Pubs in peril: Hunt’s Budget unlikely to offer relief for beleaguered boozers

Hoping Jeremy Hunt would become only the fourth Chancellor in history to cut alcohol duty was always going to be a big ask. 

As The Herald revealed back in the middle of last month, the industry had cross-party support for the measure cheapening measure. 

But the mood music, one insider tells me, is that when he stands up at the despatch box on Wednesday, rather than follow in the footsteps of George Osborne, Ken Clarke and Anthony Barber, Hunt will freeze rather than slash.

In fact, when he and Rishi Sunak met on Monday and thrashed out the final detail of what will likely be their final tax and spending plans ahead of a (what looks increasingly like a May) general election, it probably wouldn’t have merited much debate. 

The briefing coming from No 11 over the last couple of weeks is that Hunt only has meagre fiscal headroom. 

In its final update, handed over on Friday evening, the Office for Budget Responsibility reportedly said he had just £12.5 billion to play with. 

Of that, he needs to keep approximately £6 billion in reserve. And given that his 2p cut in national insurance will cost him around £9 billion, you can see why he might baulk at a duty cut on Scotch. 

Industry and MPs argue that’s short-sighted.

The Scotch Whisky Association points out that Osborne’s 2% cut to spirits duty in 2015 saw revenue increase from £3,023m in 2014/15 to £3,147m in 2015/16. 

An increase of £124m.

By the 2020/21 financial year, spirits revenue had increased to £4,115. 

Basically, in seven years, revenue had increased by over £1bn

Their own modelling suggests that a 5% cut to spirits duty on Wednesday could generate up to £1.6bn in additional revenue over the next five years.

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Of course, it depends on how you look at it. Scottish Health Action on Alcohol Problems, who are very much against a cut, says if duty had raised in line with inflation the Treasury’s coffers would have been boosted by around £24 billion between 2013-2028.

Though the sector may be disappointed by the freeze, it could have been much worse. 

Last year Hunt ended the freeze for spirits, resulting in a 10.1% hike coming in last August.

However, this time round, it looks as if he’s going to go elsewhere to raise funds. 

Hunt is expected to announce a series of revenue-raising measures on Wednesday to help pay both for the cut in NI and for another freeze in fuel duty.

As well as the well-trailed change to tax breaks for non-doms, we can also expect a new levy on vaping products, a corresponding hike in tobacco duty, higher taxes for short-term holiday lets and an extension of the energy windfall tax.

When I spoke to Aberdeen and Grampian Chamber of Commerce about the energy profits levy, they said the North Sea was “being used as a cash cow”.

The Scotch sector would say they know how that feels, with 73% of the average price bottle of blended Scotch Whisky being collected in tax through duty and VAT.

Meanwhile, it’s not an exaggeration to say that for Scotland’s pubs and bars, Hunt’s budget could be existential. 

They’re desperate for help, particularly after the Scottish Government declined to copy the Chancellor’s decision to extend the 75% discount on business rates bills of up to £110,000 in England to April 2025.

Colin Wilkinson, managing director of SLTA, said that in their most recent survey of members, some 9% of outlets are now either planning to close or considering options for the future.

Across the UK, about 3,000 pubs have shut in the past six years, including 509 last year. 

In Scotland – partly because of that lack of help with rates – bars closed at twice the rate of those south of the border. 

When you add in soaring costs and a lack of staff and consumers just not spending as much, it all adds up. 

But, again, given the little fiscal headroom, the desire to dish out tax breaks, the chances of Hunt offering much to help the beleaguered sector is slim. 

It could be a bleak year for bars and pubs.