Budget set to increase duty on spirits

The first increase in the excise duty on spirits since 1997 is expected to be announced in next week's Budget as part of the Government's attempts to combat binge drinking.

Alistair Darling, the Chancellor, is considering a plan to lift the freeze on spirits which has been in place since Labour came to power. Although taxes on beer and wine have risen in line with inflation since 1997, spirits have been exempt from increase to protect the competitiveness of the Scotch whisky industry.

Mr Darling has indicated that he will not impose swingeing increases, saying he does not want to "punish everybody for the sins of a minority". But he believes price rises can play a part in a co-ordinated strategy to tackle alcohol abuse.

Analysts have calculated that a 10 per cent rise in alcohol duties would result in a 10 per cent fall in consumption and that for spirits the drop could be as high as 13 per cent. They say a price hike would deter young people in particular.

Health experts are worried that many girls and young women are drinking large amounts of vodka with different mixers. Treasury officials believe it would not be possible to single out one drink for higher duty and so an overall rise for all spirits is under consideration.

The level of duty is typically 33p on a pint of beer, £1.33 on a bottle of wine and £5.48 on a bottle of whisky – which drinks companies say accounts for more than 70 per cent of the total price to the consumer.

Each percentage point increase in next Wednesday's Budget would raise £40m for the Treasury from beer, £25m from wine and £5m from spirits. A rise of 1 per cent in the duty on spirits would add 5p to the price. A rise of 10 per cent, which has been demanded by the Health Alcohol Alliance of doctors and charities, would add 54p to a bottle of whisky.

The Department of Health, which has commissioned a study on the relationship between the price, promotion and harmful effects of alcohol, is understood to be pressing the Treasury to raise duties. Alcohol-related hospital admissions cost the National Health Service £1.5bn a year.

The British Medical Association has called for rises to be proportionate to the amount of alcohol in the product. It cited studies showing that higher duty would reduce alcohol-related violence and crime as well as "providing the necessary funding to meet the social and economic costs of these harms".

Supporters of higher alcohol duties argue that price hikes on cigarettes for health reasons helped to deter smoking. But sceptics doubt that young people would change their lifestyle.

The drinks industry fears it will be targeted in the wake of criticism of the Government's review of the 24-hour licensing laws this week, which did not provide evidence for the U-turn on policy demanded by critics.

The Wine and Spirits Trade Association appealed yesterday to the Chancellor to think carefully before raising alcohol duties and called for a freeze. It said that a rise would not reduce problem drinking and could reduce Treasury revenues and stoke inflation. The Scotch Whisky Association said: "Calls for higher duties to tackle alcohol misuse are misplaced."

The Tories called for an increase in the duty on "problem drinks", including a rise of more than 50p on alcopops such as WKD and Smirnoff Ice; a 32p increase for a 500ml can of strong beer such as Carlsberg Special Brew and Tennent's Super and a doubling of duty on strong ciders such as Diamond White and White Lightning, adding £1.25 to a three-litre bottle.

They also proposed a cut in tax on low-strength beer and cider and no change on wines and spirits.

Labour sources said a tax rise on alcopops alone would be illegal under EU rules.

George Osborne, the shadow Chancellor, said: "Our package does not hit the vast majority of law-abiding, responsible drinkers. Binge drinkers should not be used as an excuse for yet more health taxes."

Don Shenker, director of policy at Alcohol Concern, said: "Strong cider, strong beer and alcopops are some of the most problematic alcohol drinks available in Britain. There's no doubt that measures of this kind will put a dent in teenagers' ability to buy and drink these products excessively."