New announcements on alcohol duty – what do they mean?

Ailar Hashemzadeh | September 2022 | 8 minutes

In last week’s ’fiscal statement’, the government scrapped the planned increase in alcohol duty.

At the same time, it released its long-awaited update to the new alcohol duty system that was announced in the Budget in 2021. Here we look at the impact of these measures on alcohol harm.

Scrapping the alcohol duty increase

Evidence clearly shows that cutting alcohol duty increases alcohol harm. Therefore, scrapping the increase in alcohol duty is very short-sighted. We urge the government to reconsider this policy and link alcohol duty to increase automatically in line with inflation or earnings, rather than taking such a short-term view.

The duty freeze will cost the Treasury half a billion pounds a year each year in lost revenue. This is money that could be used to tackle the harm caused by alcohol, whether that’s for the NHS, the police or the courts. Duty freezes also make cheap supermarket alcohol even cheaper relative to pubs and restaurants and, therefore, will not actually help to stimulate the hospitality sector.

We know that many households are struggling at the moment.

We know that many households are struggling at the moment. Especially in the context of a cost-of-living crisis, the government could focus on reducing the costs of essentials instead of making a non-essential item like alcohol even more affordable.

International research evidence shows that the consumption of alcohol is sensitive to changes in affordability. The relationship between price and consumption is complex. However, on average across the population, when alcohol is more affordable, more is consumed; when alcohol becomes less affordable, less is consumed. This is why the government’s policy on duty is such a key area, as measures to increase the price of alcohol are one of the best ways to reduce and prevent alcohol harm.

We have written to the new Treasury team to request a meeting with ministers to discuss alcohol duty and its links to alcohol harm.

New duty system

We welcome the government’s decision to take forward the duty reforms that were announced in the Autumn Budget 2021. As shown in our response to the new alcohol duty system consultation, published in January 2022, this is a positive step forward.

We are especially pleased to see that the new government will be linking duty to strength of alcohol for the first time across all product categories. This progressive system encourages reformulation to lower strength products and “is better aligned to public health goals,” as the government’s response says.

We will be focusing our attention on engaging with the Treasury team in charge of the reforms to highlight which policies work to reduce alcohol harm, and which need more work.

One such area is the upcoming consultation on the “definition of cider” which is an opportunity for us to ensure that cheap, high-strength ciders (which we know are linked to high levels of harm) are taxed proportionately and fairly in line with other types of alcohol.

Two new duty reliefs will be introduced: a draught relief which applies to all products on tap up to 8.5% ABV, and a small producer relief which will apply to small producers of any alcohol type up to 8.5% ABV. The Government’s commitment to limit these reliefs to products up to 8.5% ABV goes towards ensuring that very strong, cheap alcohol won’t be sold, and we appreciate their statement that these relief levels will be kept under review. These reliefs are aimed at supporting the hospitality industry, and go some way towards levelling the price playing field between the on- and off-trade.

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