The UK Treasury cannot keep marking its own homework on drink
Miles Beale, the Chief Executive of the Wine & Spirit Trade Association, is right to call time on the Treasury's habit of grading its own alcohol duty reforms against questions it never originally set. His piece in The Grocer this week deserves a louder echo, because the numbers behind his argument are not in dispute. They are sitting in the Treasury's own ledgers.
Three years after the new strength-based duty system came into force, the case for it has collapsed under its own weight. The regime was sold to the industry and to drinkers on three promises: simplicity, economic rationality and a lighter administrative load. None of those promises has been kept, and the consequences are now visible in falling receipts, rising shelf prices and a hospitality sector that is closing its doors at a rate that should worry any chancellor.
The numbers don’t add up
Start with the revenue case, since that is the test the Treasury set for itself. Duty on wine and spirits has risen by more than 18 per cent since August 2023, with higher strength wines seeing increases above 49 per cent over the same period. Yet provisional HMRC figures for the 2025 to 2026 financial year show total alcohol duty receipts running £180 million lower than the year before, with spirits down 2 per cent and beer down 2 per cent. Earlier in that same financial year the shortfall was even starker, with receipts running £285 million behind the equivalent period a year earlier despite successive duty rises. Even the Office for Budget Responsibility, in its own published forecast, now expects alcohol duty receipts to fall further before flattening out, an admission buried in a document that ministers would rather not have to read aloud. This is price elasticity in action: push the price up far enough and people simply buy less, leaving the Treasury with a smaller slice of a shrinking pie.
The rationality test fares no better. A system designed to remove distortion has instead multiplied it. Wine and spirits continue to be taxed at markedly higher rates than other categories within the same strength band, and Small Producer Relief and Draught Relief remain capped at products under 8.5 per cent ABV, a threshold that has nothing to do with how those products are actually made or consumed and everything to do with where a line was drawn on a spreadsheet. The result, as trade bodies across the sector have pointed out, is that wine and spirit producers bound by strict minimum strength rules are locked out of reliefs that brewers can access freely. That is not rationalisation. It is a new set of arbitrary distinctions dressed up as reform.
Nor has the administrative burden eased in the way ministers promised. Charging duty on wine according to its actual strength sounds tidy in a policy paper, but it has forced businesses to overhaul labelling, recalculate stock valuations and rebuild compliance systems for a regime that keeps moving. The temporary easement that taxed wine at a midpoint strength was scrapped in February 2025, removing the one mechanism that had made the transition manageable, precisely when the rest of the system was tightening further.
The cost on the high street
None of this is abstract for the businesses and consumers living with the consequences. Hospitality closures reached four a day by the end of last year and trade bodies expect that to accelerate toward six a day through 2026, as pubs, restaurants and hotels absorb duty rises on top of business rates increases, higher employer National Insurance and a steeper minimum wage. Even the Prime Minister has now conceded that some venues will struggle under the cumulative weight of these changes, a rare moment of candour that the Treasury's own evaluation should take seriously rather than quietly absorb into the next budget cycle.
Consumers are not exempt from the bill either. Wine and spirit prices have risen by close to a pound a bottle over the past year alone, a direct transfer from household budgets to the Exchequer that has so far failed to deliver the revenue gains used to justify it. When tax increases reduce sales without increasing income, the only beneficiaries are economies and producers outside the UK, who pick up the trade that British retailers and hospitality venues can no longer profitably offer.
What honest reform would look like
None of this is a case for abandoning excise duty altogether. It is a case for testing the current system honestly against the goals the Treasury itself published, rather than retreating to a narrower set of metrics that flatter the outcome. A single rate across the 3.5 to 8.4 per cent ABV band would remove a genuine distortion. Extending Small Producer Relief and Draught Relief to all eligible producers regardless of strength would close an unjustifiable gap. Reinstating a permanent easement mechanism for wine would cut compliance costs without reopening the entire rate structure.
Beale's challenge to the Treasury is simple: mark the reforms against the aims you set, not the ones you would rather discuss now. Businesses and consumers who have spent three years absorbing the cost of this experiment are entitled to the same standard of honesty. The evidence is already published. What is missing is the willingness to read it.
