The UK government has cancelled a planned freeze on alcohol duty in an “extremely disappointing” move for the drinks trade.
The alcohol duty freeze had been due to take effect from February 2023.
However, on Monday (17 October), newly appointed UK chancellor Jeremy Hunt confirmed the freeze would no longer happen. The U-turn is expected to save the government £600 million (US$677m) a year.
Instead, alcohol duty will rise in line with inflation.
The chancellor scrapped almost all of prime minister Liz Truss’s tax cuts that had been announced in the mini-budget last month.
Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA), said: “The news that the latest chancellor has scrapped the freeze to alcohol duty is extremely disappointing. This is yet another change of plans, which will cause disruption to UK wine and spirit businesses who have spent the last two years being bounced from one crisis to the next.
“Raising taxes is not only bad news for consumers worried about the cost of living, but also stifles growth and innovation for British businesses trying to recover from the pandemic and supply chain issues.
“History has shown that freezing alcohol duty does not have a negative impact on Treasury coffers. We look forward to discussing our concerns with Treasury officials.”
Certainty and stability ‘stripped’ from Scotch sector
Trade body the Scotch Whisky Association (SWA) slammed the duty-freeze reversal.
Mark Kent, chief executive of the SWA, said: “Business can only work on the basis of certainty and stability. That has been stripped from the Scotch whisky industry following the chancellor’s decision to U-turn on the duty freeze for Scotch whisky announced just over two weeks ago.
“Time after time, duty freezes on spirits have increased government revenue contrary to what the Treasury’s forecasts have predicted. The industry has been an economic anchor, even in times of volatility.
“With the average priced bottle of Scotch whisky already taxed at 70%, a double-digit rise in spirits duty will now seriously reduce the industry’s ability to support the UK economy through investment, job creation and rising revenue to the Treasury. It will add to pressures in the UK hospitality industry and household budgets as costs inevitably increase.
“Distillers are facing increasing economic headwinds and rising costs, the duty freeze offered much needed support. We urgently need that commitment to be reinstated.”