Government reinstates freeze on alcohol duties in budget flip-flop

The government said on Monday that it would freeze taxes on alcohol until August, reversing a decision taken only two months ago by Chancellor Jeremy Hunt and partially reinstating a tax cut put forward by his predecessor.

By default, alcohol duties are designed to rise in line with inflation. However, in September Hunt’s predecessor Kwasi Kwarteng announced a one-year freeze, to take effect from February 2023, as part of a plan to boost economic growth.

That freeze was one of a number of measures which Hunt reversed in October after he took over from Kwarteng. Kwarteng had to quit after financial markets baulked at the number of unfunded tax cuts he had proposed.

While new duty rates usually come in on the Feb. 1 each year, the Treasury on Monday said it was now going to keep alcohol duties on hold at their current rate for six months from Feb. 1, and that Hunt would consider appropriate future rates at his first annual budget on March 15.

“We fully understand that businesses face difficulty and uncertainty in the face of rising energy bills and inflation,” Exchequer Secretary to the Treasury James Cartlidge told parliament. “I understand that they want certainty and reassurance in these challenging times.”

When the measure was reversed in October, the Treasury said going ahead with a freeze would cost £600 million a year.

“The decision by the Chancellor to freeze alcohol duty until August will come as a much needed Christmas present for hard pressed pubs, bars and restaurants up and down the country,” commented Nuno Teles, managing director GB at Diageo, said.

“Today’s news provides much needed certainty for the sector and we raise a glass of Guinness to the Chancellor and the PM in thanks. Cheers, Chancellor!”