1. Home
2. News

Industry uncertain if Budget will bring duty relief

And, if the combination of the pandemic and Brexit will have been enough to lead to the Chancellor to take another look at it.

In March of last year, the Chancellor announced that all alcohol excise duties were frozen, which avoided increasing the burden on drinks industry businesses and consumers as measures to address Covid-19’s spread took hold – but the closure of on-trade venues days after the announcement meant that those businesses were unable to feel the benefit.

Since then, as before, the industry has made numerous calls for duty to be cut or at least frozen in the forthcoming budget on 3 March, with the UK’s alcohol industry duty remaining one of the highest in Europe, despite last year’s suspension. 

So will the Chancellor ‘freeze or cut’? Michael Saunders, Bibendum’s CEO and chair of the WSTA, said “it's a possibility – my heart says yes, but my head is less optimistic”. 

“The default position is an RPI increase. An unfortunate result would be a larger increase – I assume under the banner of ‘sin tax’. The industry, as we all know all too well, is still in the throes of lockdown that has cast a huge shadow over many. And this doesn’t seem set to change in the immediate future. Nor the increased costs and complexities around the movement of goods,” he told Harpers.

While Saunders noted that the Chancellor “may well cite success of alcohol sales during the various lockdowns”, he said that that ignores consumers and the suppliers to the hospitality industry. 

“A duty cut would ‘cost’ little given RPI is low and would support a strong recovery. And history has shown that freezes and cuts often lead to increased revenues to the Exchequer. It would also be popular.” 

Miles Beale, CEO of the WSTA, added: “It is hard to know what the Chancellor is planning for alcohol duty at the Budget, but we hope it isn’t tax rises in the middle of a pandemic! 

“If he is listening to British businesses and consumers, he will know that they do not want – and cannot afford - more punitive tax rises.”

While Beale said the WSTA appreciates that the public finances are “under tremendous pressure”, he also highlighted how some of the businesses represented by the trade body – especially those supplying the hospitality sector – are “under existential pressure”.

On top of the forthcoming Budget, there is also the forthcoming review of alcohol excise duty, which, as Saunders put it, “we need to worry about a lot”. 

However, the Brexit and Covid-19 issues are likely to delay the outcome of this review for some months, during which period the government is likely to seek to maximise revenues to deal with the huge amount of debt that has built up during the past year, said David Gleave MW, MD of Liberty Wines.

“Also, as a socially responsible industry, we need to find a way of coping with the cost of a high rate of duty by selling better wines where the duty comprises a smaller overall percentage of the cost,” Gleave added. 

HMRC declined to comment, with a spokesman saying “by way of a response, we do not provide comment or steer on potential tax changes”.