UK

OBR warns ‘wage spiral’ could force interest rates to 3.5 PER CENT

The Government’s financial watchdog today warned a ‘wage spiral’ or energy shock could drive inflation to a three-decade high of 5.4 per cent next year and force the Bank of England to take drastic action on interest rates in a move which would have major repercussions for mortgage holders. 

In a stark assessment alongside the Budget, the Office for Budget Responsibility (OBR) said its central forecast is for headline CPI to peak at 4.4 per cent in the second quarter of the year, far above the current 3.1 per cent, and more than double the Bank’s 2 per cent target. 

But it warned that data since the document was prepared suggests that a figure of 5 per cent could be more realistic.

Such a high level of inflation would likely trigger the Bank to hike interest rates in a move which could see monthly mortgage payments increase by as much as a third. 

The OBR put forward two scenarios where the situation could get dramatically worse – with either a ‘mild wage spiral’ developing or continuing pressure on energy and product prices. 

In both, CPI inflation could go up to 5.4 per cent, with the OBR saying that the Bank of England base rate would need to soar to 3.5 per cent from the low of 0.1 per cent now. 

Such a shift would cause huge pain for homeowners who would face surging mortgage costs.

A family with a £150,000 25-year mortgage could see monthly repayments increase from £759 to £1,060 – if the current gap between the Standard Variable Rate and the Bank’s interest rate was maintained.

Rising interest rates would also result in ‘fiscal consequences’ for the Government because the cost of servicing the £2.2trillion public debt mountain would rise. 

Unveiling his Budget today, Mr Sunak said he was renewing the Bank of England’s core duty to keep inflation under control.

‘I have written to the Governor of the Bank of England today to reaffirm their remit to achieve low and stable inflation,’ he said.

Rishi Sunak

The OBR said that in its scenarios where a ‘wage spiral’ developed or product prices keep rising, Bank of England governor Andrew Bailey (left) would need to raise the base rate to 3.5 per cent from the low of 0.1 per cent now

In both scenarios, CPI inflation could go up to 5.4 per cent, with the OBR saying that the Bank of England base rate would need to soar to 3.5 per cent from the low of 0.1 per cent now

In both scenarios, CPI inflation could go up to 5.4 per cent, with the OBR saying that the Bank of England base rate would need to soar to 3.5 per cent from the low of 0.1 per cent now

n a stark assessment alongside the Budget, the Office for Budget Responsibility (OBR) said its central forecast is for headline CPI to peak at 4.4 per cent in the second quarter of year

n a stark assessment alongside the Budget, the Office for Budget Responsibility (OBR) said its central forecast is for headline CPI to peak at 4.4 per cent in the second quarter of year

Public sector net borrowing will be lower than had been expected in March, thanks to the improved overall economic picture

Public sector net borrowing will be lower than had been expected in March, thanks to the improved overall economic picture

