What effect will the VAT reduction have on alcohol prices?
The VAT reduction means about 5p off the price of a £2.80 pint and 14p off a £7 bottle of wine. But the Chancellor has imposed a separate 8% excise duty increase on alcohol to offset the 2.5% VAT cut. Q:How will pub prices be affected? A: The Treasury says pubs, which charge higher drinks prices than supermarkets, could see average prices fall slightly as they pay more VAT. Q. How will licensees react? A: Many will be busy doing their sums this week. Higher margin pubs will have more room to manoeuvre than smaller businesses as the VAT saving will be more than the duty rise. But Federation of Licensed Victuallers Association chief executive Tony Payne believes Monday’s announcement will mean little, if any, move on average bar prices. Q: What is the longer term scenario for beer and alcohol prices? A: Gloomy. The Treasury says the latest duty increase will remain intact even when VAT returns to 17.5% in 13 months’ time. With a succession of annual duty rises of 2% over inflation pendin
