§ I have, therefore, decided to raise the additional money by increasing the duties on tobacco and alcoholic drinks by amounts broadly equivalent to 10 per cent.
§ At the same time, I propose to ask the Committee to renew the regulator power in a more flexible form which will allow one or more of the four major blocks of indirect taxation—that is tobacco, alcohol, oil and Purchase Tax—to be excluded from its use. This will mean, for example, that if it should be necessary to use the regulator at some period in the future it would not necessarily involve a further imposition on the tobacco or alcohol duties.
§ I propose to increase the duties on tobacco leaf by 6s. 6d. per lb. This will mean an increase of 4d. in the price of a packet of 20 cigarettes selling for 4s. or more, and 3d. a packet for the now popular filters and smaller brands selling for under 4s. The exact amount of the increase, 6s. 6d. per lb., is 2d. per lb. less than the exact equivalent of the price increases. There are precedents on previous occasions for allowing some margin of relief to the trade at times 272 when increases in duty have seemed likely to lead to exceptional difficulties in the trade. This happened, for example, in 1947 and 1956, and I think that is justified again on this occasion.
§ It is very difficult to predict what will be the effect of this further increase coming on top of recent scientific reports on the effect of cigarette smoking on health. This makes it difficult to estimate the yield we can expect from this increase. On a strictly mathematical basis, it would be over £80 million. Indeed, I have seen some commentators assuming that an increase of this order could be expected; but we must make some allowance for the fall in consumption that is likely to result and the best estimate that I can make is that this increase should yield £55 million in a full year and £53 million in the current year.
§ For the other half of the money I require, I intend to increase by a similar proportion of about 10 per cent. the duties on alcoholic drinks. This will mean, in practice, 1d. a pint on beer, 3d. a bottle on light wines and British wines, 6d. on heavy wines and 3s. a bottle on spirits. Consumption has been buoyant recently, particularly in the case of wines and spirits, where it has gone up by 12 per cent. comparing the last financial year with 1962–63. I think that it is reasonable to look to this source for additional revenue which I estimate, in a full year, at £29 million from beer, £17 million from spirits and £2¾ million from wines, a total of nearly £49 million. The corresponding figure for 1964–65 is £44½ million.
All these duty changes will operate from tomorrow.