Budget 2013: Beer down 1p as planned 3p duty rise axed

A planned 3p rise in beer duty has been scrapped and replaced by a 1p cut in the price of a pint.

The chancellor said the alcohol duty escalator - which adds inflation plus 2% to the price - would be abolished for beer completely.

The brewing industry and real ale drinkers' group Camra welcomed the news as "brilliant" and "momentous".

However, news that the escalator will remain for wine and spirits was condemned strongly by these industries.

The reduction in the beer price starts from Sunday "and I expect it to be passed on in full to customers", George Osborne said.

He noted that 10,000 pubs had closed in the last 10 years and that the industry needed support.

The brewing industry had campaigned strongly for a freeze in duty. "But I'm going to go one step further," Mr Osborne said. "We're taking a penny off a pint... All other duties will remain as previously announced."

The beer escalator was due to run until 2014-15. About £1 of the price of a pint is taken in VAT and duties, and prices are also rising because of the increasing cost of raw materials and energy used in brewing.

Brigid Simmonds, chief executive of the British Beer & Pub Association, said the price cut and abolition of the escalator was "absolutely brilliant news. By cutting the tax on beer, he has moved to boost jobs in Britain's pubs at a time when it is most needed.

"In also abolishing the beer tax escalator, the chancellor has ended a hugely damaging policy that would have made Britain's beer the most heavily taxed in Europe.

"I hope this heralds the start of a long-term change that recognises the benefits of beer and pubs, for the economy, and for society," she said.

Mike Benner, chief executive of the Campaign for Real Ale (Camra), said: "This is a momentous day for Britain's beer drinkers, who will tonight be raising a glass to the chancellor for axing this damaging tax escalator and helping keep pub-going affordable for hard-pressed consumers.

"Since the duty escalator was introduced in 2008, 5,800 pubs have been forced to call last orders for good. What could have been the final nail in the coffin for our pubs has been decisively avoided by the chancellor in a move that will spark celebration in pubs across the UK."

Camra gathered more than 100,000 names on a petition last year calling for a freeze on duty, which led to a parliamentary debate. The group estimated that beer taxes had risen 42% since 2008.

'Unfair, incomprehensible'

However, news that the escalator for wines and spirits will remain sparked a strong reaction from the industry, which questioned whether it was legal under European Union rules to tax alcohol differently.

Wine and Spirit Trade Association chief executive Miles Beale said: "This is bad news for the UK wine and spirits sector, with year-on-year duty increases hitting consumers and businesses hard. It makes little sense to single out beer, particularly as there is a legal precedent to suggest government is unable to do so."

The escalator will add another 10p to a bottle of wine and 53p to a litre bottle of spirits. Mr Beale said that the latest rise means that consumers will have seen wine duty increase by 50% and spirits duty by 44% since the escalator was introduced in 2008.

The body that represents whisky producers in Scotland also attacked the chancellor's decision. The Scotch Whisky Association (SWA) said it was ''unfair, incomprehensible and undermines one of Britain's major industries in its home market".

The SWA says the Budget announcement penalises consumers who choose Scotch Whisky over beer, adding: ''Drinkers of a dram are now paying 48% more duty than a beer drinker, further distorting the alcohol drinks market in the UK.

"A reduction in sales of spirits, which are largely bottled in Scotland for the UK market, will hit jobs and employment prospects."

Drinks producer Diageo, whose brands include Johnnie Walker whisky, also condemned the move.

A spokesman said: "This move is disappointing. Cutting duty on beer while increasing it on spirits punishes the UK spirits industry for its success in this harsh economic climate. Scotch is the UK's biggest food and drink export. This move risks that success."

The chancellor's announcement comes amid debate over the minimum price of alcohol. A minimum price was expected to be included as part of the 2012 Alcohol Strategy. A year on, there is speculation that the policy of a 45p minimum price per unit will be dropped.