UPDATE: UK Pub And Tobacco Sectors Welcome Budget Duty Freeze

22nd Jun 2010 14:07

(Adds detail) LONDON (Dow Jones)--The U.K. government's decision to freeze alcohol and tobacco duty was welcomed by the tobacco and pub sectors Tuesday, while a rise in sales tax to 20% was described as "understandable" given the nation's finances. "We welcome the coalition government's decision not to increase tobacco duties at this time," The Tobacco Manufacturers Association said. These comments were echoed by brewer and pub lobby group The British Beer & Pub Association. "This is a welcome relief for struggling pubs during difficult times," it said. The decision to freeze the beer and alcohol duty came in Chancellor of the Exchequer George Osborne's first Budget speech Tuesday. Both sectors had feared a further rise in duty as Osborne attempts to cut a budget deficit which is estimated at about 11% of gross domestic product, or about GBP155 billion for the fiscal year ending 2011. As expected however, Osborne did announce a rise in U.K. sales tax to 20% from 17.5%, though not until January 2011. The British Beer & Pub Association estimates that a 20% sales tax would result in a 6 pence rise in the price of a pint of beer. "This tax increase is not welcome, but is understandable and applies to everybody," said the BBPA. "We hope this will be short-term pain for long-term gain." Pub groups have already faced a rise in sales tax in January to 17.5% from 15%, but Osborne's duty freeze effectively scraps the previous government's alcohol tax escalator--which pledged to raise alcohol duty 2% above the rate of inflation each year until 2015. Osborne also confirmed the government would reverse the previous administration's decision to raise duty on cider by 10%. Lower taxes on cider have historically been in place to protect apple growers and artisan cider makers. The cider category is now dominated by drinks giants like Heineken NV (HEIA.AE) and C&C Group (CCR.DUB). Osborne also pledged to report back later in the year with proposals to overhaul the alcohol duty regime in order to combat binge drinking. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (END) Dow Jones Newswires June 22, 2010 09:07 ET (13:07 GMT)