Beer and sparkling wine duty cuts – we’ll cheers to that!

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Prime Minister Boris Johnson and the Chancellor of the Exchequer Rishi Sunak visit Fourpure Brewery in South East London on the day the Chancellor delivered his 2021 Budget to the House of Commons. Picture by Andrew Parsons / No 10 Downing Street

Government spending hits levels not seen since 1970s as the Chancellor announced beer and wine duty cuts, a minimum wage rise and business rates relief in his budget yesterday.

The alcohol duty changes have been welcomed by the alcohol industry, which has been hit hard during the pandemic as pubs, clubs, bars and restaurants were forced to close their doors.

Chancellor Rishi Sunak announced a raft of changes to alcohol duties that he promised will bring down the cost of a pint in the pub and make the tax on alcohol sales “simpler, fairer and healthier.”

Alcohol will now be taxed on the basis of its strength rather than the current system, which has been in place for decades and according to the Institute of Fiscal Studies has been “a mess.”

Mr. Sunak, who is teetotal, said the UK’s 380 year old system of alcohol duty was “outdated, complex and full of historical anomalies” and it’s time it was “fixed.”

Andrew Carter, the chief executive of Kent-based sparkling wine specialist Chapel Down, said:

“The duty saved will enable the industry to create jobs, support families, and bring even more young talent into this exciting, developing sector as it recovers from the pandemic.

“The English wine industry – comprising of 3,800 acres under vine, 800 vineyards, 178 wineries – is expanding rapidly and governmental support provides the opportunity to build English wine on a global level.”

The Society of Independent Brewers (SIBA) called the streamlining of the individual duties “radical” and praised the changes saying it created a “more level playing field between small breweries and cider producers.”

James Valder, SIBA Chief Executive said:

“The lower rate of duty for beer sold in pubs is a huge win for the industry and something which SIBA has been campaigning for.”

He added that the freeze in alcohol duty is “very helpful” at a time when brewers are seeing an increase in supply and running costs.

Share prices in pub companies jumped after the announcement, with JD Wetherspoon gaining 5.3, Mitchells & Butlers 5.7% and City Pub Group 1.2%.

The main changes, which will take effect from 1 February 2023 are as follows:

• The number of duty rates on alcoholic drinks will be cut from 15 to six – “the stronger the drink, the higher the rate,” Mr Sunak said.

• All drinks above 8.5% ABV will pay the same rate of duty – so rose will come down by 23p per bottle while strong beer will be more expensive.

• Fruit ciders and low alcohol spirit drinks, such as G&T in a can, below 3.5% ABV will have lower rates.

• A new Small Producer Relief will give tax reliefs to small brewers and distillers of beer, cider (for the first time) and other alcoholic drinks less than 8.5% ABV.

• Sparkling wine’s 28% premium duty will be cut so it is the same as still wine of equivalent strength.

• Draught relief – a lower rate of duty on draught beer and cider from containers over 40 litres, with a cut of 5%.

• An alcohol duty rate rise will be cancelled from immediate effect.

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