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Inflation drains Treasury coffers by £600m

Published:  21 February, 2024

Soaring alcohol inflation has made an explosive hole in HMRC’s receipts, new figures reveal.

Wine and spirit businesses along with bodies such as the WSTA spent much of 2023 and 2024 warning that last year’s duty hikes would have a severe dampening effect on sales and by extension, the revenue from excise receipts lining the government’s pockets.

This prediction has now been borne out by HMRC statistics. Published today (21 Wednesday), the figures show the Treasury lost £436m in wine and spirits excise duty between September and January 2023/24 compared with the same period in 2022/23. Combined with the losses from beer and cider, that number rises to almost £600m.

“Last year’s punishing duty increases have had an immediate and negative impact on the amount of wine and spirit sold in the UK,” WSTA chief executive Miles Beale said.

“Not only has this hurt British businesses, it has fuelled inflation and significantly reduced excise duty receipts to the Exchequer.”   

August 2023’s alcohol duty increases were the largest in almost 50 years: they added 20% to excise duty on over 85% of all wines on the UK market and more than 10% to duty paid on full strength spirits.  

More sobering reading is to follow. As a result of the hikes, sales volumes have declined while alcohol inflation has risen to more than double the headline rate. In the twelve weeks to December, sales of spirits and wine were in decline in Britain’s supermarkets and shops. Compared to the previous year, spirit volume sales were down 7.1%, while wine volumes were down 4.1%.

According to ONS data for average prices on items in the UK consumer’s shopping basket in January 2024, the average price of a bottle of red wine is now £7.85 (+8% on last year). The average price of a bottle of gin has climbed to £17.11 (+6%), while fortified wine jumped to £11.67 (+17%).

Philippa Strub, UK CEO of Laithwaites, has added her voice to the call from businesses asking for urgent action from government. Alongside a cut in duty at the Spring Budget (15 March), this includes calls for the duty easement to continue past the 2025 deadline.

The alternative, she says, is to “unleash a system so fiendishly complicated that even Laithwaites, a business with over 50 years of experience, will struggle to operate across our range of 2,000 wines”.

For now, cutting duty at the upcoming Budget remains the key short-term priority. Wine duty was last cut 50 years ago when Nigel Lawson was Chancellor back in 1984. Spirit drinkers haven’t enjoyed the benefits of a duty cut since 2015 under the coalition government.  

“Recent history has shown that cutting excise duty can lead to increased sales, prevent further price rises for consumers and bring in more revenue into the Exchequer. We are calling on the Chancellor to do himself – and everyone else – a huge favour by cutting alcohol duty,” Beale concluded.