No change in alcohol duty

By Gemma McKenna

- Last updated on GMT

Related tags Vat increase Tax Government

Osborne: no change on duty but VAT up to 20%
Osborne: no change on duty but VAT up to 20%
The alcohol duty escalator remains in place and VAT will rise to 20% — that's the news from the new Government's Emergency Budget. Chancellor...

The alcohol duty escalator remains in place and VAT will rise to 20% — that's the news from the new Government's Emergency Budget.

Chancellor George Osborne also announced that the 10% above inflation increase on cider, which was announced at the last Budget in March, will be reduced by the end of this month.

At the news that VAT is to rise by 2.5% in January 2011, Osborne said: "The years of debt and spending make this unavoidable"

The duty escalator on alcohol remains for time being, though Osborne said the Government would look at the taxes on products that most account for binge drinking again in the autumn.

Other measures announced included a rise on the National Insurance threshold and an extension of the Enterprise Finance Guarantee Scheme, to help improve lending.

Trade reaction

Brigid Simmonds, British Beer & Pub Association chief executive, said: "We applaud the Government's decision to freeze beer tax and deliver on its promise made in the coalition agreement to not penalise pubs, responsible drinkers and important local industries. This is a welcome relief for struggling pubs during difficult times.

"A beer tax freeze will also help the beer and pub sector's ability to play its part in contributing to much needed economic growth and generating valuable private sector jobs.

"The VAT rise is a price to pay for tackling the deficit and bringing Britain's balance sheet back in order. This tax increase is not welcome, but is understandable and applies to everybody. We hope this will be short-term pain for long-term gain.

"Once the nation's finances are back on a more even keel, we look forward to VAT rates returning to more favourable levels. We also look forward to the promised review of our alcohol tax system tax as an opportunity to rebalance our tax system to one that is more fair towards community pubs and our national drink - beer."

Mike Benner, Campaign for Real Ale chief executive, said: "In the New Year, many pub goers will be hit with a VAT increase that will push up the combined taxation on a pint of beer to over a pound!

"This historically sad moment for the nation's 15 million pub goers is compounded by the knowledge that this increase will cause yet more well-run community pubs to shut their doors unless the Government acts.

"Relentless tax increases on the nation's pubs are contributing to pub closures, job losses and a decline in community spirit.

"The announcement of a review into alcohol pricing and taxation this Autumn gives the Government an opportunity to avoid the harm that this VAT increase will impose on pubs. CAMRA will be pressing for targeted measures to support well-run community pubs. These measures could include a new class of business rate relief for community pubs and a compensatory reduction in beer duty."

Wine & Spirit Trade Association chief executive Jeremy Beadles said: "Today's announcement provides some relief for a sector that has faced substantial tax increases in recent years and I welcome the Chancellor's decision.

"Repeated tax hikes have produced less revenue for the Treasury and punished responsible drinkers, while failing to tackle the problem of binge-drinking."

Simon Dodd, commercial Director at pub operator Orchid Group, welcomed the news on alcohol duty.

"The green shoots of recovery we and our sector are starting to experience should now, we hope, continue.

"However, Orchid is strongly against the VAT increase from 17.5% to 20%.

"Our recovery is fragile and the increase of 6p a pint in Jan 2011, followed by a CPI +2% in March 2011 (another circa 6-8p on a pint) could dramatically damage this."

ALMR chief executive Nick Bish said: "The industry will be relieved that it was spared any particular attention from the Chancellor and although the VAT increase is swingeing it is no more than was widely forecast. But our customers will certainly have less money in their pocket so the task of competing for their business will be more acute than ever." He added: "And we notice that the VAT-driven differential between the price of a pint from the supermarket and across the bar counter is yet again widened.

"The focus of our lobbying with government is now to seek relief from regulatory interference and red tape.

"We can take our share of the general debt reduction burden and we will contribute to employment and to the prosperity of small businesses, but only on the basis that pubs and bars and restaurants are given room to succeed. We are definitely part of the solution."

A Punch spokeswoman said: "We recognise that the Government needs to take steps to tackle the deficit and bring the economy back in line and hope that this will be a short term measure (that will be rebalanced in the future).

"In the longer term, we would encourage the Government to recognise the important role that pubs play in local communities and the wider economy and to take positive steps to reduce the tax burden on our licensees.

"We firmly believe that the duty burden imposed on alcohol by the previous Government has exacerbated the move of alcohol sales from the on-trade to the off-trade. Further increases in duty will continue this trend, resulting in reductions in tax take by the Exchequer."

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