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UK Budget: Alcohol duty overhaul may benefit sparkling wine

UK chancellor Rishi Sunak has announced an overhaul of the 'outdated' alcohol duty system in his autumn Budget, with sparkling wine singled out as a potential winner in his speech.

Sparkling wine could benefit from a new, simplified UK alcohol duty system that will be based largely on the strength of drinks, UK chancellor Rishi Sunak announced in his autumn Budget speech today (27 October).

He also announced a freeze on wine, spirits, beer and cider duties within the current system.

Full details of the overhaul to alcohol duty were not yet clear, but Sunak described the changes as the most radical for more than a century.

He outlined a basic principle of ‘the stronger the drink, the higher the rate’.

‘Our alcohol duty system is outdated, complex and full of historical anomalies,’ Sunak said, following a government review of the way alcohol duty works.

One specific measure would likely see duty tax fall on sparkling wines, from Champagne and Prosecco to those from England and Wales, Sunak indicated.

‘Over the last decade, consumption of sparkling wines has doubled. It’s clear they are no longer the preserve of wealthy elites, [so] I’m going to end the irrational duty premium of 28% they currently pay. Sparkling wines will now pay the same duty as still wines of equivalent strength.’

In a video posted on Twitter, Sunak explained that a ‘typical’ bottle of English sparkling wine could be ‘as much as’ 64p cheaper under the new scheme, although retail prices depend on a variety of factors.

However, Sunak also suggested in his speech to Parliament that some higher strength red wines could face an increased duty rate under the new rules.

Miles Beale, CEO of the Wine & Spirit Trade Association (WSTA), welcomed the freeze on duty, even if clarification on the new rules is needed.

‘The decision to freeze wine and spirit duty comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers, giving everyone a much-needed break to help them recover from the pandemic,’ said Beale.

‘Chancellor Rishi Sunak should be commended for listening to our calls for support and understanding that punishing tax hikes are not the best way to reinvigorate the sector.’

Alcoholic drinks prices this Christmas were set to hit all-time highs, warned the WSTA last week.

Beale added, ‘We welcome the reduction of the sparkling wine super tax, which is long overdue. We look forward to seeing the detail of a new system which should remove the existing unfairness of how different products are treated.’

Sunak said that measures to support pubs would also lead to the biggest cut to beer duty for 50 years, equivalent to a ‘permanent cut to the cost of a pint by 3p’.

Sunak also announced business rates relief measures designed to aid hospitality.

In its Budget submission to the Treasury at the start of October, the WSTA said the average price of a bottle of wine had risen by 18p in the last year, to £6, with gin also up by 22p-a-bottle.

Campaigners have long highlighted that the UK has some of the highest duty rates in Europe.

On a £6 bottle of wine, 55% of the price is tax, said the WSTA, which added UK wine and spirit businesses support more than 360,000 jobs and generated around £50bn annually for the British economy.

Campaign group Wine Drinkers UK, which also lobbied for a duty freeze, said that duty tax on wine has risen by 39% since 2010.

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