Blog: Olly WehringThe UK Budget - A storm in a teacup/shot glass/beer flagon?

Olly Wehring | 22 April 2009

The trade organisations here in the UK have been falling over themselves today (22 April), desperate to lay into the Chancellor of the Exchequer's announcement that he is upping the duty on alcohol by 2%. In doing so, the Chancellor, Alistair Darling, has merely done what he said he was going to do last year, despite intense lobbying from the drinks industry.

The rise follows two increases last year. Back in March, the Chancellor announced a 9% increase in alcohol duty and his intention to introduce a four-year tax escalator, increasing duty rates by 2% above the rate of inflation from the time of this year's Budget. Then, in November, he introduced an 8% increase in alcohol duty - 4% for spirits - designed to offset a temporary reduction in value added tax (VAT) - which will remain in place once VAT returns to its standard rate in January 2010.

“At a time when the Government is offering other industries a helping hand it is extraordinary that it wishes to hurt the drinks industry with further tax increases,” said the chief executive of the Wine & Spirits Trade Association, Jeremy Beadles, today. The British Beer & Pub Association, meanwhile, thanked Darling for signing a "death warrant" for thousands of Britain’s pubs and for tens of thousands of British jobs.

What is interesting to note, however, is quite how matter-of-fact the press is being this afternoon about the increase. It's very much a given that alcohol – and cigarettes, of course - get hit with a tax hike of sorts every Budget.

There is a school of thought – certainly not mine, I must note – that believes that, if drinks companies and retailers can't work together to get these tax rises passed down to the consumer, then that's their fault rather than the Government's.

The same school of thought – still not mine – also feels that an extra GBP0.01 on a pint of beer is not going to lead to drinkers avoiding UK pubs and bars in droves. Indeed, consumers are already avoiding pubs and bars in droves anyway, so what possible difference could one penny make?

Do please let me know your responses to these schools.

Or have they got a point?


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