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Duty-free budget

A cheer went up in the House of Commons when, choosing his words carefully, the Chancellor of the Exchequer, Gordon Brown, said that duty on alcohol would not be increased before the Millennium. It seems that the most important thing was not to mar in any way the booze-up planned for the end of the century. The joy expressed by Members of Parliament was regardless of party, as though the wider implications of alcohol tax policy took second place to thecontinuation of cheap drink in the many bars available in the Palace of Westminster.

Chancellors traditionally sip their favourite drink whilst delivering the budget speech. Gladstone preferred egg-nog, Churchill, brandy and soda, Ken Clarke, scotch. As befits a son of the manse, Brown favours mineral water. But there was nothing sober about his measures. The only alcoholic drinks to be subject to any increase are sparkling cider and low-strength sparkling wine - a totally insignificant section of the market. That measure was taken simply to avoid action in the European Court. The sparkling variety comprises 0.5 per cent of total cider sales. Duty on spirits was frozen last year as well (that on beer and wine increased by the rate of inflation on 1st January) and so, of course, they are becoming cheaper as time goes by.

Whilst alcohol escaped extra taxation, tobacco was subject to swingeing increases - 17.5 pence on a packet of cigarettes and 7.5 pence on a pack of 5 small cigars. At the same time the Chancellor promised action against tobacco smuggling, which is said to cost the Treasury £1.5 billion in lost excise duty every year, but was not specific about what this action would be. A spokesman for the Tobacco Manufacturers' Association said: "The Chancellor's misguided cigarette tax policy is simply flushing billions of pounds 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 Britain's ludicrously high tobacco tax." At the Dispatch Box, Gordon Brown acknowledged this argument implicitly but said that he could not allow any loss in revenue to undo a policy in place for "good and urgent health reasons."

In a statement on the budget, the Institute of Alcohol Studies said: "The Chancellor's decision to freeze excise duties on alcohol while raising them on tobacco is an exercise in political cynicism. If the problem of smuggling is not to be allowed to undo health policy on tobacco, as the Chancellor asserted, then why is it to be allowed to undermine health policy on alcohol? The argument is exactly the same.

"This is further evidence that the Government has been 'nobbled' by the alcohol industry. The Chancellor's decision, along with other Government proposals bodes ill for the national strategy to reduce alcohol misuse that it is supposed to be drawing up. While having little, if any, effect on smuggling, Gordon Brown's decision indicates that the Government has no serious intention of tackling alcohol misuse. Indeed, it seems set on encouraging it."

The drink industry, by and large, welcomed the budget. The Brewers and Licensed Retailers Association said: "A freeze is very welcome as far as it goes, but as long as the duty differentials between the UK and France remain so high, jobs will go, pubs will close and crime will increase." Presumably, the reference to crime concerns smuggling rather than the violence and disorder increasingly associated with alcohol. Quentin Rappaport of the Wine and Spirits Association was happy with the freeze: "We are particularly pleased that he mentioned that he did not want to spoil the Millennium party."

The Scotch Whisky Association was more churlish. A spokesman said that its members were disappointed not to see taxes on their product cut in order to help reverse falling UK sales. "We are very disappointed because the Chancellor has ignored the problems we are facing," he said. "The Chancellor made a start in reversing the trend last year by freezing tax and we were hopeful there would be a cut this year. Unfortunately, the situation has remained the same,and the cause of the industry's decline - cross-border shopping - has not been tackled." The Association were hoping for a cut of 26p on a bottle.

Any reasons for the freeze on alcohol duty are a matter of surmise since the Chancellor declined to give any, other than the implied disinclination to do anything to temper the millennium booze-up. It may be, in an inexplicable contrast to his action on tobacco, that he hopes to stem the tide of alcoholic drink being brought in from France. If so, the difference in prices on either side of the Channel remain sufficient to make smuggling well worth while. The Government's anxiety not to take any action which might be electorally disadvantageous is another possible explanation for freezing alcohol duties. This is particularly the case in Scotland, where any increase in the duty on whisky would have resulted in scares about exports and unemployment playing into the hands of the SNP which is running neck and neck with the Labour Party as the election to the Scottish parliament approach. "It is a pity, to put it mildly," the IAS said, "that a coherent public health policy is to be sacrificed to these short term interests. How can there be any effective national alcohol strategy when excise policy works in the opposite direction?"