Alcohol escalator scrapped but these sin taxes are still hitting the poorest hardest
Beer drinkers raised a glass yesterday as the chancellor cut beer duty by 1p and abolished the alcohol duty escalator. Whiskey drinkers also enjoyed rare victory in the form of a freeze on the spirit as did cider drinkers.
Bingo enthusiasts saw the bingo tax halved, with the chancellor giving a special mention to the campaign waged by Tory MP Robert Halfon to cut the tax.
Gambling
While the chancellor may be the toast of bingo halls other gamblers have not fared so well. Osborne hiked the tax on fixed-odds betting terminals (FOBTs) from 20 per cent to 25 per cent.
Bookmakers William Hill and Ladbrokes have already taken hit in their share prices, with William Hill recalculating the tax cost them £22m a rise of £6m from the previous estimate.
Investment banking group Numis commented:
The duty changes will, we believe reduce the number of betting shops. Independent shops and the tail of the large estates may close.
In January, JP Morgan warned that a fifth of Britain's betting shops could become unprofitable if further regulations are imposed on the gambling industry.
A further 20 per cent of shops could become only marginally profitable if measures such as limits to the number fixed odds betting terminals (FOBTs) and the size of prizes are introduced.
Tobacco
Smokers have also seen no let up in terms of tax hikes. The chancellor raised tobacco duty by two per cent above inflation and remained committed to the duty escalator throughout the next parliament.
Paul Stockall of the Tobacco Manufacturer's Association said:
This duty escalator policy through the next parliament will do nothing to arrest the increase in illegal tobacco that is currently costing the UK Government up to £7.9m per day in lost tax revenues. This loss in revenue is further compounded by the Office for Budget Responsibility’s repeated downgrading of legitimate tobacco receipts, which has seen projected revenues for 2013/14 fall by up to £200m.
The increasing cost of tobacco will have a disproportionate impact on the poor. Those who work in routine operations are three times as likely to smoke as those in upper management. The Office for National Statistics (ONS) recently showed a strikingly strong link between deprivation and smoking rates.
The ONS grouped areas of England into five categories (quintiles), with quintile one representing the most deprived areas in England and quintile five representing the most affluent.
Men in the most deprived quintile were more than twice as likely to smoke, compared with men in the least deprived areas. Smoking rates amongst women were also higher in the most deprived areas, with 26 per cent women from the poorest areas smoking compared to 10 per cent from the richest.
This is likely to continue for some time, with 68 per cent of smokers in the top occupations saying they would like to ‘give up smoking altogether’ compared with 59 per cent of those in routine and manual jobs.
Alcohol
The chancellor's decision to scarp the alcohol duty escalator and cut beer duty by 1p will be welcomed by many, the UK remains one highest taxed nations in terms of alcohol. Nearly all EU countries have much lower alcohol taxes than Britain.
Most of them, including Spain, Italy and Germany do not charge any duty on wine at all (and the vast majority have beer duty that is less than half of the current British rate (Ireland, Sweden and Finland are the only exceptions). Indeed, most EU countries levy beer duty at less than twenty per cent of the current British rate.
Alcohol duty currently accounts for two per cent of the disposable income of Britain’s bottom quintile, but only 0.6 per cent of the income of the top quintile.