Budget 2021: key points

  • Rishi Sunak said he was creating ‘a stronger economy for the British people’
  • He warned of continuing challenges from Covid 
  • Office for Budget Responsibility says inflation expected to average 4 per cent over the next year, was 3.1 per cent in September.
  • Sunak: ‘The pressures caused by supply chains and energy prices will take months to ease.’ 
  • Vehicle excise duty for HGVs frozen for a year  
  • Suspension of HGV levy extended for another year 
  • OBR says economy will return to pre-Covid levels at the turn of the year, earlier than expected
  • Forecast 6.5 per cent growth this year, up from 4 per cent, then 6 per cent in 2022. 
  • But lower rates of 2.1 per cent in 2023, 1.3 per cent in 2024 and 1.6 per cent in 2025 
  • Unemployment forecast to peak at 5.2 per cent, lower than expected 
  • Foreign aid budget will go back up to 0.7 per cent on GDP by 2024/2025, having been cut to 0.5 per cent
  • Every Whitehall department will get a ‘real terms rise in overall spending’ as part of the Spending Review, amounting to £150 billion
  • Borrowing as a percentage of GDP is forecast to fall, from 7.9 per cent this year to 3.3 per cent next year, then 2.4 per cent, 1.7 per cent, 1.7 per cent and 1.5 per cent in the following years. 
  • A levy will be placed on property developers with profits over £25 million at a rate of 4 per cent to help create a £5 billion fund to remove unsafe cladding 
  • The national minimum wage will increase from £8.91 to £9.50 from April next year. 
  • NHS gets an extra £6billion to pay for new equipment and new facilities to clear Covid backlog. 
  • Brownfield sites covering the equivalent of 2,000 football pitches could be turned into plots for housing as part of a £1.8billion injection. 
  • A £2.6billion pot of funding set up to help children with special educational needs and disabilities. 
  • Levelling up transport outside of London will benefit to the tune of nearly £7billion, paying for a range of projects, including tram improvements. 
  • The Department of Health and Social Care will receive £5billion over the next three years to fund research and development in areas such as genome sequencing and tackling health inequalities. 
  • A cash injection of £3billion will be given to both post-16 education but also to adults later in life. 
  • £850million spent over three years to ‘breathe life’ back into cultural hotspots like London’s V&A museum, Tate Liverpool and Imperial War Museum Duxford
  • Ageing Border Force vessels will be replaced by new cutters as part of a £700million investment to improve the safety of Britain’s borders. 
  • An 8 per cent cut to the Universal Credit taper rate meaning working recipients keep more benefit cash 
  • He outlined the ‘most radical simplification of alcohol duties for over 140 years’ that cuts number of rates paid from 15 to six
  • The stronger the drink the higher the rate, as some high-percentage beverages are ‘under-taxed’
  • New ‘small producer relief’ to include small cidermakers and other producers making alcoholic drinks of less than 8.5% alcohol by volume (ABV).
  • ‘Draught relief’ – a new, lower rate of duty on draught beer and cider.  
  • Fuel duty rise cancelled for the 12th year in a row 

The OBR said: ‘In both scenarios, a further sharp and persistent increase in costs means inflation peaks at 5.4 per cent (1 percentage point above our central forecast and the highest rate in three decades) and then falls back more slowly than in our central forecast. 

‘Based on a simple monetary policy rule, Bank Rate in our scenario reaches 3.5 per cent (its highest since November 2008), thereby suppressing demand and moderating inflationary pressures, but even so it still takes a year longer for inflation to return to the target than in our central forecast. 

‘At its peak, the impact of this vigorous monetary tightening prevents a further 2 to 3 percentage point rise in inflation, and without it the price level would be some 6 to 8 per cent higher at the scenario horizon.’  

The OBR’s central forecast upgraded growth for this year from the 4 per cent it suggested in March to 6.5 per cent – less than some had hoped but still enough to return to pre-Covid levels of activity. 

Next year GDP is expected to be 6 per cent, lower than the 7.3 per cent at the last set of figures. 

Critically the ‘scarring’ – long-term damage to the economy – is now only thought to be 2 per cent rather than 3 per cent.   

The watchdog also now forecasts that unemployment will peak at 5.2 per cent, a fraction of what had been anticipated at the height of the crisis. 

‘Today’s Budget does not draw a line under Covid. We have challenging months ahead,’ Mr Sunak said.

‘But today’s Budget does begin the work of preparing a new economy post-Covid.’ 

Jonathan Gillham, chief economist at PwC, said: ‘This rapid recovery must be viewed through the lens of inflation which is largely being ‘imported’ from overseas.

‘This is because some countries have not opened up as rapidly as the UK, are still in lockdowns and have less access to vaccines, so there are supply chain shortages.

‘Also, energy prices have risen sharply, again, as key production and extraction facilities are not at full capacity. 

‘There is increased competition for scarce resources. Inflation forecasts for 2022 have more than doubled since the last forecast peaking at 4.4 per cent in the second quarter of 2022.’

