The price of a bottle of wine could rise by 44p this summer after Jeremy Hunt limited a freeze on alcohol tax to pints.
The chancellor unveiled a surprise “Brexit pubs guarantee” in his budget that will keep the levy on beer and cider up to 11p lower than shop-bought booze.
But drinkers will see the duty on other alcohol soar by 10.1% in August in line with inflation after a freeze during the peak of the cost of living crisis.
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Mr Hunt said the exemption would protect pubs as he quipped: “British ale is warm but the duty on a pint is frozen.”
However, wine and whisky producers did not see the funny side as they accused the chancellor of inflicting a “historic blow” on their industries with the highest tax increases in nearly 50 years.
The Wine and Spirit Trade Association (WSTA) said the changes will mean that duty on a bottle of still wine will go up by 44p while a bottle of vodka could rise by 76p.
For fortified wines, the increase will be even greater, with port potentially rising by £1.30 a bottle.
Miles Beale, Chief Executive of the WSTA, said the government was “punishing” businesses and consumers with “the largest increase in wine duty since 1975”.
“What does government have against people who choose to produce and drink wine?” he said.
“These crippling inflationary tax hikes will be lumped on top of stealth tax rises for some alcoholic products, which the government has built into the move to taxing alcohol by strength.
“After all the effort to relaunch hospitality supply chains in 2022, the government is offering no help in 2023 for the wine and spirit trade – and particularly for the UK’s 33 million wine drinkers who will see their – and the nation’s – favourite drink hit with a 44p duty rise in the midst of a cost-of-living crisis.”
The Scottish Whisky Association (SWA) also claimed the rise in alcohol duty would be the “largest tax increase for decades”.
Chief executive Mark Kent told Sky News: “It’s bad news. It’s bad news for the consumer, it’s bad news for inflation, bad news for spirits, bad news for scotch and bad news for Scotland which produces 90% of all UK spirits.”
The whisky boss said the duty rise means 75% of the cost of a bottle of scotch will go to the exchequer in tax – about £11 out of £15.
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The key points
Mr Kent said that is “the biggest tax hike since 1981” and the largest rate in the G7.
“We are already the highest taxed country in the G7 for spirits and our taxes are 60% more on average than the EU, so all of this puts us at a competitive disadvantage compared to other countries,” he said.
“It discriminates against people who drink spirits, what we want to see is a fair system where the unit of alcohol, however you choose to consume it, is taxed at the same rate.”
He warned the hit to profit will impact jobs and investment as he called on MPs to reject the measure.
“Our message has been clear, the best outcome would be a freeze because that has shown to bring in increasing revenues for the exchequer and supports businesses to invest more in the economy and in jobs.”
‘Brexit pubs guarantee’
Explaining the beer exemption as he set out his budget, Mr Hunt said he wanted to protect “one of our other most treasured community institutions, the great British pub”.
He told the Commons: “In December, I extended the alcohol duty freeze until August 1, after which duties will go up in line with inflation in the usual way.
“But today, I will do something that was not possible when we were in the EU and significantly increase the generosity of Draught Relief so that from August 1 the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets, a differential we will maintain as part of a new Brexit pubs guarantee.
“Madam deputy speaker, British ale may be warm, but the duty on a pint is frozen.”
Many Tory MPs welcomed the announcement, while the British Beer and Pub Association (BBPA) said it was a “positive” step in time for summer.
But Emma McClarkin, the BBPA’s chief executive, added: “The fact is our industry will be facing an overall tax hike, not a reduction, come August. Duty on non-draught beer will rise and the measures introduced today won’t rebalance the catastrophic impact soaring inflation and unfair energy contracts are having on both pubs and the breweries that supply them.”