Navigating the Budget Battlefield: Taxation Tactics and Spending Strategies

Navigating the Budget Battlefield: Taxation Tactics and Spending Strategies

Blog | 09 February, 2024

With last Budget of the Parliament hoving into view, it’s been another week of ‘tit for tat’ between political parties over whether the country can – or perhaps cannot – afford new spending commitments or tax cuts. 

The Chancellor has recently intervened to temper expectations that he will use next month’s pre-election Budget to announce a raft of tax cuts. Whether this is classic Treasury pitch-rolling, playing down expectations only to pull a rabbit or two out of the Chancellor’s hat – or red-box – on Budget day, we will have to wait and see. On the other hand, the International Monetary Fund has urged the Chancellor not to cut taxes and instead to boost public spending.  

Need it be a binary decision? Actually, no. I don’t think so – particularly since I would argue that not all taxes are equal. Increasing tax doesn’t automatically guarantee increased revenue to the Exchequer while cutting some taxes need not automatically result in a drop in revenue. Alcohol excise duty is a case in point. The impact of last year’s historic increases to alcohol excise duty have been felt immediately – consumer demand is down and so is revenue to the Exchequer. In the months from September to December, the Government lost almost £600 million in alcohol tax, and almost £500m from wine and spirits, compared to the same period 12 months earlier. You only have to do a bit of digging to find out that cutting excise duty benefits everyone: businesses, consumers and Treasury receipts. Following the last duty cut enjoyed by the spirits sector in 2015, spirits receipts increased by £124 million compared to the previous year (+4%). Unfortunately for wine you have to go back 40 years to find the last time wine businesses were thrown a bone and wine duty was cut. Cutting excise duty is best for business, consumers and the Treasury. 

The Chancellor has some tough decisions to make at the Budget, but alcohol duties isn’t one of them. The evidence makes his job easy: cut excise duty. Such a cut would benefits consumers, business and increases revenue to the Exchequer – what’s not to like? 

Go to the WSTA website to find out how you can support the #CutDrinksDuty campaign. Better still, MPs have a ‘half term’ or recess of their own next week – so they’ll have more time for their constituents. Why not write to them at home, tag them into social media posts or better yet pay them a visit at a Surgery. After all, all politics is local and all communities have wine shops and consumers!

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