Alcohol Duty

There will be many claims for the Budget next week, and often these appear to be contradictory.  There are demands to protect or increase spending in key areas, yet to reduce the burden of taxation in others.

Sometimes we forget that, while the budget deficit has halved, Britain will still spend more than we take in receipts for the next three years, and that eliminating the deficit will require spending reductions.

The size of that deficit means that we spend more every year just to pay the interest on Britain's debt (a staggering £53 billion a year) than we do on defence (£38 billion a year). 

If we are to protect defence spending from cuts - a compelling claim, given the growing national security risks - then we need to find savings elsewhere and boost revenues.

A strong economy is key to this, because growth leads to the revenues that fund public services. 

Despite the deficit, the Government has reduced taxes in key areas, for instance freezing and cutting fuel duty, without which motorists would not have enjoyed the recent reductions in pump prices.

The Chancellor also delivered another tax cut which has been important locally: scrapping the beer and alcohol duty escalators, and cutting beer duty for two years running.

Local pubs are important to our communities, and West Sussex is building a reputation as a producer of English wine.  So these duty reductions have been particularly welcome.

Nearly 80 per cent of the price of a bottle of spirits and 60 per cent of a bottle of wine is tax.  Excise duty on wine in the UK is the highest of any EU country except Ireland.  It is almost ten times as high as the duty on a bottle of wine in France.

Labour introduced the alcohol duty escalator in 2008.  It was self-defeating.  Beer duty increased by 42 per cent, but revenues only increased by 12 per cent.

Conversely, Oxford Economics has calculated that most of the direct cost of cutting beer duty is recouped by increases in revenue from employment and sales taxes.

So, despite the deficit, and despite pressing spending claims, there's a strong case for cutting alcohol duty - as local businesses like Hennings Wine have pointed out to me.

It will help our pubs and help the economy.  That's why I've urged the Chancellor to cut alcohol duties - and hope that his Budget next Wednesday will deliver.

Nick Herbert