Hard pressed pubs, bars and restaurants have received a ‘much needed Christmas present’ with the news that the planned February 2023 increase in alcohol duty has been cancelled, and the whole issue will not be looked at again til August 2023.
Coming as the latest in a dizzying series of government u-turns, this week’s announcement scraps the duty increase announced by Chancellor Jeremy Hunt in his earlier package of measures that themselves reversed the decisions made by his predecessor Kwasi Kwarteng – but despite the muddled route to this point, the hospitality sector has warmly welcomed the news.
In a statement to the House of Commons, Exchequer Secretary to the Treasury James Cartlidge said that the new plan would ‘provide certainty and reassure pubs, distilleries, and breweries as they face the challenging period ahead’.
While new duty rates usually come in on the 1 February each year, Mr Cartlidge said that this year the duty rates decision will be held until Chancellor Hunt delivers his Spring Budget on 15 March, 2023 – and if any changes to duty are announced then, they will not take effect until 1 August 2023.
This aligns any changes with the planned date for major reforms of the alcohol duty system, and amounts to an effective six month extension to the current duty freeze.
Mr Cartlidge said: “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 of industry-wide changes next summer.”
The new alcohol tax system planned for next August will, said the Exchequer, adopt a ‘common-sense approach’, where the higher a drink’s strength the higher the duty, whilst new reliefs will be made available to help pubs and small producers thrive.
New Draught Relief will be worth £100 million a year and will ensure smaller craft producers can benefit, the threshold for qualifying containers will be 20 litres.
Small Brewers Relief will be renamed Small Producer Relief, and reformed, removing the ‘cliff-edge’ when relief is withdrawn for brewers who make more than 5,000 hectolitres a year. There will instead be a gradual taper to the removal of relief, which will empower small breweries to grow, after they had made clear through consultation that the current design was acting as a barrier. Further, the expansion of the relief means that all producers that make drinks below 8.5% – mostly craft brewers and cidermakers – will be able to get relief on their products.
The intention is that the higher rate for sparkling wines will come to an end, meaning they will pay the same rate as still wine. Liqueurs will be put on the same footing as fortified wine, meaning a sherry and Irish Cream will now pay the same duty, and super-strength ‘white cider’ will rise to address public health concerns.
The deferral of any change in alcohol duty til next August was welcomed across the trade. Chief executive of the British Beer and Pub Association, Emma McClarkin, said: “This freeze will allow £180m to be reinvested into our sector at a critical moment and inject a much-needed flurry of festive cheer for pubs and breweries.
“We look forward to working with the government to implement the promised duty reforms in 2023 ensuring a fair and modernised rates system in the UK that support lower-strength products and our country’s pubs.”
Diageo’s Managing Director GB, Nuno Teles, said: “The decision by the Chancellor to freeze alcohol duty until August will come as a much needed Christmas present for hard pressed pubs, bars and restaurants up and down the country. Today’s news provides much needed certainty for the sector and we raise a glass of Guinness to the Chancellor and the PM in thanks. Cheers, Chancellor!”
However, Michael Kill from the Night Time Industries Association called for more government support for the sector: “The alcohol duty freeze will give businesses some breathing space but will not repair the damage already done or solve the immediate challenges faced by the sector following three years of disruption,” said Mr Kill.
