Alcohol duty drop may have led fewer to buy wine

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It's hard to imagine a set of circumstances in which a reduction in alcohol duty might result in fewer people choosing to buy wine, but frustratingly for the industry, it appears that is the effect the 2014 Budget speech may have had.

The reason is that the action on alcohol duty was widely anticipated - meaning there was not the usual level of fear that has been the case in recent years, when the alcohol duty escalator made punishing increases in taxation levels a regular occurrence.

With no fear of an imminent price rise, people did not flock to buy wine and beer at the 'old' duty level, and HMRC figures now show a 1.7% lower amount of alcohol duty collected in April and May 2014, compared with the same period of the previous year.

Despite this, the total amount of alcohol duty paid continues to increase, hitting around £10.5 billion in 2013-14.

In 2009-10 this figure stood at just around £9 billion, demonstrating the continuing cost of duty increases in previous Budget speeches.

Thanks to economic growth, alcohol duty has remained at just over 0.6% of the nation's total GDP, but a £1.5 billion increase in the gross cost of the tax demonstrates why the recent action to cut duty was long overdue.