The Wine and Spirit Trade Association (WSTA) has called for a continuation of the freeze to alcohol duty, declared last year by Chancellor Philip Hammond.
WSTA said the freeze “represents a favourable outcome for the UK economy,” according to a study by independent financial experts commissioned by the trade body.
WSTA claimed that last year’s freeze increased Treasury coffers by £270 million in six months.
The call came in the backdrop of a planned 3.4% rise in duty in line with inflation. This would “undermine an industry already facing a tough trading landscape following Brexit’s impact on the pound and rising inflation,” WSTA said in a statement.
Treasury Minister Robert Jenrick recently claimed that duty freezes had not been beneficial to the Treasury and “have come at a significant cost to the Exchequer in lost revenues.”
However independent analysis by EY shows that a boost in economic activity in the wine and spirit sectors that is supported by a freeze in duty leaves the wider economy better off at no cost to the Treasury, WSTA noted.
The latest HMRC data also vindicates this, added WSTA. The official data following the freeze last November shows that the Chancellor raked in a £270 million windfall from alcohol duty – a 5% increase on last year.
In contrast, alcohol duty was hit with an inflationary rise of 3.9% in March 2017, yet the summer following the rise failed to raise as much for the public purse.
“UK consumers already pay some of the highest alcohol prices in Europe and it makes no sense to hit wine and spirit businesses, pubs and consumers with a duty rise,” said Miles Beale, Chief Executive of the WSTA.
The EY projections show that if alcohol duty is frozen this year it would boost the UK economy by £1.1bn and create an estimated 27,000 jobs by 2022.
Further, Brexit might add to the woes as a duty rise in the Autumn would come into force on February 1, 2019 – a matter of weeks before the Brexit deadline. This would be particularly painful for the wine and spirit trade and its consumers, WSTA warned.
“Any rise in duty would be particularly harmful for importers and small businesses, who are acutely exposed to the risks of leaving the European Union. With Brexit fast approaching duty is one decision which is entirely in the Government’s hands. Any rise would send the wrong signal, undermining UK business and consumer confidence,” Beale added.
“We are asking the Chancellor for a fair freeze for all.”