§ Mr. Austin Mitchellasked the Chancellor of the Exchequer how the rates of duty proposed by the European Economic Commission for alcoholic beverages and tobacco compare with the rates of duty charged in the United Kingdom; and what is his estimate of the effect on consumption of reducing the United Kingdom rates to the rates proposed by the Commission.
§ Mr. BrookeThe European Commission's proposals for "approximation" of rates of excise duty on alcoholic beverages and tobacco products, would require reductions in existing United Kingdom duty rates as shown below as follows:
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Product Commission proposal Existing United Kingdom duty rate Approximate percentage rate charges Spirits 12.71 ECU (£8.91) per litre of alcohol £15.77 per litre of alcohol -44 Beer 1.32 ECU (£0.92) per hectolitre/ degree Plato of finished product at 15°c (8.89 for average beer) £25.80 per hectolitre plus 86p for every degree of original gravity over 1030° (31.82 for average beer) -72 Table wine 17 ECU (£11.92) per hectolitre £98.00 per hectolitre -88 Fortified wine 15–18 per cent, volume 85 ECU (£59.42) per hectolitre £169.00 per hectolitre -65 18–22 per cent, volume 85 ECU (£59.42) per hectolitre £194.90 per hectolitre -70 Cigarettes 19.5 ECU (£13.70) per 1000 plus 52–54 per cent, of retail selling price £30.61 per 1000 plus 21 per cent, of retail selling price -10 Pipe tobacco Excise duty +VAT to comprise 54–56 per cent, of retail selling price £24.95 per kilogram -17 Cigars Excise duty+VAT to comprise 34–36 per cent, of retail selling price £47.05 per kilogram -52 Hand-rolling tobacco Excise duty +VAT to comprise 54–56 per cent, of retail selling price £49.64 per kilogram -55 Note: 1ECU = £0.701159.
Because of the very large changes in duty levels involved, estimates of the effect on consumption are subject to wide margins of error. Applying the assumptions normally used to calculate the effect of small changes in duty rates suggests that consumption of spirits and wines could rise by as much as a third; beer by about 10 per cent; cigarettes and pipe tobacco by about 5 per cent; and cigars and hand-rolling tobacco by about a quarter.
§ Mr. Austin Mitchellasked the Chancellor of the Exchequer what is his estimate of the effect on consumption of the standstill on the excise duties on alcoholic beverages and tobacco in recent Budgets; what is the current value in cash terms of the 1978 rates of duty; and what is his estimate of the increase in revenue which would accrue from such rates in a full year.
§ Mr. BrookeIt is not possible to distinguish between changes in consumption which may have resulted from the standstill on excise duties in recent Budgets and changes which occurred as a result of other factors. However, an indication of the effect on consumption of the duty standstill can be provided by estimating what would happen to consumption in 1987 if the duties were restored to their real value at the time of the last duty change. (For example, beer duty was last increased in 1985.
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Table 2 1987 duty rates 11978 duty rates in 1987 terms 2Estimated change in revenue if 1978 duty rates applied, full year, 1987–88 £ £ £ million Alcoholic beverages: +120 Beer 25.80 322.05 per hectolitre Revalorisation since then would require an increase in the duty of 9.6 per cent. If beer duty were increased by 9.6 per cent. in 1987, it is estimated that consumption would fall by about 1 per cent., all other things being equal). The estimates are shown in table 1.
The current value of the 1978 rates of duty and the estimated changes in revenue which would accrue if these duty rates were applied in 1987 are shown in table 2.
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Table 1 Budget in which duty last increased Increase required in 1987 to revalorise since the last increase Estimated change in consumption in 1987 if duty increased in 1987 by revalorisation since last increase Per cent. Per cent. Alcoholic beverages: Beer 1985 9.6 -1 Cider 1985 9.6 Less than -1 Spirits 1985 9.6 -5 Wines 1985 9.6 -3 Tobacco: Cigarettes 1986 3.7 -1 Hand rolling 1986 3.7 -1 Cigars 1984 14.6 -4 Other 1982 27.3 -7
1987 duty rates 11978 duty rates in 1987 terms 2Estimated change in revenue if 1978 duty rates applied, full year, 1987–88 £ £ £ million Cider 15.80 11.01 per hectolitre Spirits 15.77 421.61 per litre Wines of fresh grape: not exceeding 15 per cent. 98.00 147.98 per hectolitre 15 per cent., not exceeding 18 per cent. 169.00 170.73 per hectolitre 18 per cent., not exceeding 22 per cent. 194.90 201.02 per hectolitre sparkling, not exceeding 15 per cent. 168.00 180.55 per hectolitre Tobacco: -1130 Cigarettes 30.61 518.63 per 1000 Hand rolling 49.64 41.98 per kilo Cigars 47.05 43.35 per kilo Other tobacco 24.95 33.31 per kilo 1 Increased in line with the increase in the RPI from April 1987 to August 1987. 2 Given the large changes in duty rates that would be required in some cases, these revenue estimates are subject to larger than normal margins of error. 3 At 1030 degrees of original gravity. Each additional degree of original gravity is charged at one-thirtieth of this rate. 4 Litre of alcohol. 5 Specific duty only. Ad valorem duty is also charged.