Budget 1999: Alcohol and Cigarettes - Surprise reprieve for drinkers but smokers pay a high price

SMOKERS AND tobacco manufacturers bore the brunt of the Chancellor's tax increases while drinkers won a surprise reprieve with a freeze in duty on beer, wine and spirits.

Gordon Brown stuck to a long-standing tradition and announced that excise duties on tobacco will increase by 5 per cent above the rate of inflation, to help to pay for a pounds 3bn package of tax benefits for the elderly. The rise will add around 17.5p to a packet of cigarettes, pushing the cost of 20 Benson & Hedges to around pounds 3.80. A pack of five small cigars will cost 7.5p more, while a 25g pack of pipe tobacco will go up by 9.5p.

The rises will take place immediately.

Mr Brown decided to keep on hold the other section of the so-called "sin taxes" leaving duties on beer at 33p a pint, on spirits at pounds 7.82p per litre and at pounds 1.49 per litre for wine.

Cigarette-makers and retailers reacted angrily to the decision to hike taxes, noting that taxes now account for nearly 80 per cent of the retail price of cigarettes. John Carlisle of the Tobacco Manufacturers Association (TMA), which had called for a pounds 1 cut in taxes said: "We are very cross. This is an ostrich-policy and a head-in-the-sand Budget. The Chancellor has totally ignored the problem of smuggling, the loss of tax revenues and the threat to the livelihood of retailers."

The tobacco industry has attacked the Government's tax increases as a blueprint for smugglers. According to the TMA, the Exchequer loses pounds 1.5bn in revenue a year to smuggling.

The TMA claims that UK taxes are almost pounds 1.50 higher than the average of the rest of the European Union countries. The differential encourages smuggling and bootlegging. Over 15 per cent of all cigarettes and over 75 per cent of hand-rolling tobacco smoked in Britain comes from illegal imports, the TMA maintains.

Mr Brown acknowledged the problem of the black market in his speech to the House of Commons but added that smuggling "will not be permitted to undo a policy on cigarettes which successive British governments have adopted for good and urgent health reasons".

He added that the Government will strengthen its anti-bootlegging strategy with "new resources to detect, prevent and punish this costly form of organised crime".

Small retailers said the Government could do little to stop illegal importing of cigarettes. Paul Mason of the Tobacco Alliance, which represents 26,000 retailers, said: "Mr Brown may as well try to stop the tide at Dover as stop the flow of smuggled cigarettes.

"The Chancellor's misguided policy is just flushing billions down the drain. He says he is alarmed at the state of the tobacco smuggling problem, but he chooses to ignore the only sensible option to combat it, namely cutting the UK's ludicrously high tobacco tax."

Anti-smoking pressure groups welcomed the decision to put the cigarette duties. Clive Bates, director of Action on Smoking and Health (Ash), said: "We are satisfied. When cigarette prices rise, tobacco consumption falls as smokers cut down, give up or never start in response to prices."

Labour has taken a harder stance on cigarette duties than the Conservatives, which were committed to duty increases of at least 3 per cent above inflation.

Cigarette duties have been increased every year for the past nine years. The 1987 and 1989 budgets were the only two occasions in the last 12 years were not increased.

Beer and wine producers were delighted with the surprise decision to leave taxes unchanged. Mr Brown had increased duties on beer in line with inflation in the past two budgets and the industry was bracing itself for another hike. However, the Chancellor hinted that another increase would have spoilt the Millennium celebrations. "There will be no tax rises on alcohol this side of the Millennium," he said.

The only increase will apply to sparkling cider, where a 75cl bottle will go up by pounds 1.02p to bring it into line with sparkling wine.

The Brewers and Licensed Retailers Association said: "A freeze is very welcome as far as it goes and the Chancellor does seem to be acknowledging the problems caused by smuggling.".

Quentin Rappaport of the Wine and Spirits Association welcomed the freeze, which mirrored last year's decision on spirits duty but departs from the decision to add 3p to a bottle of wine. "We are particularly pleased that he mentioned that he did not want to spoil the Millennium party," he said.

The industry lobby groups claim that the high level of British duties is at odds with the rest of the EU, where duties are moving towards a target rate of 8p a pint. In wine, the gap is even more pronounced with the French duty on a litrepitched at just 0.2p.

They maintain that the tax differential encourages cross-Channel smuggling. According to the industry, every day more than 1.5 million pints of beer cross the Channel - the equivalent of beer sales of all the pubs in Dorset, Somerset, Devon and Cornwall. Over two-thirds of them are re-sold illegally without paying the UK duty, causing a tax revenue loss of around pounds 800m a year to the Exchequer.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
techPatent specifies 'anthropomorphic device' to control media devices
Voices
The PM proposed 'commonsense restrictions' on migrant benefits
voicesAndrew Grice: Prime Minister can talk 'one nation Conservatism' but putting it into action will be tougher
News
Ireland will not find out whether gay couples have won the right to marry until Saturday afternoon
news
News
Kim Jong-un's brother Kim Jong-chol
news
News
Manchester city skyline as seen from Oldham above the streets of terraced houses in North West England on 7 April 2015.
news
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 Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?