Make Mine Light: U.K. Changes How It Taxes Alcohol—Now by Strength, Not Type

Rishi Sunak, Britain's top financial official, said Wednesday that the system of how alcoholic drinks are taxed in the U.K. is being drastically changed, the Associated Press reported.

Sunak, chancellor of the Exchequer and a noted teetotaler, announced the new system during his annual budget speech, calling it the "most radical simplification of alcohol duties for over 140 years."

People will now pay taxes based on the strength of the beverage they purchase rather than the type of drink.

"Our new system will be designed around a common-sense principle: the stronger the drink, the higher the rate," Sunak said.

He also characterized the current tax system on alcohol as outdated, even though it raises more than 12 billion pounds ($17 billion) a year.

The changes will go into effect in February of 2023, and wine serves as an example of how prices could be different within the same types of drinks. Drinkers of rosé and sparkling wine could pay less, though people who prefer wines with a slightly higher alcoholic content—such as some reds or ports—could shell out more.

While Sunak detailed the better-than-expect economic recovery Britain is experiencing, the largest portion of his one-hour address to lawmakers was dedicated to the new alcohol tax system.

For more reporting from the Associated Press, see below.

Boris Johnson and Rishi Sunak
Drinkers in the U.K. will soon pay taxes based on the strength of their drinks rather than what type of drink they are having. Above, British Prime Minister Boris Johnson (right) and Chancellor of the Exchequer Rishi Sunak raise a pint as they visit Fourpure Brewery in Bermondsey, London, on on October 27, 2021. Getty

Sunak also said that the new changes to the alcohol taxes would not have been possible if Britain had remained within the European Union. Beer duties were first introduced in 1643 by his predecessors in Parliament, when they levied a tax on alcohol for the first time to finance the Roundhead armies in the English Civil War against Charles I's Cavaliers.

The alcohol tax changes certainly took up more words from Sunak than environmental issues even though the U.K. is set to host the U.N. climate summit in the Scottish city of Glasgow within days.

Overall, Sunak painted a relatively rosy picture of the state of the British economy following the country's deepest recession in around 300 years as a result of the pandemic. The economy, which suffered the worst recession among the Group of Seven industrial nations last year, has been recovering in recent months following the lifting of lockdown restrictions.

However, unlike others in the G-7, the British economy won't have recouped all its COVID-related losses by early next year, and is likely to remain hobbled over coming months by a series of shortages that many blame on Brexit as well as dislocations caused by the pandemic. It is also experiencing big price rises, largely due to the sharp pick-up in energy costs.

Sunak said the government's independent forecasters at the Office for Budget Responsibility are predicting growth this year to be 6.5 percent, up from the previous prediction of 4 percent just a few months ago, and that growth next year will be 6 percent.

He also said that borrowing and debt will be lower as a proportion of national income than previously thought over coming years, an improvement that Sunak used to lavish cash around, from new hospital equipment to local community soccer fields, as well as Prime Minister Boris Johnson's long-term priorities to "level up" prosperity in the U.K.

"He's used that windfall to spend significantly more, especially in the next few years," said Torsten Bell, chief executive at the Resolution Foundation think thank. "The lasting effect of that extra spending is to allow him to partially reverse some of his own decisions."

In his speech, Sunak said his controversial temporary cut in the government's spending on overseas aid to 0.5 percent of national income will, according to the forecasts, revert back to the previous level of 0.7 percent by 2024/25. He also said he would make the welfare program more generous to low-income families beginning in December at the latest, just weeks after a pandemic-related uplift for all claimants came to an end.

"Today's budget does not draw a line under COVID. We have challenging months ahead," Sunak said. "But today's budget does begin the work of preparing for a new economy post-COVID."

Ahead of his statement, Sunak had already announced that spending on health care will go up to resolve a massive virus-related backlog in care and that the minimum wage for low-income workers will rise 6.6 percent beginning in April. He has also said the public sector pay freeze for military personnel, police officers and teachers will end.

Given that inflation is set to rise further in the coming months, potentially to over 5 percent, there are concerns as to whether the pay increases will be enough to keep track with inflation.

Rachel Reeves, the Treasury spokesperson for the main opposition Labour Party, said struggling families must think that Sunak is "living in a parallel universe" if he thought the measures will offset the rise in prices and previous tax increases.

"Taxes on those with the broadest shoulders, those who earn their income from stocks and shares and dividends and property portfolios, they've been left barely untouched," she said. "We have a government that is a by-word for waste, cronyism and vanity projects."

Rishi Sunak
British Chancellor of the Exchequer Rishi Sunak holds up the traditional ministerial red dispatch box as he leaves for the House of Commons to deliver the Budget in London on October 27, 2021. AP Photo/Alastair Grant