Beer drinkers toast to budget, but wine and whisky producers feel sour over alcohol duty increase
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.”
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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.”
Jeremy Hunt has been urged to U-turn on the decision to end the alcohol tax freeze
‘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.”
Sainsbury’s has claimed it is winning over customers from its rivals after reporting higher than expected profits.
The country’s second-largest supermarket chain announced on Thursday its underlying pre-tax profits were £701m for the 2022/23 financial year.
The figure is up 1.6% on the previous year’s haul of £690m – and ahead of company forecasts that it would make between £670m and £700m.
It comes amid fierce competition from rivals, with Sainsbury’s crediting the gains to its Aldi Price Match campaign and its move to provide better prices to Nectar card holders.
The firm said: “In January we doubled the number of products price matched to Aldi, with over 600 products now included across fresh, grocery and household ranges.
“We also made it easier for customers to identify lower prices in store by moving all of our entry price point products into a single brand, Stamford Street and by introducing Low Everyday Prices, which has replaced Price Lock and includes over 1,000 products, primarily branded.”
Total sales for the 12 months to the end of March were £36.3bn, up 3.4% year-on-year.
Sainsbury’s also said it expects “strong profit leverage in the year ahead”, with growth of up to 10% and underlying profit of up to £1.06bn.
It comes after the company announced cost-cutting plans in February, including 1,500 job cuts.
Pic: Reuters/Isabel Infantes
The preliminary results on Thursday said the chain launched nearly 1,200 new products during the year, while sales of its premium Taste the Difference range grew by 12%.
Much of the growth came from grocery sales, which were up more than 9%.
However, clothing was down 6.4%. The company said there had been “a bit” of disruption to supplies following attacks on shipping in the Red Sea region.
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Like-for-like sales, excluding fuel, rose 4.8% in the fourth quarter.
However, this was the firm’s slowest growth for more than a year and down on the 7.4% rise in the previous three months.
Statutory pre-tax profits were £277m in 2022/23, down more than 15%, largely due to a restructuring of the company’s banking division.
Chief executive Simon Roberts said: “We said we’d put food back at the heart of Sainsbury’s and that’s what we’ve done. Our food business is firing on all cylinders.
“We have the best combination of value and quality in the market and that’s winning us customers from all our key competitors, driving consistent volume market share growth as more customers choose us for their weekly shop and all their special occasions.”
Last year Sainsbury’s reported a 5.4% rise in sales but a 5% fall in pre-tax profits.
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