The bounceback and enormous furlough support is also helping the UK jobs market weather the pandemic, with the OBR now expecting the unemployment rate to peak at 5.2 per cent, down from 5.6 per cent previously and the 12 per cent initially feared.

Mr Sunak outlined a raft of new fiscal rules, called the Charter for Budget Responsibility, which will look to ensure day-to-day spending is no longer funded via borrowing and for underlying debt – currently around 100 per cent of GDP – to fall.

The OBR said the improved fiscal outlook means the Chancellor is on track to meet his new goal for underlying debt to fall by 2024-25.

This is thanks to sharply lower borrowing expected in each year under the forecasts, with the OBR now saying it believes borrowing will drop to £183 billion or 7.9 per cent of GDP in 2021-22, down from the 10.3 per cent or £234 billion previously predicted and almost half the record £320 billion amassed in 2020-21 after a mammoth £315 billion of emergency pandemic support.

Borrowing will then drop to £83 billion or 3.3 per cent of GDP next year, then decline gradually to 2.4 per cent, 1.7 per cent and 1.7 per cent in the following years before reaching £44 billion or 1.5 per cent in 2026-27.

This would leave borrowing at the forecast horizon 1 per cent of GDP lower than it was before the pandemic struck, and the lowest level for 25 years, according to the OBR. 

Public sector debt does not rise as high under the latest OBR projections

Public sector debt does not rise as high under the latest OBR projections 

The tax burden is going to its highest level since the Second World War, despite Rishi Sunak's promise that he wants to cut it

The tax burden is going to its highest level since the Second World War, despite Rishi Sunak’s promise that he wants to cut it 

Government spending is going to continue higher than it was before the pandemic as a proportion of GDP

Government spending is going to continue higher than it was before the pandemic as a proportion of GDP

The scenarios with a huge spike in inflation would have knock-on effects for the wider economy, the OBR said

The scenarios with a huge spike in inflation would have knock-on effects for the wider economy, the OBR said 

WHAT DOES A RATE RISE MEAN? 

What is the bank rate?

Also known as the base rate, this is the Bank of England’s benchmark interest rate that banks and other financial institutions use to price their loans and savings rates.

Where is it now?

The bank rate is still at an all-time low of 0.1 per cent, where it was cut to in March 2020, in order to help ward off pandemic-induced economic crisis. It has been at or below 0.75 per cent ever since the aftermath of the financial crisis in February 2009.

Is it about to go up and why?

Markets and economists think so. The Bank of England is supposed to set the bank rate to control inflation, and prevent it going above 2 per cent. However, as the economy has been in the doldrums for many years, inflation has not been a threat. 

This year however, with the sudden economic recovery from lockdown, the surging oil price and the various supply chain blockages it has returned with a vengeance. Inflation is now at 3.1 per cent and set to go higher. 

Money markets and economists say there is a good chance that the BoE could raise rates in November and almost certainly in December.

What changed today?

Accompanying the Autumn Budget, the Office for Budget Responsibility forecasts showed inflation peaking at 4.4 per cent in the second quarter next year and to average 4 per cent over 2022. 

Rishi Sunak also said he had written to BoE Governor Andrew Bailey to remind him of the importance of controlling inflation!

So rates are going up?

Yes it is just a question of when and how much. Initial rises are likely to be cautious: to just 0.25 per cent or 0.50 for the bank rate. It seems odds-on we’ll get a hike by the endof the year.

The OBR warned that inflation could go even higher – above 5 per cent – and in in a worst-case scenario the implied interest rates that would be required to get inflation back down would be a bank rate of 3.5 per cent. 

What difference will that make to me?

Even in the best-case scenario, mortgage rates will start to creep up and the best current mortgage deals will start to be pulled.

If you are on a variable rate deal or a tracker you could see an increase in monthly payment very soon after any rate hike. If you are on a fixed deal then, you are protected until it expires. But it does mean some of the best deals that are around now might not be by the time you come to arrange a new mortgage.

What can I do?

