In a stunning reversal of fiscal fortune, Chancellor Rachel Reeves's flagship plan to increase alcohol duty is set to backfire catastrophically, with Treasury forecasts predicting a near £1 billion nosedive in annual tax revenues. The analysis, conducted by the government's own economists, reveals that the proposed hikes would suppress sales so severely that the tax take would actually fall.
A Bitter Pill for the Treasury
The internal assessment paints a bleak picture for the nation's finances. Rather than filling government coffers, the duty increase is expected to drive consumers away from legally purchased alcohol, leading to a significant net loss. This miscalculation strikes at the heart of the new government's economic credibility, presenting an immediate and embarrassing challenge to its financial stewardship.
The Economic Domino Effect
The projected shortfall is not just a number on a spreadsheet; it has real-world implications:
- Public Service Funding: The nearly £1 billion gap could have funded vital services across the NHS, education, and social care.
- Industry Impact: Pubs, breweries, and retailers already struggling with inflation fear the duty hike could be a final blow, potentially costing jobs.
- Consumer Behaviour: Experts warn that higher prices could inadvertently boost the black market for alcohol, compounding the revenue loss.
Questions for the Chancellor
This revelation forces urgent questions about the modelling and assumptions used by the Treasury. How did a policy designed to increase revenue become a recipe for its drastic reduction? Opposition parties and industry bodies are demanding a swift re-evaluation of the plan, labelling it "economically illiterate" and "dangerously out of touch" with the realities facing both businesses and households.
As the Chancellor grapples with this self-inflicted fiscal wound, all eyes will be on Downing Street to see if she will persist with a policy that appears doomed to fail or pivot to avoid a costly political and economic mistake.
