Brown looks both ways and stays where he is

Despite the automatic cries of "Foul!" from the industry, the Chancellor has in effect left the alcohol question on hold. He could have gone either of two ways. In order to combat the considerable problem of cross-channel smuggling, he might have taken the bold step of slashing duty as demanded by the industry. On the other hand, he had the opportunity of listening to the public health lobby and imposing increases which would have had a real effect on consumption. He has chosen to temporise.

The argument that tax increases have a direct impact on public health and the environment is accepted in the cases of tobacco and petrol, but not when it comes to alcohol, is the clear implication of Gordon Brown's budget. Whilst a swingeing 20p was added to the price of a packet of cigarettes, beer escaped with 1p a pint, wine with 4p a bottle, and for spirits there was no increase at all. In other words, the Chancellor has done no more than keep any alcohol price rises in line with inflation and these will not come into effect until 1st January, 1999.

The increases which will occur are:

  • Pint of beer +1p

  • 75cl bottle of table wine +4p

  • litre bottle of cider +1p

  • 33cl bottle of alcopop +1p

  • 70cl bottle of fortified wine +5p

At the same time, 36p has been knocked off the price of a bottle of low-strength sparkling wine as a result of a 20 per cent reduction in duty. There was, however, a 20 per cent increase in the duty paid on sparkling cider or perry - 9p on a litre bottle. These measures follow complaints from Brussels that the mainly domestically produced sparkling cider enjoyed an advantage over the largely imported wine.

The decision to leave the duty on spirits unchanged was taken in order to help UK producers and exporters. The Scotch Whisky Association, a powerful force north of the border where the Labour Party feels threatened by the growth in SNP popularity in the run up to the establishment of a Scottish Assembly, was understandably pleased at having escaped any increase.

Others in the drinks industry were not so happy. The Chairman of the Wines and Spirits Association, Dr Barry Sutton, claimed that Gordon Brown had produced a "crime-boosting budget." Dr Sutton added, "Increasing taxes on wine will further encourage organised crime without any real benefit for UK taxpayers." (sic) The chief executive of Diageo, the newly-formed largest drinks group in the world, said, "We are pleased that the Chancellor has at last recognised the need to reduce the level of tax discrimination against spirits... However, the budget increase on beer is a detrimental one for the beer and pub sector and will serve to increase cross-border smuggling." This last point was echoed by The Brewers and Licensed Retailers' Association: "This is bad news for thousands of pubs and good news for the beer smuggler." The Campaign for Real Ale (Camra) stated that the duty increase on beer will mean 2p on a pint over the bar when brewers' profit margins are taken into consideration.

Alcohol Concern was pleased with the increased duty on beer. A spokesman said that "any cut in duty would be damaging. And before brewers and pubs expect the Chancellor to bail them out, we think they should take a lead and trim their own margins. The bulk of disparity in prices between the UK and France does not come from excise duties."

However, others concerned with alcohol policy may note that despite the government's tough talk about alcopops and the setting up of a ministerial group, Gordon Brown, in his two budgets, has raised the excise duty on these products by a mere two pence. In 1996 Ken Clark, the then Tory Chancellor, froze the duties on beer and wine and took 26p a bottle off spirits, but imposed a 40 per cent increase on the duty on alcopops, the equivalent of 7/8p. This increase was clearly a response to the pressure "to do something" about under-age drinking in general and alcopops in particular.

The rise of 20p on a packet of cigarettes was not welcomed unequivocally by anti-smoking organisations. Clive Bates, the Director of ASH, whilst estimating that the measure would save 2,000 lives a year, was "very unhappy with the fact that the increase would not come in until December 1st." Much happier were French supermarket managers near the Channel ports. They estimate that their trade in cigarettes has increased by 600-700 per cent since the last increases and see no reason to doubt that this budget will encourage the trend.

According to official figures, the Treasury is losing £690 million every year because of tobacco smuggling. The Tobacco Manufacturers Association believes that the true figure is nearer £2 billion. The Wine and Spirits Association says that alcohol smuggling is costing another £500 million.

The industry believes that one in five pints of beer is being imported from France. Camra has stated that 13 per cent of the beer produced in France goes to UK customers and that 1.4 million pints are imported every day which amounts to the weekly sales of 2,000 pubs.