The UK Treasury has extended its freeze on alcohol duty for another six months, handing a much needed relief to pubs, breweries and distilleries across the nation. The duty freeze is expected to remain until a new universal alcohol tax system comes into effect in August.
Treasury minister James Cartlidge has told lawmakers that the government will not be increasing duties on alcohol products including beers, cider, wine and spirits until August 1, 2023, providing much needed relief for the UK’s hospitality industry.
While new duty rates are announced by the Finance minister on the first of February every year, Cartlidge has promised that the duties on alcohol sold by pubs, breweries and distilleries will remain the same until a new simplified tax system will come into effect in August. The move was made by the government to provide reassurance to businesses affected by the double whammy of a cost of living crisis and travel disruption caused by worker protests across the country during the busiest time of the year.
“The alcohol sector is vital to our country’s social fabric and supports thousands of jobs – we have listened to pubs, breweries and industry reps concerned about their future as they get ready for the new, simpler, alcohol tax system taking effect from August. That’s why we have acted now to give maximum certainty to industry and confirmed there will be just one set industry-wide changes next summer” said Cartlidge.
Last month, Chancellor of Exchequer Jeremy Hunt unveiled his Autumn package that will see a series of tax increases and spending cuts to curb the highest inflation rate faced by the British economy in over 40 years. Latest forecasts by the country’s central bank, the Bank of England (BoE), says the economy has officially entered a period of “prolonged recession” that will effectively wipe out eight years of growth achieved by the country.
The Office for Budget Responsibility (OBR) says that despite reforms by the Rishi Sunak government, the economy would shrink by 2% over the length of the recession period that is expected to last until mid 2024. Inflation, which is expected to be 7.4% next year, added with the cost of living crisis will lead to overall living standards of Britons falling by over 7% in the next two years. Housing prices are predicted to drop by 9% in the same period. Unemployment is forecast to rise by 505,000 from 3.5%, to peak at 4.9% in the third quarter of 2024.
While the Chancellor pointed out global factors such as Covid and the war in Ukraine as reasons for the economic crisis, OBR forecasts noted the BoE’s interest rate hike on the Sterling and the disastrous mini-budget announced by the Liz Truss government in September as main reasons behind the turmoil faced by Britons. The budget announced by then Chancellor Kwasi Kwarteng is expected to increase the government’s debt by £400 billion in 2026-27 than what was forecast in March. This is equivalent to 18% of the country’s entire GDP (gross domestic product).
The current alcohol duty was announced in the 2021 Autumn Budget, saving consumers £3 billion over five years. However, the existing duty rate was set to be revised in February as Chancellor Hunt will reverse most of Liz Truss’s September Growth Plan to stabilise and strengthen the economy by announcing his first full budget on March 15, 2023. The event will allow Hunt to consider the effects of various recent developments, including the cost of energy and the interest rate hikes by the central bank.
Hunt will also decide on whether to boost investment initiatives for businesses by offsetting the planned increase in corporation tax from 19% to 25%, which will come into effect in April 2023. With £25 billion in tax increases and more than £30 billion in spending cuts to be expected by 2027-28, taxes will contribute to 37.5% of the country’s economic output in 2025-26 – which is the highest since the end of World War II.
Last year’s budget announcement was the biggest reform made to alcohol duty in 140 years. The upcoming alcohol duty system means consumers will be taxed depending on the amount of drinks they’ve had. The New Draught Reliefs is worth £100 million a year and will help pubs and small distilleries survive current economic conditions. The threshold for qualifying for the relief programme will be 20 litres. The Small Brewers Relief which will be renamed as Small Producer Relief, is set to be reformed and expanded to increase the limit to include brewers who produce more than 5,000 hectolitres of alcohol a year.