Rachel Reeves mulls second booze tax hike
Chancellor Rachel Reeves is considering an increase in taxes on alcohol in line with a higher reading of inflation in a repeat of last year’s Budget, according to reports.
Reeves could hike duties by the retail prices index (RPI) inflation rate in a bid to raise more cash to fill an estimated £30bn fiscal hole and build a larger headroom, LBC has reported.
Duties went up by 3.6 per cent last year, in line with RPI inflation, pushing up the price of wine bottles and gin by up to 54p.
Some beer duty rates saw a reduction in cash terms.
The last reading for the RPI inflation for the year to September was 4.5 per cent.
This reading was higher than the consumer price index (CPI) inflation rate, the measure more widely used by economists, of 3.8 per cent.
The Treasury declined to comment on Budget speculation when asked by LBC.
Labour and Tory MPs meanwhile told the broadcaster that Reeves risked putting more pubs at risk as a result of hiking taxes on alcohol.
The Liberal Democrats, however, have called for a five per cent cut in VAT to boost footfall at pubs and restaurants.
It said the tax cut could be funded by a proposed new windfall tax on banks, bringing in around £30bn across five years.
Deputy leader Daisy Cooper said: “People are working with their nose to the grindstone all month and have next to nothing left over after sky-high bills and spiralling food prices.
“In years gone by people knew they could look forward to fish and chips with their family on a Friday night or a weekend trip to the cinema.
“Now those small joys – the ones that make life worth living – are becoming an unaffordable luxury for too many.”
Industry takes on tax threats
Industry bodies have also ramped up lobbying campaigns against suggested hikes to alcohol duties.
Organisations representing the Scotch whisky industry wrote to the Chancellor pleading with her to freeze the duty on spirits.
Liz Camero, chief executive of the Scottish Chambers of Commerce said: “A duty freeze is not a handout.
“It is an investment in British business, British exports, and British jobs — and a chance to back one of the UK’s most successful and globally recognised industries, alongside the sectors that bring these products to life for consumers at home and abroad.”
The British Beer and Pubs Association has also warned that a pub is set to close every day over the course of 2025 based on current trends. UK Hospitality has also warned of mass job losses across pubs up and down the country.
The Office for Budget Responsibility (OBR) will have to consider to what extent receipts will rise in its forecasts as a result of expected tax hikes.
In a July review of its models, OBR analysts said excise and fuel duties were “overestimated at each forecast” between 2022 and 2023.
Errors in forecasting for sin taxes by the OBR could lead it to make more moderate projections at this year’s Autumn Budget.
Separate analysis by tax analysts at the accountancy UHY Hacker Young has shown that sin taxes have fallen as a share of total government revenue from around 4.3 per cent to 2.8 per cent.
The findings may suggest the government is not generating the income it hopes from hiking sin taxes.
Briefings in newspapers have also suggested that higher levies on gambling may not generate as much as £3bn, a figure former Prime Minister Gordon Brown has cited in his campaign for the two-child benefit cap to be removed.