The UK government has introduced a new system of alcohol taxation that aims to encourage consumers to drink less and choose lower-strength drinks. The changes, which took effect on August 1, 2023, have been met with mixed reactions from drinkers and businesses, who are facing higher or lower prices depending on the type and strength of their favourite beverages.
How does the new system work?
The new system is based on the alcohol by volume (ABV) of each drink, rather than the category of wine, beer, spirits or cider. Drinks with an ABV below 3.5% will be taxed at a lower rate, while drinks with an ABV above 8.5% will be taxed at the same rate, regardless of their category. The government claims that this will simplify the duty system and reflect the popularity of low-alcohol drinks.
The changes also include a “Brexit pubs guarantee”, which ensures that pubs always pay less alcohol duty than supermarkets. The duty paid on draught drinks in pubs will be up to 11p lower than what drinkers can expect to pay at the shops.
The new system is expected to raise an extra £1.2 billion in revenue for the government over the next five years.
Who will pay more and who will pay less?
The biggest winners of the new system are drinkers of low-alcohol wines and some sparkling wines, which will see their prices drop by up to 19p per bottle. The government hopes that this will encourage more people to switch to these drinks, which have fewer calories and health risks.
The biggest losers are drinkers of high-strength wines, spirits and fortified wines, such as port and sherry, which will see their prices rise by up to £1.50 per bottle. The Wine and Spirit Trade Association (WSTA) has criticised the changes as a “crippling blow” to the industry and consumers, especially during a cost-of-living crisis.
The impact on beer drinkers will depend on whether they buy their drinks in bottles, cans or draughts. The duty on bottles and cans of beer will increase by 10.1%, adding an extra £225 million of costs per year across the industry, according to the British Beer and Pub Association (BBPA). However, the duty on draught pints in pubs will stay the same, protecting the price of a pint for pub-goers.
What are the reactions from drinkers and businesses?
The new system has sparked mixed reactions from drinkers and businesses, who have different preferences and interests.
Some drinkers have welcomed the changes, saying that they will save money and enjoy more variety in their drinks. Others have expressed frustration and anger, saying that they will have to pay more for their favourite drinks or switch to lower-quality alternatives.
Some businesses have praised the changes, saying that they will boost growth and innovation in the sector by supporting small producers and low-alcohol drinks. Others have condemned the changes, saying that they will harm their sales and profits and put them at a competitive disadvantage with other countries.
Some businesses have also decided to reduce the alcohol content in some of their drinks to avoid paying higher taxes. For example, Heineken has lowered the ABV of its Strongbow cider from 5% to 4.5%, while Diageo has reduced the ABV of its Gordon’s gin from 37.5% to 37%. However, some consumers have complained that this affects the taste and quality of their drinks.
