Excise Duties: Chancellor's tax double-whammy to persuade smokers to give up

Thursday, March 22, 2007

By Karen Attwood

The surprise move was welcomed by health campaigners, although an inflation-linked rise on the price of a packet of cigarettes was criticised for being "a missed opportunity".

But there was anger from the beer industry after a penny was added to the price of a pint, fuelling concerns over the future of smaller pubs. Duty on cider has been frozen in recent years, but the Chancellor added a penny to a litre yesterday and there were fears this could hamper its recent resurgence.

Mark Hastings, of the British Beer and Pub Association, called the Budget "a slap in the face for one of Britain's world-beating businesses". He added: "Once again, the Chancellor has battered beer and favoured stronger alcoholic drinks like spirits." He pointed out that tax on beer had risen 23 per cent since 1997, while beer consumption had fallen 11 per cent.

For the fifth consecutive year, the Chancellor announced that excise duties on beer, wine and cigarettes would rise in line with inflation from midnight on Sunday. This puts 5p on a bottle of wine and 7p on sparkling wine. But duty on spirits remains frozen for the 10th budget in a row.

VAT on nicotine replacement products drops from 17.5 per cent to 5 per cent from 1 July, while the price of a pack of 20 cigarettes will rise by 11p. The Government has stepped up its anti-smoking campaign to encourage more people to kick the habit ahead of the extension of the smoking ban in public places that will be introduced into Wales in April and England in July. Mr Brown described the measure as a "new incentive" to encourage people trying to quit smoking.

The Campaign for Real Ale said the increases in beer and cider duties were a mistake, as it would lead to an "exodus from pubs" and therefore a drop in revenue for the Treasury. Its chief executive, Mike Benner, said: "At a time when 56 pubs a month are closing, the smoking ban is imminent and supermarkets are selling beer at ridiculously low prices, British pubs needed a lifeline from their government and that has been denied them." Meanwhile, the Wine & Spirit Trade Association said it was disappointed at the decision to raise tax on bubbly by 7p a bottle. Duty on champagne and sparkling wine was frozen last year in anticipation of a successful World Cup. "This is a startling U-turn for the Chancellor and will have a serious impact, particularly on the burgeoning English and Welsh wine market," its spokesman, Jeremy Beadles, said. "Some 15 per cent of wine produced in the UK is sparkling, and this duty hike will deal a real blow to this domestic industry."

Alcohol Concern criticised the Chancellor for failing to address the damage done by alcohol misuse, pointing out that alcohol was 54 per cent more affordable than it was in 1980. But Mr Brown won praise from the anti-smoking charity Action on Smoking and Health (ASH) for "making this budget a quitter's budget". The director of ASH, Deborah Arnott, said NRT (nicotine replacement therapy) could double smokers' chances of kicking the habit. One in five smokers say they will try to quit in the run-up to the introduction of the smoking ban, according to ASH. "Reducing the price will encourage many more smokers to use these products, so making it more likely they can successfully quit," Ms Arnott said. "However, a one-year reduction in the price of NRT was not enough and should be sustained permanently."

Manufacturers of NRT products, unsurprisingly, welcomed the move. Ben Peters, the marketing manager for Nicorette at Pfizer, said "it was a helpful further incentive for more individuals to choose to double their chances of quitting by using Nicorette".

Retailers were urged to make NRT products available to buy alongside cigarettes on the shelves and in vending machines. The British Heart Foundation (BHF) urged manufacturers to cut their prices to help smokers quit. "This will make giving up smoking easier for the millions who want to quit," the BHF said. But the organisation was disappointed the Chancellor "didn't take a two-pronged approach to help smokers quit by increasing tax on cigarettes above inflation".

Health professionals said the Chancellor should have gone further. "There is strong evidence that higher prices are one of the most effective ways of helping people give up smoking and preventing young people from starting," the British Medical Association said. It added that "11p does not go far enough".

The smokers' lobby group Forest was disappointed with the budget for hitting smokers and urged the Government to stop using smokers as a "cash cow". Neil Rafferty, its spokesman, said: "Gordon Brown gets £7.5bn a year from smokers that pays for services that non-smokers use, too... People choose to smoke. If they choose to quit, they should not be subsidised by the rest of the population. This is great news for the pharmaceuticals industry, but bad news for the British taxpayer."

Ken Patel, a spokesman for the Retailers Against Smuggling campaign, which is funded by the Tobacco Manufacturers' Association, warned that the Chancellor had just created greater opportunities for smugglers. "UK tobacco tax levels are the highest in the EU," he added.