- New CPS briefing note urges the Chancellor to avoid raising fuel and alcohol duties or risk aggravating the cost of living crisis
- Raising excise duties in line with RPI would add 2.4% to the typical price of a tank of petrol, 2.2% to a bottle of wine, 3% to a case of beer, 3.1% to a bottle of whisky and 3.4% to a bottle of gin
- British excise duties are already high by European standards. Wine and beer duties are the third-highest in Europe, spirits duties fourth-highest, and fuel duties seventh-highest
- Hiking duties would mean that tax (including VAT) made up 60% of a tank of fuel, 55% of the price of a bottle of wine, 68% of a can of beer and more than 70% of a bottle of spirits
- These costs are paid disproportionately by those on low incomes, who are already feeling the squeeze the most
At the forthcoming Spending Review, the Chancellor should avoid adding to the cost of living crisis and rule out raising excise duties on fuel and alcohol.
The UK is facing by a cost of living crisis as families are hit by energy prices increases, inflation rises and the withdrawal of Universal Credit – on top of tax increases pencilled in for April. All this is putting pressure on living standards, especially for poorer households.
In a new briefing paper, released ahead of the Spending Review later this month, the Centre for Policy Studies is urging the Chancellor not to add to these pressures by increasing taxes on fuel and alcohol.
The research shows that if Excise Duty is increased in line with RPI inflation, the price of a full tank of petrol will go up by £1.50, a bottle of gin will rise by almost 50p, a bottle of whisky by 46p, a bottle of white wine by 13p and an 18-pack of lager by 36p.
The UK already levies very high excise duties compared with its neighbours: beer and wine duty are the third-highest in Europe, spirits duty is the fourth-highest and petrol duty is the seventh-highest in Europe, while we levy the highest duty on diesel of any European country.
The think tank also highlights that a continued freeze on alcohol duty is likely to help the still-struggling hospitality sector to recover after the pandemic – and points to the success of previous duty freezes in increasing revenue to the Treasury (as recommended in previous Centre for Policy Studies work).
Tom Clougherty, Head of Tax at the Centre for Policy Studies, said:
‘There is a strong case for freezing fuel and alcohol duties for a further tax year at the forthcoming Budget. Inflation and already-announced tax and benefit changes are putting pressure on household budgets. Our existing excise duties are high compared with our neighbours and as a proportion of final sale prices. What’s more, both alcohol and fuel duties are outdated in their current form and in need of a serious overhaul – a process that is already underway for alcohol.
‘The Chancellor froze alcohol and fuel duties at his March 2021 Budget. He should do the same again in a few weeks’ time.’