If you are on a variable rate – especially if it is an expensive standard variable rate – you might want to think about applying for a two or even a five-year fixed rate while they are cheap. Those on fixed rate deals already can apply for a new rate six months before their mortgage expires so it might pay to start looking now.

But at least savings rates will start to rise?

We can hope. But it is really up to banks how quickly and how much they pass on rate rises in the form of better savings rates. Historically, they have been much quicker to hike mortgage rates than savings rates.

 

Retailers welcome £7billion business rates cut in boost to High Street that will save them up to £110,000 each – but warn 50% reduction ‘doesn’t go far enough’ and demand online sales tax

The High Street today welcomed £7billion worth of cuts to business rates – but others grumbled the reduction ‘didn’t go far enough’ and criticised the decision not to immediately bring in an online sales tax. 

Rishi Sunak announced a series of changes for next year, including the cancellation of next year’s increase in the rates multiplier and a 50 per cent cut to next year’s rates for most retail, hospitality and leisure businesses.

Shevaun Haviland, director general of the British Chambers of Commerce, welcomed the changes and said they would give firms ‘renewed confidence to invest and grow’.  

Jack Griffiths, founder of luxury loungewear firm Snuggy, based in Teesside, welcomed the rates cut but said he would have 'liked to see more support' for small businesses. He is seen on the right with co-founder Joel Pierre

Jack Griffiths, founder of luxury loungewear firm Snuggy, based in Teesside, welcomed the rates cut but said he would have ‘liked to see more support’ for small businesses. He is seen on the right with co-founder Joel Pierre

She said: ‘The Chancellor has listened to Chambers’ long-standing calls for changes to the business rates system and this will be good news for many firms.

‘It will provide much-needed relief for businesses across the country, giving many firms renewed confidence to invest and grow.’ 

Jace Tyrrell, chief executive of the New West End Company, representing firms across London’s West End, said business rate reforms were ‘encouraging’ but said they still fell ‘far short’ of what he had hoped.

‘Cancelling the inflation-linked rise to the multiplier may ensure that rates won’t go up this year, but they are still too high,’ he said.

‘Reducing the time between revaluations to three years is welcome, as is the short-term relief for investment in improvements and sustainability, but this falls far short of a fundamental review.’

Unveiling his Budget today, Mr Sunak told MPs that the cancellation of next year’s increase in the multiplier will save around £4.6bn over the next four years.

His new set of changes also included a 50% business rates relief in England for retail, hospital and leisure properties, for up to £110,000 per business.

It said this will benefit around 90% of businesses across the sectors, from newsagents and grocers to hairdressers, pubs, gyms and cafes. 

This will come after business rates reductions for firms in these sectors over the current financial year following the rates holiday during the pandemic.

Mr Sunak said the new temporary relief rate will take place for 2022-23 and be worth around £1.7bn.

The Chancellor also highlighted that rates revaluations will now take place every three years, replacing current five-year gaps.

Rishi Sunak announced a series of changes for next year, including the cancellation of next year’s increase in the rates multiplier and a 50% cut to next year’s rates for most shops. Pictured: Windsor High Street  

Robert Hayton, UK president at the real estate adviser Altus Group, called the measures ‘a compelling basket of support which will aid the recovery’.

Ryan Jones and Mike Hampton-Riddington, partners in the business rates team at Cluttons, said: ‘As an industry we were expecting no significant measures to alleviate the burden of business rates, so the announcement in the Budget is more welcome than expected, although not as fundamental as hoped, and certainly not in line with ‘a fairer simpler tax system’ that the Chancellor promised at the beginning of his speech.’

Jack Griffiths, co-founder of luxury loungewear firm Snuggy, based in Teesside, told MailOnline: ‘The freeze on the business rates multiplier is welcome, but I would have liked to have seen a bit more in the way of support for small businesses. 

Mr Sunak told MPs that the cancellation of next year's increase in the multiplier will save around £4.6bn over the next four years

Mr Sunak told MPs that the cancellation of next year’s increase in the multiplier will save around £4.6bn over the next four years 

‘We have had a tough year with the ongoing impact of COVID-19 and, more recently, supply chain issues, so I would have liked to have seen a bit more support to get us through the Christmas period and into the New Year.’ 

