Budget 2021: Sunak cuts draft beer duty in most radical reforms in 100 years

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Budget 2021: Sunak cuts draft beer duty in most radical reforms in 100 years
Sunak said the measure was a 'long-term investment' in UK pubs, amounting to £100m a year and a permanent cut in the costs of a pint by 3p. Photo: Andy Buchanan/AFP via Getty

Chancellor Rishi Sunak has announced a 5% cut to duty on draught beer and cider, as part of the “most radical” reforms to alcohol duty in a century.

The finance minister said he wanted to support pubs to help them bounce back from the coronavirus pandemic, highlighting that they were already struggling before the health crisis started.

"That’s the biggest cut to cider duty since 1923," he told the House of Commons on Wednesday. "The biggest cut to fruit ciders in a generation, and the biggest cut to beer duty for 50 years."

The draught relief applies to beer and cider served from draught containers over 40 litres.

Read more: Budget 2021: Sunak resets UK's spending focus for a post-COVID economy

Sunak added that the measure was a “long-term investment” in UK pubs, amounting to £100m ($137.4m) a year and a permanent cut in the cost of a pint by 3p.

He called pubs “the home of British community life,” saying that many public health bodies recognise them as safer drinking environments than being at home.

Sunak said there would now be just six duty rates on alcohol, down from 15, with the system based on the alcohol content — the stronger the drink, the higher the rate.

Watch: What are the key takeaways from Rishi's budget?

This means that some stronger spirits and wines will become more expensive, however, weaker alcohols like beer and rosé will become cheaper.

A planned increase on duty on spirits will also be cancelled, as well as the duty premium of 28% for sparkling wines.

"That’s the right thing to do, and it will help end the era of cheap, high-strength drinks which can harm public health and enable problem drinking,” he said.

There will also be a new "small producer relief" which will include small cider makers for the first time. Current alcohol duties were first introduced to pay for the English civil war in the 17th century.

The chancellor said that the UK was only able to make these changes because it had left the EU.

He said: “Our reforms make the alcohol duty system simpler, fairer and healthier. They help with the cost of living while tackling problem drinking, they support innovative entrepreneurs and craft producers, they back pubs and public health, and they’re only possible because we’ve left the EU.”

Watch: Budget 2021: Rishi Sunak unveils tax cuts and benefits boost

The news sent shares in pub chains soaring on the back of the announcement, with JD Wetherspoons (JDW.L) up almost 6%. Mitchells and Butlers (MAB.L), which owns All Bar One and Toby Carvery, gained 4.3% on the back of the news.

Wine Drinkers UK said: “We welcome the cancellation of the planned increased in all alcohol duty and the government’s long overdue decision to abandon the “super-tax” on sparkling wines.

"On the proposed wider reform of the alcohol duty we await clarification from HM Treasury in the coming days. We hope this will put a stop to the historic unfairness of favouring one drink over another.”

Read more: Sunak announces 50% business rates discount for retail and hospitality sectors

Meanwhile, Chris Sanger, EY’s head of tax policy, said: “The sector is facing a combination of challenges, including rising food and energy costs, and National Living Wage and employers’ NI contribution increases from next April.

“However, the duty changes may not be enough to prevent rising prices at bars and tills as companies in the sector try to cover the cost of all their input prices.”

Watch: What is a budget deficit and why does it matter?

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