§ I come now to the indirect taxes. I propose no change in the rate of VAT.
§ For the Excise duties there has grown up in recent years a sensible presumption that they should be adjusted in line with the movement in prices from one year to the next. That, after all, is what happens automatically with VAT and the ad valorem duties; and also to the personal tax allowances, unless Parliament decides otherwise. And that is the basis of my approach to Excise duty changes this year.
§ I start with the duty on tobacco. Last year the duty was increased twice—in March as part of the Budget measures and in July to help recoup the loss of revenue from the derv duty reduction. I have taken account of that in proposing this year an increase that is the equivalent of 5p, including VAT, on the price of a typical packet of 20 cigarettes. There will be consequential increases for other tobacco products. These changes will take effect from midnight on Thursday.
743§ Next, alcoholic drinks. I propose to increase the duties from midnight tonight by amounts which represent about 2p on the price of a typical pint of beer, lop on a bottle of table wine, and 13p on a bottle of sherry—all including VAT. The full increase in the price of a bottle of spirits necessary to take account of inflation would have been over 50p. However, in the light of the representations about the state of the Scotch whisky industry which I have received from hon. Friends representing Scottish constituencies and others, I have decided that it would be appropriate to limit the increase on spirits to 30p a bottle, again including VAT.
§ In proposing a rather larger percentage increase in the duty on claret than on whisky, I have at no stage had in mind adding to the problems of the candidate for the Social Democratic Party in Glasgow, Hillhead—Mr. Roy Jenkins. I fancy that he may have enough troubles of his own already.
§ Next, the oil duties. Last year, as the House will recall, I felt it right to go some way to meet the representations made to me by hon. Members in favour of a lower increase in the case of derv than of petrol, in view of the impact of derv duty on industrial and distribution costs. I have decided this year slightly to widen that differential.
§ There is a strong case for a larger increase in the petrol duty than in the other duties, for our average pump prices are currently among the lowest in the European Community. They have, moreover, been favourably affected by recent changes in the price of oil. Pump prices have been falling rapidly.
§ Against this it has been impressed upon me by a number of my hon. Friends from rural constituencies, in all parts of the kingdom, again including Scotland, that pump prices in remote areas are very much higher than those in more heavily populated areas. Yet dependence on cars for transport is greatest in the more scattered communities.
§ On balance, I think it would be right, at least at this stage, not to impose any real increase in the oil duties. I propose, therefore, to limit the increases in the duties on both petrol and derv to amounts which no more than compensate for one year's inflation. The duty on petrol will accordingly increase by the equivalent, including VAT, of about 9p a gallon or 2p a litre. This will still leave most pump prices lower than they were at the end of last year. The duty on derv will increase by the equivalent including VAT, of about 7p a gallon or 1.5p a litre. As almost all derv is used by businesses, this smaller increase will help to hold down business costs.
§ As last year, I propose no change in the rate of duty on heavy fuel oil. I am not able, as some would wish, to cut the duty rate; but leaving it unchanged will help industry as the duty burden continues to fall in real terms.
§ Last year I undertook to review the rate of duty applied to aviation gasoline, or avgas. I have given very careful consideration to the representations which I have received on behalf of air taxis, flying schools, crop-spraying and other specialist services, and from those concerned with air travel in the Highlands and islands of Scotland. I cannot accept in full the arguments which have been put to me, but I have decided that it would be right to reduce the avgas duty rate to one-half of that on petrol. Including VAT, this amounts to a reduction of about 32p a gallon, or 7p a litre. All these changes take effect for oil delivered from refineries and warehouses from 6 pm tonight.
744§ I also propose to increase most rates of vehicle excise duty. For the motorist, the increase will be £10, from £70 to £80. Duty levels on most other groups of vehicles will be increased by about 12 pet cent.
§ I propose to make two important changes in the VED on commercial vehicles. I have decided that it would offer a substantial, and justifiable, help to small and medium-sized businesses at this time to bring the duties on about half a million light commercial vans more closely into line with those on cars. On the other hand, it would be appropriate, in the light of the conclusions of the Armitage report, to impose on the heavier lorries—the 80,000 or so of more than 9 tons unladen weight—a licence duty which more closely reflects the actual cost which they impose on the road network. So the duty on this category will be increased by about a quarter. These changes have effect for licences taken out after today.
§ The changes I propose for commercial vehicles reflect the Government's intention to get a fairer balance between the taxation burden on different groups of lorries and their road costs. I propose to take a further step in this direction by including in the Finance Bill provisions for restructuring the basis of VED on heavy lorries, to a gross weight method of assessment, and for taxing all light commercial vehicles in due course at the same rate as cars. The House will recall that the framework for this major reform of the VED system was set out in the Transport Act 1981. It will involve substantial changes in the pattern of commercial vehicle taxation and I think it right that the road transport industry should have time to adjust. I therefore propose that the rates of duty on the new gross-weight basis should take effect from 1 October.
§ And, last of the Excise duties, taxes on betting and gaming. Many of my hon. Friends pressed last year for substantial increases here; and I made some changes in July. I now propose no further increase in the rates of duty on general betting and bingo, both of which were increased then. But I have decided that pool betting duty, which has been unchanged since 1974, should go up from 40 to 42½ per cent. from 1 April. I also propose increases from the same date in the rates of duty on casinos, where I believe the existing rates are too low. Full details of the new rates, and other changes which I shall be announcing today, will be given in press notices this afternoon.
§ My right hon. and learned Friend the Chief Secretary announced last summer that Customs and Excise would undertake a comprehensive review of gaming machine taxation. A very large number of representations were received during the course of this review, from and on behalf of clubs, public houses, amusement arcades, and others. In the light of these representations I have decided that it would not be appropriate to introduce an ad valorem duty on gaming machines, or to impose an excise duty on amusement machines, such as "space invaders". I have also decided that duty should no longer be charged on 2p gaming machines, which are mostly to be found in the seaside arcades. However, I have decided that there should be significant increases from 1 October in most rates of the existing licence duty on 5p and 10p gaming machines.
§ The total effect of all these changes in Excise duties will be to raise an additional £1,150 million in 1982–83, and £1,165 million in a full year. The impact effect on the RPI will be about three-quarters of 1 per cent. This has been fully taken into account in my forecast of falling inflation in the year ahead.