And Michael Oszmann, founder of online marketplace, Buy Britain said:: ‘Overall this was a good Budget for Britain’s small firms, especially on the business rates front and for those in the hospitality sector that have been through hell.

‘ Yes, you always need to go through the small print as that can hide many a sin, but first impressions are that it is a positive Budget.’

Others questioned why the Chancellor had not used his Budget to unveil an online sales tax – although he did announce the start of a consultation.

Scott Parsons, UK chief operating officer at Unibail-Rodamco-Westfield’s, which is behind the Westfield centres in London, was one of those expressing his disappointment.

‘The decision by the Chancellor to continue to avoid imposing any kind of tax on the e-commerce sector is another blow, as bricks and mortar retailers continue to operate on an uneven playing field,’ he said. 

In a further boost to pubs, the Chancellor also announced a series of reforms to alcohol taxes from February 2023 – including a 5% cut in duty on draught drinks.

‘That’s the biggest cut to cider duty since 1923. The biggest cut to fruit ciders in a generation. The biggest cut to beer duty for 50 years,’ he said.

‘It’s a long-term investment in British pubs of £100m a year. And a permanent cut in the cost of a pint by 3p.’

Mr Sunak also announced a planned increase in duties would be cancelled – a tax cut worth £3bn..  

Boris and Rishi roll out the barrels as teetotal Chancellor uses post-Brexit freedoms to slash cost of rose by 23p a bottle and pints of beer by 3p as fruit cider and prosecco are also made cheaper – but red wine drinkers are warned they will pay more

How will the cost of YOUR drink go up or down?

– Stella Artois: 3p less tax on a pint in the pub, no change in shops.

– Guinness: 3p less tax on a pint in the pub, no change in shops. 

– Strongbow: 2p less tax on a pint in the pub, 0.5p less tax in shops. 

– Strongbow Dark Fruits: 13p less tax on a pint in the pub, 1p less tax in shops.

– Hardy’s VR Merlot red wine: 35p more tax on a bottle in shops.

– Echo Falls Zinfandel rose wine: 23p less tax on a bottle in shops. 

– Canti Prosecco: 87p less tax on a bottle in shops.  

– Harvey’s Sherry: 51p more tax on a bottle in shops. 

– Taylor’s Port: £1.09 more tax on a bottle in shops. 

– Smirnoff Vodka: No change on a bottle in shops. 

– Bailey’s Irish Cream: 41p less tax on a bottle in shops.  

Source: HM Treasury 

Rishi Sunak today unveiled a major overhaul of the UK’s alcohol taxes as he cut the price of a pint of draught beer by three pence – but increased the levy on red wine. 

The teetotal Chancellor used his Budget to set out a new Draught Relief policy which will see beer and cider duty reduced by five per cent. 

He said that amounted to the biggest cut on the tax on beer in 50 years and the ‘biggest cut to cider duty since 1923’. 

He also announced a planned increase to the duty on spirits, wine, cider and beer will be cancelled while the ‘irrational’ 28 per cent duty on premium sparkling wines like prosecco and fruit ciders will be cut.     

However, the Chancellor’s plan to simplify the alcohol duty system – which he said was made possible by Brexit – will see some drinks become more expensive, with red wine drinkers among those hit.

Mr Sunak said that under his new system – which be rolled out in February 2023 – the stronger the drink, the higher the rate of tax will be.  

That will also mean less-strong drinks like rose wine and liqueurs which are currently ‘over taxed’ will become cheaper.

Mr Sunak and the Prime Minister Boris Johnson marked the announcements by visiting Fourpure Brewing Company in Bermondsey, central London, this afternoon as they poured pints and saw the brewing process. 

Hospitality bosses welcomed the changes as they said pubs, brewers and beer drinkers ‘will be toasting the Chancellor’ for bringing forward a ‘range of business-boosting measures’.     

