HC Deb 16 March 1993 vol 221 cc176-7

The second is excise duties. The removal of customs controls at the channel has been welcomed by many thousands of travellers who are now seeing the benefits of the single market at first hand. It has also brought many benefits to British business, including some 10 million fewer forms this year. But there is a natural concern as well about the impact of an increase in cross-border shopping, and the effect that it might have on British businesses, particularly in the south-east.

In considering what changes to make to excise duties, I have had to balance that against the need to raise revenue. I have therefore decided to raise the duties on most alcoholic drinks by only 5 per cent. this year. From 6 pm today, the total tax on a pint of beer will rise by about 1½p, and that on a bottle of wine by about 5½p.

I have also received many representations this year about the taxation of spirits, and, in particular, the taxation of whisky. This is one of Britain's most successful exporting industries. I promised in my Budget speech last year to resist proposals from Brussels to introduce tax rules that would hit whisky sales in Europe; but, having succeeded in that, it is important that our own tax regime does not further disadvantage the industry. I have therefore decided to make no change in the duty on spirits this year. I am sure that that will be welcomed by hon. Members on both sides of the House, and especially in Scotland.

I turn next to tobacco. Last July, my right hon. Friend the Secretary of State for Health published a White Paper containing our commitment to maintain the real value of the taxation on tobacco products, but again I have also had to take into account the impact of the single market. I propose, therefore, to increase the overall burden of duty by some 6½ per cent, four percentage points above the rate of inflation. This will add 10p to a typical pack of 20 cigarettes—and, I regret to say, some 4½p to a pack of five small cigars. But I also propose to make this increase in a different way from usual.

As the House will recall, cigarettes are subject to two different excise duties: a "specific" duty, which is a flat-rate charge per cigarette, and an "ad valorem" duty, on their price. Given that the health objective is to tax the harm that cigarettes do, it is better to tax the cigarettes themselves than to tax their price. I therefore propose to increase the specific duty on cigarettes by 10 per cent., while cutting the ad valorem duty from 21 per cent. to 20 per cent. This will mean a proportionately bigger tax increase for cheap cigarettes, many of which are imported. I also propose this year to increase the duty on most gaming machines by 20 per cent. Taken together, those changes will raise £290 million in 1993–94 and £365 million in 1994–95.

I turn now to motoring taxes, where I propose to combine raising revenue with tax reforms. When I abolished car tax in my autumn statement, I said that I would recoup the cost from other motoring taxes. I therefore propose to raise all fuel duties by 10 per cent. from 6 pm today, putting 12p on a gallon of unleaded petrol and 15p on a gallon of four-star. From midnight tonight, vehicle excise duty for cars—the tax disc—will also rise, by £15, to £125.

Taken together with the abolition of car tax, those measures will raise a net £400 million in 1993–94. The overall impact will be to shift the tax burden from car buyers to car users; and to help both the environment and the industry. Together with the increases that I have announced on alcohol and tobacco duties, it will add a quarter of a percentage point to the RPI in April, compared with indexation.

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