Smokers and drinkers escape harsh rises as Chancellor chases £2.5bn lost revenues

Smokers and drinkers have escaped relatively lightly, with taxes on cigarettes and alcohol increasing by no more than the rate of inflation.

Smokers and drinkers have escaped relatively lightly, with taxes on cigarettes and alcohol increasing by no more than the rate of inflation.

From 6pm last night, a packet of 20 cigarettes went up by 7p to about £4.96, in line with inflation. From midnight on Sunday, the price of a pint of beer will go up by 1p while 4p will be added to a bottle of wine. Duty on spirits, cider and sparkling wine has been frozen.

The Government pledged to continue its crackdown on cigarette smuggling. It loses out on £2.5bn of revenue a year from smuggled tobacco, with estimates suggesting about 28 per cent of cigarettes in the UK and 73 per cent of hand-rolling tobacco evades duty. Of particular concern to the Government are counterfeit cigarettes, which are often contaminated with poisonous substances such as arsenic and pose an even greater health risk to smokers.

The Chancellor's decision to increase the tax on cigarettes by no more than the rate of inflation saw an unusual coming together of anti-smoking campaigners and the tobacco industry. They agreedthe Government was not doing enough to tackle the trade in illegal cigarettes.

Action on Smoking and Health (Ash) said the rise in prices would help to ensure that cigarettes did not become more affordable, but said the Government needed to take urgent action on smuggling. Deborah Arnott of Ash said: "We welcome the modest increase in tobacco tax. But the UK has the worst record on smuggling in Europe and accounts for around 10 per cent of illicit trade in cigarettes. It is a scandalous loss of income, which could be stemmed if tobacco companies were legally required to impose stricter controls on tracking and tracing their products."

The Tobacco Manufacturers' Association (TMA), which represents the UK's largest cigarette companies, also said the level of smuggling was a concern. Tim Lord, the chief executive of the TMA, said: "Increasing the cost of cigarettes, already at £4.89 a pack, when the average price in the rest of the EU is less than £2, does nothing to deter smugglers or reduce the incentive for smokers to buy cheap cigarettes from abroad."

Beer drinkers expressed disappointment that the tax on lager and ale had been increased. Mark Hastings, of the British Beer & Pub Association, said: "Gordon Brown continues to choose a tax strategy that favours imported Australian Chardonnay over home produced British beer. Beer is taxed on a sliding scale according to alcoholic strength, whereas stronger wine is taxed the same as weaker wine. Most popular wines in Britain enjoy a tax advantage over beer."

Commenting on the freezing of duty on sparkling wine, Quentin Rappoport, of the Wine and Spirit Association, said: "For more than a century, the 'bubble tax' has discriminated against sparkling wine on the grounds of it being a luxury product, which is clearly no longer the case. Exceptional English sparkling wine is currently being produced and this move will help this budding sector."