Rishi Sunak today unveiled a major overhaul of the UK's alcohol taxes as he cut the price of a pint of draught beer and cider by three pence. He is pictured with Boris Johnson at a brewery in Bermondsey, London this afternoon

Rishi Sunak today unveiled a major overhaul of the UK’s alcohol taxes as he cut the price of a pint of draught beer and cider by three pence. He is pictured with Boris Johnson at a brewery in Bermondsey, London this afternoon

Mr Sunak said that under his new system - which be rolled out in February 2023 - the stronger the drink, the higher the rate of tax will be

 Mr Sunak said that under his new system – which be rolled out in February 2023 – the stronger the drink, the higher the rate of tax will be

The Chancellor said the Draught Relief amounts to the biggest cut on the tax on beer in 50 years and the 'biggest cut to cider duty since 1923'

The Chancellor said the Draught Relief amounts to the biggest cut on the tax on beer in 50 years and the ‘biggest cut to cider duty since 1923’

Treasury estimates suggest the changes to beer duty will shave three pence in tax off the cost of a pint of Stella Artois and Guinness in a pub

Treasury estimates suggest the changes to beer duty will shave three pence in tax off the cost of a pint of Stella Artois and Guinness in a pub

Some two pence in tax will be taken off the cost of a pint of Strongbow and Magners in a pub

Some two pence in tax will be taken off the cost of a pint of Strongbow and Magners in a pub 

The tax on stronger red wines will go up under Mr Sunak's plans. For example a bottle of Hardy's VR Merlot will be hit with 35 pence more in tax

The tax on stronger red wines will go up under Mr Sunak’s plans. For example a bottle of Hardy’s VR Merlot will be hit with 35 pence more in tax 

But fruit ciders will be made cheaper because they will now be treated the same as beer and apple cider. A pint of Strongbow Dark Fruits in a pub will have 13 pence less tax

But fruit ciders will be made cheaper because they will now be treated the same as beer and apple cider. A pint of Strongbow Dark Fruits in a pub will have 13 pence less tax

What are the main changes to the alcohol tax system and how will prices change?

– Duty rates for draught beer and cider will be cut by five per cent – taking three pence off a pint. 

– Duty rate on draught fruit cider will be equalised with beer, cutting the rate on fruit cider by 20 per cent, taking 13 pence off a pint.

– All products will be taxed according to their Alcohol By Volume (ABV), cutting duty on lighter wines and cider. Tax on a 10.5% bottle of Rose will decrease by 23 pence per bottle. But the levy on white ciders and stronger still wines will go up.  

– Sparkling wine will be taxed at the same rate as still wine, ending the 28 per cent premium currently applied to the product. 

Emma McClarkin, chief executive of the British Beer and Pub Association, said: ‘Pubs, brewers and beer drinkers will be toasting the Chancellor today for a range of business-boosting measures.

‘Pub goers will also be toasting the Chancellor today for announcing a five per cent lower duty rate on draught beer worth £62million.

‘This is great news for our local pubs and recognises the crucial role they play in our economy and society.

‘However, the overall beer duty rate in the UK remains amongst the highest in Europe.

‘It is vital for Britain’s brewers, a world class homegrown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs.’

The Chancellor told MPs that the existing alcohol duty system in the UK is ‘outdated, complex and full of historical anomalies’. 

He said his overhaul will deliver the ‘most radical simplification of alcohol duties for over 140 years’, resulting in a ‘simpler, fairer and healthier’ system. 

Mr Sunak said Brexit made the shake-up possible, telling the Commons the Government is ‘taking advantage of leaving the EU’ by rolling out a raft of changes.

The changes will see the overall number of alcohol duties reduced from the current 15 to just six.

Mr Sunak said the new system will be guided by a ‘common sense principle’ of ‘the stronger the drink, the higher the rate’. 

He said: ‘This means that some drinks, like stronger red wines, fortified wines or high strength white ciders will see a small increase in their rates because they are currently undertaxed given their strength.

