Brown's cigarette tax delay costs pounds 300m

A decision by Gordon Brown to defer a hike in cigarette duty by five months to 1 December has cost the Treasury pounds 300m in lost tax and handed manufacturers a likely profits bonanza.

Since the Chancellor made his announcement in his first budget last July to delay the imposition of extra duty by five months, the major producers have all been laying on extra shifts to make as many cigarettes as possible ahead of the deadline.

Their bonded warehouses are full to bursting with cigarettes, which, provided they are taken out of bond by the first of next month, can be sold by retailers without the duty increase. So many cigarettes have been made, and demand from retailers to beat the deadline has been so great, that cigarettes at "pre-budget prices" will be sold well into next year, even as late as summer.

Any hope by Mr Brown to use t`e extra duty to reduce demand has backfired, adding to Labour's embarrassment over its generosity to the industry in allowing tobacco advertising in Formula One motor racing. David Swann of the Tobacco Manufacturers Association estimated the lengthy deferral had cost the Treasury around pounds 300m in lost duty.

One manufacturer said it had added two shifts a day and had been working flat out to meet demand from supermarket chains and other retailers anxious to be able to offer cheap cigarettes. It had managed to make the equivalent of 18 months'-worth of cigarettes in just five months. And Imperial Tobacco confirmed: "We have been working extended overtime for several months and have still been unable to fully meet our orders."

In his Budget, Mr Brown announced a rise in excise duty equivalent to 19p on a packet of 20 cigarettes. ,Industry disappointment gave way to disbelief and delight when it became apparent the new tariff would not be introduced for five months.

Industry insiders said they were at a loss to explain the Government's thinking. It was possible the Chancellor had decided to target the practice of "forestalling", whereby retailers stockpile cigarettes ahead of a budget in anticipation of a duty increase. But this speculatory stockpiling normally takes place over one month, not five, and because the industry knows the exact size of the rise, they have been able to deliberately add extra shifts in the knowledge they will safely beat the deadline.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Account Manager / Sales Executive - Contract Hire

£35000 - £60000 per annum: Recruitment Genius: This industry leader provides c...

Recruitment Genius: Project Coordinator

£28000 - £30000 per annum: Recruitment Genius: A Project Coordinator is requir...

Recruitment Genius: Area Sales Manager - Midlands

£20000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: PHP Developer - 3-4 Month Fixed Contract - £30-£35k pro rata

£30000 - £35000 per annum: Recruitment Genius: This is a 3-4 month pro rata fi...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave