Darling could raise alcohol taxes in budget

21/02/2008 23:33

By Sumeet Desai

LONDON (Reuters) - Booze-mad Britons could be in store for higher taxes in next month’s budget as the government tries to clamp down on binge drinking and boost revenues.

The British Medical Association urged the government on Thursday to make alcohol more expensive, saying a 10 percent tax rise could cut alcohol-related deaths by nearly 30 percent.

The same day, Britain’s biggest supermarket chain Tesco also said it wanted to work with government to limit the sale of cut-price alcohol by allowing retailers to fix prices together, something forbidden by competition law.

Chancellor Alistair Darling could use the current debate to justify tax hikes on alcohol in his inaugural budget on March 12. He also needs to shore up the public finances as borrowing still remains on track to exceed forecasts.

"All taxes are kept under review by the Chancellor as part of the Budget process," said a Treasury spokesman.

The resurgent Conservatives have suggested as much as 1 billion pounds could be raised through carefully-targeted taxes on alcohol.

Duties on spirits have been frozen since the Labour Party came to power more than a decade ago but raising duty in line with inflation would only yield 15-20 million pounds.

"BOOZE CRUISES"

Taxes on beer and wine have been rising .....continued below

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in line with inflation and the government could differentiate more between strong and weak lagers to encourage more responsible drinking.

However, consumers are often not very price-sensitive and so hefty tax hikes are needed to change people’s drinking habits.

Darling has already suggested that huge rises are unlikely, saying in an interview last week: "I don’t take the view that the best way to deal with this is to punish everybody for the sins of the minority."

Too sharp a rise in alcohol prices could encourage Britons to join "booze cruises" to continental Europe to stock up on cheaper drinks, thereby depriving Britain of any revenue.

But the pound has fallen 12 percent against the euro in a year, giving the government scope to hike taxes without losing demand to overseas markets.

Perhaps the biggest consideration will be the public reaction to raising alcohol taxes at a time when the government is struggling in the polls and Darling is under fire over tax issues and the nationalisation of the ailing Northern Rock bank.

"As you know there are reviews ongoing into the relationship between pricing and alcohol drinking habits, but obviously in the interim, any progress we can make with all those involved is to be welcomed," Prime Minister Gordon Brown’s spokesman said.

(Additional reporting by Peter Griffiths and Katherine Baldwin; Editing by Jon Boyle)

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