drinking cannot. People also tend to consume less alcohol in the on-trade, reducing overall alcohol consumption. And economically, hospitality requires far more employment than the off-trade, so could boost the economy.
Ultimately though, alcohol duty rates should cover the huge cost of harm that alcohol places on society, estimated at £27 billion in England alone. We would like to see the government consider an alcohol duty ‘escalator’, automatically raising duty above inflation at each fiscal event, as is in place with tobacco duty.
Dr Severi discusses the decision here:
Professor Sir Ian Gilmore, Chair of the Alcohol Health Alliance, also welcomed the decision:
After years of government inaction and repeated freezes or cuts to alcohol duty, this increase is not only a necessary measure in light of rising alcohol-related deaths, but also signals a shift toward prioritising health over industry interests, protecting the most vulnerable, and mitigating preventable harm. We ask that the revenue raised from the duty increase be used to contribute towards frontline NHS and alcohol treatment services which are currently not equipped to treat the soaring numbers of people in need.
I commend the Chancellor for her leadership in putting public health at the heart of policymaking, and I am optimistic that this is the beginning of real change for alcohol harm reduction in the UK.
Dr Peter Rice, Chair of IAS and Scottish Health Action on Alcohol Problems, said:
The increase in alcohol duty announced in today’s budget is good news for health and good news for raising much-needed revenues for public services. We also welcome action to narrow the price gap between pubs and supermarkets.
However, this increase merely maintains the real-terms value of alcohol duty, but the UK Government can go further. We would like to see the reinstatement of the duty escalator first introduced by former Labour Chancellor Alistair Darling which saw duty automatically uprated by 2% above inflation each year. When this was in operation, alcohol-related deaths began to fall and when it was scrapped by George Osborne, deaths started to increase again. Reintroducing this policy would ensure the public health and economic benefits of alcohol duty are maintained.
Dr Aveek Bhattacharya, Research Director at the Social Market Foundation, was more critical, stating on X that:
CAMRA, the Campaign for Real Ale, welcomed the Budget decisions:
Despite general rises in alcohol duty next year, CAMRA is pleased to see the Chancellor’s decision to cut the rate of tax specifically on beer and cider served in pubs, clubs and taprooms. This will help pub goers as well as independent breweries and cider producers who sell more of their products into pubs, and recognises the principle that drinking in the community setting of the local pub is far preferable to the likes of cheap supermarket alcohol.
Miles Beale, Chief Executive of the Wine and Spirit Association said:
We simply cannot understand why Government has said they are trying to protect income and in the next breath raising alcohol duty in a move that is totally counterproductive. Recent history has shown us that duty increases lead to price rises for consumers, a dip in sales and, as a result, fewer receipts for the Treasury. The near £500 million loss in alcohol duty receipts, in the last six months, couldn’t make that clearer.
Instead of reversing the last Government’s damaging plans to bring in unnecessary, complex and costly changes to the way wine is taxed, Labour wants to plough ahead.
The Scotch Whisky Association claimed that Labour had broken its promise to “back Scotch producers to the hilt”. Chief Executive Mark Kent said:
On the back of the 10.1% duty increase last year, which led to a reduction in revenue for HM Treasury, this tax hike serves no economic purpose. It will damage the Scotch Whisky industry, the Scottish economy, and undermines Labour’s commitment to promote ‘Brand Scotland’.“This further tax rise means the lessons have not been learned, and the Chancellor has chosen continuity with her predecessor, not change.
We urge all MPs who support Scotch Whisky to vote against this duty hike and tax discrimination of Scotland’s national drink.
The Scottish Licensed Trade Association (SLTA) told The Telegraph that pubs and bars could end up closing thanks to a triple whammy of costs linked to the rises in the National Living Wage and employer National Insurance.
The British Beer and Pub Association’s Emma McClarkin said:
The Chancellor clearly recognised the sector with some business rate relief – albeit at a lower percentage – and a cut to draught beer duty, but it is hard to see how this Budget will unlock growth and the critical investment needed to deliver it. The cumulative impact of today’s announcement means a £500m increase to the cost of doing business for the industry putting pubs, brewers, investment and jobs at continued risk.”
The Night Time Industries Association (NTIA) was also critical, with Chief Executive Michael Kill stating that the lowering of business rates:
will be immediately undercut by increased NIC Employer contributions and thresholds with increased individual employer contributions to businesses, net increase in alcohol duty and overarching workforce increases, although rightly intended to support the workforce, will have severe repercussions for already struggling businesses across the sector.
To round things off, Nigel Farage MP hinted at the amount he drinks, by stating in the Budget Resolutions:
The fuel duty freeze is very welcome, especially for those living in rural parts of our country. But for me, the big one is of course the 1p off a pint off draught beer. I have worked out that it will save me over £1 a week, so I am particularly thrilled about that.