Excise duty: Smokers and drinkers confront big hikes

Pub-goers may want to drown their sorrows before last orders this Sunday night after the Chancellor slapped a substantial hike on booze yesterday.

In a further blow for the struggling pub and drinks industry, the duty escalator on beer, wine and spirits was extended by two more years to the end of the tax year in April 2015. The tobacco industry also bemoaned a 15p rise on a packet of cigarettes from today.

The Government said it wanted to bring cider duties more into line with those on other alcoholic products. As a result, the duty charged on cider will rise by 10 per cent above the rate of inflation from 29 March.

The duty on beer, wine and spirits will increase by 5 per cent – 2 per cent above the current rate of inflation – from Monday. According to the Treasury's scribblers, the changes would add just 2p to a pint of beer, 10p to a bottle of wine and 36p to a bottle of spirits.

But the British Beer & Pub Association stressed that these calculations were based on wholesales prices and forecast that the price of a typical pub pint will go up by 8.2p. The BBPA said a record 2,365 pubs closed in 2009, although the closure rate has dropped to 39 a week, from a peak of 52 last year.

The BBPA was particularly incensed by the Chancellor extending the beer tax escalator – set at 2 per cent above the rate of inflation – for two years beyond the original end date of April 2013.

Brigid Simmonds, the chief executive of the BBPA, said: "The Chancellor's claims that this is a Budget for investment and growth are hollow, considering he's just hit the beer and pub sector with a £161m tax rise. The extension of the tax escalator for an extra two years also means more pain. Recently, there had been some signs of improvement in our industry but this recovery will be threatened by Mr Darling's tax rise, which is putting hundreds more pubs and thousands more jobs at risk."

The forecast from the Campaign for Real Ale (Camra) was more dramatic: it estimated that beer prices in pubs could rise by up to 20p a pint from 29 March. Mike Benner, Camra's chief executive, said: "Today's budget is a charter for the large supermarkets who irresponsibly promote alcohol as a loss leader at the expense of our nation's community pubs, real ale and responsible pub goers."

For smokers, the Chancellor increased duties by 1 per cent above inflation from today, which will add 15p to a packet of fags. But the duty will double to 2 per cent above inflation from 2011 to 2015.

Japan Tobacco International, which makes Benson & Hedges, said the rises were a gift to cigarette smugglers. JTI said that the Treasury already loses about £3bn each year in tax revenue to smugglers, which equates to up to £38bn since 2001. Daniel Torras, the managing director of JTI UK, said: "This tax rise is further good news for criminals who already view the UK as a smugglers' paradise and do not care what age their customers are."

He added: "Since January the tax on cigarettes has risen more than the previous three UK Budgets combined. Today's increase follows the VAT increase on cigarettes at the beginning of 2010 of 18p, which was in effect a tax on a tax, and brings the total tax rise so far this year to 33p."

Did you know?

The word "budget" is derived from "bougette", a medieval French word used to describe a small leather bag.