No Tax Hike on Alcopops in the Budget...

The new Chancellor of the Exchequer, Gordon Brown, disappointed public health advocates and many others besides by ignoring the demands for a major tax increase on alcopops in his first Budget.

In the event, despite the intense public clamour, and the fact that the alcopop manufacturers were clearly braced for a large tax increase, the Chancellor made no specific reference to the drinks and the tax on alcopops was increased only in line with inflation, along with all other alcoholic drinks. The increase does not take effect until 1st January 1998.

In contrast, in his last budget, Mr. Brown's predecessor as Chancellor, Kenneth Clarke, increased the tax on alcopops by around 8 pence in response to worries about their popularity with under age drinkers.

Commenting for the Institute of Alcohol Studies, Derek Rutherford said that the Chancellor had declined an opportunity to tackle a serious and growing problem. "The public were clearly expecting and hoping for the tax on alcopops to be increased. The fact that this has not happened makes even more necessary the introduction of a statutory code on the marketing of alcopops. The IAS also calls on the Government to take further action through the Office of Fair Trading to remove the worst offending products from the shelves."

Mr. Brown's only comment on alcohol excise duties was that they, and tobacco duties, demand careful consideration because of the problems of fraud, smuggling and cross-border shopping. "I have therefore decided to review all tobacco and alcohol duties and while this review is under way, inflation only rises for alcohol will take effect from January."

However, despite the review, with effect from 1 December this year, tobacco duties were increased by an extra 2 per cent above the annual 3 per cent real rate of increase established by the previous Government. As a result of duty increases, the price of a packet of 20 cigarettes will rise by 19 pence on 1 November.

On the assumption that the rate of inflation is 3 per cent, the new rates of duty plus VAT will have the effects shown in the table.

The alcohol industry broadly welcomed although the Scotch Whisky Association condemned the duty increase on spirits as a retrograde step. However, the Association did welcome the review of excise duties and called for Mr. Brown to introduce a system of unit taxation - all drinks being taxed according to their alcohol content.

Commenting on the review, Financial Secretary to the Treasury, Dawn Primarolo, said: "The Government is concerned about the level of fraud and smuggling in relation to alcohol and tobacco. This is having a serious impact on Government revenues. It cheats the taxpayer and damages legitimate businesses. We want to forge a partnership with the industry with a view to finding new ways of tackling these problems.

Fraud is a Europe-wide problem, which we are addressing in the UK and the Community. There will be no let up in Customs' fight against this criminal activity. I have asked Customs to consult interested parties with a view to reporting to me by the end of the year."

Ms. Primarolo explained that trade associations and other interested parties will be consulted at an early stage and their views sought on the extent of the problem and practical ways in which it can be tackled. While the review will take health considerations into account, it will concentrate on fraud, smuggling and cross-border shopping.

Despite the slender acknowledgement of the health dimension of alcohol taxes, the basic terms of reference of the review imply that it is more likely to result in alcohol excise duties being restructured in a downward rather than an upward direction.

70cl bottle of spirits +19 pence Pint of beer +1 pence 75cl bottle of table wine +4 pence Pint of cider +1 pence 33cl bottle of high strength alcopop +1 pence