WSTA calls on Chancellor to freeze alcohol duty and extend VAT reduction to help economic recovery

The WSTA has called on the Treasury to freeze wine and spirit duty and extend the hospitality VAT reduction in the Autumn Budget to allow the country to climb out of the Covid-19 slump.

In a submission sent to the Treasury yesterday (Thursday), the WSTA has appealed to the Chancellor to give British business and consumers a break, in the face of a slowing economic recovery, rising inflation, rising energy costs and surging fuel prices.

The impact of the pandemic, closure of the hospitality sector, Brexit and adapting to a new trading landscape has meant that businesses are facing record high prices, which are inevitably being passed on to increasingly squeezed consumers.

The latest WSTA figures show that in our supermarkets and shops an average priced bottle of still wine has risen by 3% from £6 in 2020 to £6.18. For an average priced bottle of gin consumers were paying £14.65 a bottle in 2020, this has risen to £14.87.

The mounting pressures on the consumer purse and British business, comes ahead of a 1.25% rise in National Insurance which will hit next year and inflation forecast to reach 4%.

Keeping wine and spirit duty rates as they are, instead of the Government planned tax rises in line with RPI, will ease the burden on consumers and help businesses and the hospitality sector to survive, recover and eventually thrive.

UK wine and spirit businesses support over 360,000 jobs across the supply chain as well as bringing in around £50 billion annually to the British economy.

A duty freeze will safeguard UK wine and spirit businesses, many of whom are SMEs, protect future income to the Treasury, and support a sustainable recovery for the UK’s hospitality sector - in which wine and spirits will play an important role.

As it stands, the temporary cut in VAT to 5% on soft drinks and food ends today (Friday), with VAT increasing to 12.5%. To support the hospitality industry in their recovery, the WSTA is asking the Government to keep the lower rate if VAT for hospitality, but also to broaden the scheme to include alcoholic drinks.

The WSTA continues to work with government to achieve a simpler, fairer system of alcohol taxation in the UK through the ongoing Alcohol Duty Review. No changes to existing excise duty rates should be made until after the government has completed its review.

Miles Beale Chief Executive of the Wine & Spirit Trade Association said: “After more than 18 difficult months, and with the prospect of rising prices and falling consumer confidence, we are calling on the Government to keep alcohol duty rates as they are until after it has completed its Alcohol Duty Review. Freezing wine and spirit duty at the Budget will give businesses and consumers a much-needed break, which will be vital for our sector’s the road to recovery.

We appreciate that the public finances are under tremendous pressure, but so are the businesses we represent – and that is why our ‘asks’ are modest. The country has to be allowed to recover from Covid, we need the Government’s backing to recover, to rise again and achieve our full potential.

Freezing alcohol duty will keep cash strapped consumers from facing further price hikes and will allow the UK’s wine and spirit businesses to recover, grow and explore new opportunities as the UK forges new trading relationships across the globe.”

Duty is currently so high that 55% of the average priced bottle of wine and 73% of a bottle of spirits, at 40% abv, sold in shops and supermarkets is now taken by the Treasury in tax and VAT.