Chancellor faces alcohol duty shortfall

The UK chancellor George Osborne is facing a £100 million shortfall in the duty he collects from alcohol, according to new figures released by the Wilson Drinks Report (WDR).

The latest figures from HM Revenue and Customs (HMRC) show the amount of duty collected for alcohol for the 12 months to April 2013. They show that for the first time, the total alcohol duty collected for a 12 month period, was less than the previous 12 month period.

In analysing the data the WDR highlights a growing concern that the alcohol duty escalator has had a “disproportionate effect on the UK drinks industry, as the tough economic situation increases pressure on household budgets.”

Tim Wilson, managing director of the WDR, said: “We have been highlighting the dangers of increasing duty during a period of falling volumes for some time.”

The biggest drop in alcohol duty in the 12 months to April 2013 came from beer duty, which fell by £179m compared to the previous and cider duty also fell by £9m. Wine and spirit duty both rose, but the overall drop in alcohol duty totalled £41m and Wilson warns that with the duty escalator still in place for wine and spirits the chancellor could be facing an even bigger shortfall next year.

Wilson added: “The big risk for Chancellor Osborne is that wines and spirits will follow beer and cider and fall into a cycle of decreasing duty receipts.

“The latest forecast from the Office for Budget Responsibility in March 2013 predicted that total alcohol duty for 2013/14 will be £10.1 billion. However, we expect that the decrease in duty receipts will continue at a similar rate for the remainder of 2013/14 which could lead to a duty shortfall of at least £100m for the year.”

The alcohol duty escalator was introduced in 2008 by the previous chancellor, Alastair Darling and although George Osborne removed it from beer in his last Budget, the escalator is still in place for wine and spirits. The escalator increase alcohol duty by 2% above inflation each year.