Moves to cut duty on beer, but to increase the tax take from wine and spirits, could be challenged in court, it emerged tonight.
George Osborne won plaudits from brewers, pub companies and campaigners when he announced he was scrapping plans to raise duty by 3p a pint and was going further by trimming it by 1p from Sunday.
However, taxes on other types of alcohol are to be increased by 5.3 per cent, adding 10p to the cost of a bottle of wine and around 40p to a bottle of spirits. Groups representing those sectors reacted furiously at the uneven treatment and suggested it could prove to be illegal.
The Chancellor’s announcement on beer prices came after warnings over the scale of pub closures – 10,000 have called last orders in the last decade – and the problems confronting the brewing industry.
To the cheers of MPs, Mr Osborne said he was scrapping the duty escalator launched in 2008 under which tax on beer was lifted by two per cent above inflation each year. It would have added 3p on the price of a pint this year, followed by another 3p in 2014.
He added that he would in fact cut the duty on beer by a penny.
His move was welcomed by the Campaign for Real Ale, which forced a Commons debate last year after it gathered more than 100,000 names on a petition protesting about beer price rises.
Brigid Simmonds, the chief executive of the British Beer and Pub Association, said: “This is absolutely brilliant news and it will make George Osborne the toast of Britain’s pubs today. He has moved to boost jobs in Britain’s pubs at a time when it is most needed.”
But the Wine and Spirit Trade Association said it was considering taking legal advice on the move to separate its products from beer. It said the Thatcher government backed off from a similar move in 1983 amid doubts over its legality, while the French government could be challenged in the European Courts over plans to raise duty on beer but not wine.
Miles Beale, the association’s chief executive, said: “Year on year duty increases hitting consumers and businesses hard. It makes little sense to single out beer, particularly as there is a legal precedent to suggest Government is unable to do so.”
Gavin Hewitt, the chief executive of the Scotch Whisky Association, condemned “an unfair and incomprehensible attack” on the industry. He said: “It penalises responsible drinkers who like a dram rather than a pint. There is no justification for spirits being taxed more heavily than beer.”
The drinks giant Diageo said: “Scotch is the UK's biggest food and drink export. This move risks that success.”
Duty rose on tobacco rose by two per cent above inflation last night, adding 26p to the price of a packet of 20 cigarettes and 9p on five small cigars.
The health charity Ash said the Chancellor should have hiked it by five per cent to encourage smokers to kick the habit.
Case study: Pub landlord
Micky Sheehan, 37, runs The Victoria Inn and The Graduate in Derby.
"What will affect me most are the cuts to National Insurance bills. I think I'll be able to employ two more people. While the Budget won't make me money, it will help me save money. I pay myself below the minimum wage, so the £10,000 tax-free allowance will hopefully help me make another saving.
"They'll never be able to make a massive impact on the price of a pint, but to celebrate the beer duty cut I'm going to hold a 'penny for a pint' night next Friday. The second pint the customer buys will cost 1p."