Manufacturers fume over new hike in tobacco

Tobacco manufacturers – the perennial whipping boys of Budgets – were angry at the big hike in tax, claiming it would cost jobs.

Cigarettes are rising in price by 15p for 20, small cigars rise by 6p and an extra 8p goes on pipe tobacco. “This rise is only 1p less than last year, which was the highest rise for 20 years,” says Clive Turner, executive director industry affairs at the Tobacco Manufacturers’ Association. “Our UK duties are already among the highest in Europe and another swingeing increase is the last thing we need.”

But pressure group ASH (Action on Smoking & Health) is happier. Chief executive Pamela Furness says: “It is very encouraging to see that the Chancellor is continuing to raise tobacco taxes at least three per cent above inflation.”


Retailers’ hopes of a Budget giveaway were dashed – some had been looking for 5bn in tax cuts and incentives to consumers, rather than the 3bn delivered.

On its own, retailers do not view the Budget as sufficient to stimulate consumers into a flurry of spending, though they expect it to be followed by cuts in interest rates, which could contribute to the “feelgood factor” they hope will emerge this Christmas.

But some of the moves offered more welcome news to retailers. The British Retail Consortium, which represents 90 per cent of retailers, has praised the capping of increases in business rates and the freeze on VAT and excise duties on beer and wine. It also welcomes the increase in resources for town centre security.


The drinks industry takes a mixed view of the Budget. Whisky manufacturers are naturally delighted the Chancellor has finally listened to their cries for help and knocked 27p off a bottle of whisky. This should help alleviate the pressure from cross-Channel shopping, and inject life into the whisky market.

Cider makers are less happy. They are disappointed the Chancellor has introduced a two-tier tax system for cider with an extra 8p per pint for ciders over 7.5 per cent ABV. Equally, brewers are angry he has done little to help them in their battle against cross-Channel imports by only freezing beer and wine duties.

Financial Services

The financial services sector re-sponded positively to the Budget more for what it didn’t do than what it did. “I’m delighted there is no change with insurance premium tax,” says Andy Welling, marketing and sales director for Commercial Union.

The changes in the financial ceiling on long-term care provision are also welcome. “It’s becoming a major product area and the changes look like they will provide a real stimulus to the market,” adds Welling.

Ambrose McGinn, marketing director of Abbey National, says the tax cuts and tax band changes will stimulate the economy. “It will put money back into people’s pockets, it should boost optimism.”


The motor industry broadly welcomed the Budget’s personal tax reductions as a possible stimulus to the economy. But a further 3.5p per litre on petrol and diesel caused anger. The Society of Motor Manufacturers & Traders chief executive Ernie Thompson says: “It does represent a large increase in motoring costs. Although it was designed to counter global warming, it has become just another exorbitant tax on car use.”

The Petrol Retailers Association welcomed the Chancellor’s 4p price hike on super unleaded fuel because “it is a minority product”. But adds that while the rise was not unexpected “it will only add to the difficulties of small petrol retailers”.

Environmental pressure group Friends of the Earth is delighted the Treasury has cut road-building funds by a third, but is disappointed it has still committed 500m to such projects.

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