The price of a bottle of wine is set to rise by 13p as Rachel Reeves launched a Budget raid on drinkers and smokers.
Despite warnings about the fragile state of the hospitality sector – and concerns about inflation – the Chancellor has pressed ahead with an increase in alcohol duty across the board.
The Treasury will revert to the formula of raising alcohol duty in line with its forecast rise in the retail prices index of 3.66 per cent.
This will add 11p on a bottle of Prosecco, 13p on a bottle of red wine and 38p for a bottle of gin from February 1 next year, according to the Wine and Spirit Trade Association (WSTA).
Tobacco duty will rise above inflation, which a new duty on vapes will be introduced next year as planned.
Miles Beale, chief executive of the WSTA, called the alcohol duty increase ‘typically disappointing and shortsighted’.
‘Despite the OBR at last acknowledging higher prices lead to a decline in receipts, the Government fails to recognise that its own policy is driving up those prices,’ he said.
‘Amazingly, the Treasury continues to press ahead with its ill-founded plan to pile further duty increases on alcohol.
‘Prices will rise once more for consumers, British businesses will suffer, and Treasury receipts will continue to fall – forecast to be £700 million lower than last year and £1.1 billion lower than was forecast in March.’
Alcohol prices are up 5.8 per cent on last year, according to official figures.
Last year, drinkers faced a 3.6 per cent hike to alcohol duty and a new system to tax wines and spirits based on strength introduced at the same time.
This added 54p to a bottle of wine and gin by 32p – while draught duty was cut by 1.7 per cent – or a penny off a pint – in the 2024 Budget.
Greg Mulholland, Campaign Director of the Campaign for Pubs, said: ‘This is a deeply disappointing budget that does nothing to address the crisis facing the UK’s world famous pubs.
‘There’s some limited support for some pubs in England through business rates, but no support whatsoever for pubs in Scotland, Wales & Northern Ireland.
‘Despite around 90,000 lost jobs in hospitality since last year’s disastrous budget, the Chancellor has done nothing to address those damaging cost hikes and indeed has imposed further costs on pubs and publicans who have to pay increased staff wages, at a time when many publicans are already earning less than their staff.’
Tom Houseman, co-founder of PintPal, called the news a ‘huge blow to pubs’.
‘These costs will ultimately land on consumers, and it’s the free houses and independent pubs who’ll feel it most — torn between keeping prices fair for regulars and charging enough to stay afloat,’ he said.
‘The upcoming minimum-wage increase adds another layer, especially for pubs that employ younger staff, with an 8.5% rise for 18–20-year-olds further pushing up operating costs.’
Paul Crossman, who runs The Swan, The Slip Inn and Volunteer Arms pubs in York, added that wage increases were ‘good news’ for workers, but could cause some pubs to cut their hours.
‘There was very little in today’s Budget for pubs, and while the Chancellor may have been hoping that no news would be good news, publicans will in fact be bitterly disappointed that industry wide calls for a package of direct targeted help have been ignored,’ he said.
‘With a pub a day closing for good the status quo is clearly untenable, and while the reform of business rates is welcome we still do not have the full detail, and in any event it is not enough on its own.
‘Pubs need real help on multiple fronts including with VAT rates, energy bills and employment costs if they are to continue to be able to serve their crucial role at the heart of our communities amidst the ongoing cost of living crisis.
‘By ignoring clear, united calls for real help the Chancellor has only ensured that needless mass closures will continue to blight our communities, our economy and our culture.’
The rise in alcohol duty is expected to net £14billion for the government by 2030-31, an average rise of 3.4 per cent each year.
That is despite a sharp 6.4 per cent decline in the sale of alcohol products this year, which the OBR described as the result of a trend towards moderation and a reaction against lower prices.
Emma McClarkin, CEO of the British Beer and Pub Association, said: ‘Despite the Government’s clear intention to support pubs with permanent business rates reform – which we welcomed – these lower multipliers are vastly insufficient.
‘The Budget has missed a clear opportunity to meaningfully reduce the disproportionate burden on pubs.
‘There’s little to raise a glass to because bills for most will go up overall and, therefore, it will become harder for pubs to stay open which will risk jobs, the hearts of communities, and drive growth.’
But the Alcohol Health Alliance (AHA) welcomed the Chancellor’s decision.
AHA chairman Professor Sir Ian Gilmore said: ‘The decision to allow alcohol duty to keep pace with inflation in today’s Autumn Budget marks a welcome shift towards a more responsible approach to alcohol taxation.
‘It signals recognition that maintaining alcohol duty in real terms is an important step towards bringing back an annual duty escalator at 2% plus RPI. We know that this is not only fair, but necessary, to save lives, reduce harm and protect the health of the nation.
‘While parts of the alcohol industry may seek to portray this as a significant increase or a punitive measure, this is simply a return to the long-established principle that duty should rise in line with inflation, just as it does for other goods and services.
‘Years of cuts and freezes by previous governments have eroded the public health benefits of this system and have created an expectation that alcohol should be treated differently.’
Karl Mason, UK Spirits Alliance spokesman and Director of Masons of Yorkshire, said: ‘This is a sad day for the nation’s distillers, pubs and the wider hospitality sector.’
‘Innovative, world-leading distillers are disappearing from communities. Three in ten landlords are scared that they will go bust within a year if costs increase; this Budget will push businesses on the brink over the edge.’