‘That is the right thing to do and will help end an era of cheap high strength drinks which can harm public health and enable problem drinking.’

The Chancellor said the ‘converse is also true’ for alcoholic drinks which are not as strong. 

He said: ‘Many lower alcohol drinks are currently over taxed and have been for many decades.

‘Rose. Fruit ciders. Liqueurs. Lower strength beers and wines. Today’s changes mean that they will pay less.’ 

Mr Sunak said that drinking habits in the UK had changed, with more people now consuming sparkling wines as he moved to make them cheaper. 

He told MPs: ‘Over the last decade, consumption of sparkling wines like Prosecco has doubled. English sparkling wine has increased tenfold. It is clear they are no longer the preserve of wealthy elites.

‘And they are no stronger than still wines so I am going to end the irrational duty premium of 28 per cent that they currently pay.

‘Sparkling wines wherever they are produced will now pay the same duty as still wines of equivalent strength.’

Bottles of Rose wine will see tax bills slashed. The tax applied to a bottle of Echo Falls Zinfandel will be 23p lower

Bottles of Rose wine will see tax bills slashed. The tax applied to a bottle of Echo Falls Zinfandel will be 23p lower

Tax on sparkling wine will be reduced significantly under the Chancellor's new simplified duty system

Tax on sparkling wine will be reduced significantly under the Chancellor’s new simplified duty system

The tax applied to fortified wines will increase under the Chancellor's plans. A bottle of Harvey's Sherry will cost 51 pence more

The tax applied to fortified wines will increase under the Chancellor’s plans. A bottle of Harvey’s Sherry will cost 51 pence more

Mr Sunak had been under pressure from Tory MPs to bring forward help for struggling pubs. 

Many Conservative MPs had been calling for a reduction in beer duty and Mr Sunak obliged as he announced his new ‘Draught Relief’ policy. 

He told the Commons: ‘A fairer, healthier system supports pubs so I can announce today Draught Relief.

‘Draught Relief will apply a new, lower rate of duty on draught beer and cider.

‘It will apply to drinks served from draught containers over 40 litres. It will particularly benefit community pubs who do 75 per cent of their trade on draught.

‘And let me tell the House the new rate: Draught Relief will cut duty by five per cent.

‘That is the biggest cut to cider duty since 1923, the biggest cut to fruit ciders in a generation, the biggest cut to beer duty for 50 years.

‘This is not temporary, it is a long term investment in the British pubs of £100million a year and a permanent cut in the cost of a pint of 3p.’ 

He added: ‘These much needed reforms will come into effect in February 2023.’ 

Miles Beale, chief executive of the Wine and Spirit Trade Association, welcomed the decision to freeze wine and spirit duty. 

He said: ‘The decision to freeze wine and spirit duty comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers, giving everyone a much-needed break to help them recover from the pandemic.

Hospitality bosses welcomed the changes as they said pubs, brewers and beer drinkers 'will be toasting the Chancellor' for bringing forward a 'range of business-boosting measures'

Hospitality bosses welcomed the changes as they said pubs, brewers and beer drinkers ‘will be toasting the Chancellor’ for bringing forward a ‘range of business-boosting measures’

‘Chancellor Rishi Sunak should be commended for listening to our calls for support and understanding that punishing tax hikes are not the best way to reinvigorate the sector.

‘By offering continued respite to the UK wine and spirit sector his actions will help save jobs and – in time – replenish revenues to the Treasury through growth in our potential-filled sector.’ 

Jez Lamb, founder of the Wirral-based craft beer marketplace [email protected], questioned whether the shake-up will benefit smaller breweries. 

He said: ‘The devil’s always in the detail. It’s brilliant to see alcohol duty cut on draught beer but that’s only for ‘containers’ more than 40L.

‘This is great for the big breweries but so many smaller craft brewers only supply in 30L containers.

‘This just further supports the big players in the market, not supporting the smaller, independent breweries who need support most.’ 


Source link

Related Articles

Back to top button