The 2014 Budget has signalled the end of the alcohol duty escalator, which had seen duty rise 2% above inflation since 2008 until last year.
Chancellor George Osborne again cut beer duty by one penny but this time froze duty on spirits and cider. Last year beer duty was also cut by a penny but the escalator still applied to other drinks.
The budget says the freeze on spirits is "to support the domestic market for the thriving Scotch whisky industry and jobs in Scotland", while the beer cut "will support jobs in the pub industry, and means that a pint of beer will be 8p cheaper than under the previous government’s duty plans." Duty on wine will rise at the rate of inflation.
However health groups saw the decision as another blow to the need to address cheap alcohol. Eric Appleby, Chief Executive of Alcohol Concern said: "Once again this government has cast aside the health of the nation to protect the interests of big alcohol". Katherine Brown, Director of the Institute of Alcohol Studies (IAS) said: "Alcohol is 61% more affordable today than it was in 1980 and current duty rates for strong white cider amount to just 6p per unit."
Writing for the BMJ, Katherine Brown had recently argued why the escalator should be kept, highlighting the annual lost income of £110 million "could fund 2,587 alcohol nurses in emergency departments, 468 085 ambulance call-outs, or 723 684 days of inpatient detoxification services." A briefing by the Alcohol Health Alliance had also set out 'The importance of maintaining the Alcohol Duty Escalator' [pdf].
Indeed the Treasury estimates the changes will result in about £1.5bn less income over the next five years (see page 57). It is also suggested that it will undermine the already questionable effectiveness of the 'below cost ban' expected next month, to be based on the rate of duty paid + VAT.
However trade and industry bodies welcomed the decision. The Wine and Trade Spirit Association (WTSA), said the wine and spirit industry is set to save £175 million. Chief Exec Miles Beale said it "will help British pubs, bars, and restaurants up and down the country, and will boost jobs and investment in the great British drinks industry". WTSA had headed a Call Time on Duty campaign supported by the Scotch Whisky Association and The TaxPayers’ Alliance, which it claims resulted in almost 90% of MPs emailed by their constituents to scrap the escalator.