Rishi Sunak today unveiled a major overhaul of the UK’s alcohol taxes as he cut the price of a pint of draught beer by three pence – but increased the levy on red wine.
The Chancellor used his Budget to set out a new Draught Relief policy which will see beer and cider duty reduced by five per cent.
He said that amounted to the biggest cut on the tax on beer in 50 years and the ‘biggest cut to cider duty since 1923’.
He also announced a planned increase to the duty on spirits, wine, cider and beer will be cancelled while the ‘irrational’ 28 per cent duty on premium sparkling wines like prosecco and fruit ciders will be cut.
However, the Chancellor’s plans to simplify the alcohol duty system – which he said was made possible by Brexit – will see some drinks become more expensive, with red wine drinkers among those hit.
Mr Sunak said that under his new system which be rolled out in February 2023, the stronger the drink, the higher the rate of tax will be.
That will also mean less-strong drinks like Rose wine and liqueurs which are currently ‘over taxed’ will become cheaper.
Rishi Sunak today unveiled a major overhaul of the UK’s alcohol taxes as he cut the price of a pint of draught beer and cider by three pence
The Chancellor said the Draught Relief amounts to the biggest cut on the tax on beer in 50 years and the ‘biggest cut to cider duty since 1923’
Treasury estimates suggest the changes to beer duty will shave three pence in tax off the cost of a pint of Stella Artois and Guinness in a pub
Some two pence in tax will be taken off the cost of a pint of Strongbow and Magners in a pub
The tax on stronger red wines will go up under Mr Sunak’s plans. For example a bottle of Hardy’s VR Merlot will be hit with 35 pence more in tax
But fruit ciders will be made cheaper because they will now be treated the same as beer and apple cider. A pint of Strongbow Dark Fruits in a pub will have 13 pence less tax
The Chancellor told the Commons that the existing alcohol duty system is ‘outdated, complex and full of historical anomalies’.
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He said his overhaul will deliver the ‘most radical simplification of alcohol duties for over 140 years’, resulting in a ‘simpler, fairer and healthier’ system.
Mr Sunak said Brexit made the shake-up possible, telling the Commons the Government is ‘taking advantage of leaving the EU’ by rolling out a raft of changes.
The changes will see the overall number of alcohol duties reduced from the current 15 to just six.
Mr Sunak said the new system will be guided by a ‘common sense principal’ of ‘the stronger the drink, the higher the rate’.
He said: ‘This means that some drinks, like stronger red wines, fortified wines or high strength white ciders will see a small increase in their rates because they are currently undertaxed given their strength.
‘That is the right thing to do and will help end an era of cheap high strength drinks which can harm public health and enable problem drinking.’
The Chancellor said the ‘converse is also true’ for alcoholic drinks which are not as strong.
He said: ‘Many lower alcohol drinks are currently over taxed and have been for many decades.
‘Rose. Fruit ciders. Liqueurs. Lower strength beers and wines. Today’s changes mean that they will pay less.’
Mr Sunak said that drinking habits in the UK had changed, with more people now drinking sparkling wines as he moved to make them cheaper.
He told MPs: ‘Over the last decade, consumption of sparkling wines like Prosecco has doubled. English sparkling wine has increased tenfold. It is clear they are no longer the preserve of wealthy elites.
‘And they are no stronger than still wines so I am going to end the irrational duty premium of 28 per cent that they currently pay.
‘Sparkling wines wherever they are produced will now pay the same duty as still wines of equivalent strength.’
Mr Sunak had been under pressure from Tory MPs to bring forward help for struggling pubs.
Many Conservative MPs had been calling for a reduction in beer duty and Mr Sunak obliged as he announced his new ‘Draught Relief’ policy.
He told the Commons: ‘A fairer, healthier system supports pubs so I can announce today Draught Relief.
‘Draught Relief will apply a new, lower rate of duty on draught beer and cider.
‘It will apply to drinks served from draught containers over 40 litres. It will particularly benefit community pubs who do 75 per cent of their trade on draught.
‘And let me tell the House the new rate: Draught Relief will cut duty by five per cent.
‘That is the biggest cut to cider duty since 1923, the biggest cut to fruit ciders in a generation, the biggest cut to beer duty for 50 years.
Bottles of Rose wine will see tax bills slashed. The tax applied to a bottle of Echo Falls Zinfandel will be 23p lower
Tax on sparkling wine will be reduced significantly under the Chancellor’s new simplified duty system
The tax applied to fortified wines will increase under the Chancellor’s plans. A bottle of Harvey’s Sherry will cost 51 pence more
‘This is not temporary, it is a long term investment in the British pubs of £100million a year and a permanent cut in the cost of a pint of 3p.’
He added: ‘These much needed reforms will come into effect in February 2023.’
John O’Connell, chief executive of the TaxPayers’ Alliance campaign group, welcomed the changes and said: ‘After being battered by the pandemic, punters, publicans and producers will be raising a glass to these reforms and rate cuts.
‘Shaking up alcohol duties has been a long time coming and big moves to simplify the system are a welcome signal of support for the Great British pub and the hospitality industry more broadly.’
Jez Lamb, founder of the Wirral-based craft beer marketplace [email protected], questioned whether the shake-up will benefit smaller breweries.
He said: ‘The devil’s always in the detail. It’s brilliant to see alcohol duty cut on draught beer but that’s only for ‘containers’ more than 40L.
‘This is great for the big breweries but so many smaller craft brewers only supply in 30L containers.
‘This just further supports the big players in the market, not supporting the smaller, independent breweries who need support most.’
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