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Excise Duties: Alcoholic Drinks

Volume 486: debated on Tuesday 13 January 2009

To ask the Chancellor of the Exchequer (1) what estimate he has made of the effect on the price of (a) a pint of beer, (b) a bottle of wine and (c) a bottle of spirits of the measures announced in the pre-Budget report 2008 in each year to 2011-12; (240865)

(2) what economic (a) assumptions and (b) formula his Department uses to calculate the effects of alcohol duty on the price of a (i) pint of beer, (ii) bottle of wine and (iii) bottle of spirits.

The effect of the PBR 2008 measures on the price of a pint of beer, a 75cl bottle of wine and a 70cl bottle of spirits is estimated to be:

Pence

Beer

Wine

Spirits

2008-09

-1

+ 1

-12

2009-101

-1

+2

-11

2009-102

+3

+ 14

+28

2010-11

+4

+15

+29

2011-12

+4

+ 15

+31

1 April to December. 2 January to March.

These estimates are based on HM Treasury's projections of retail price inflation and the producer prices index as well as average prices and strengths calculated using market data. They include VAT and duty measures.

The calculation of the expected effect of changes in duty rate on consumer demand for excise goods assumes that any change in duty is passed on in full to consumers. See paragraph A.2.3 of the Financial Statement and Budget Report (FSBR) 2008. Website address:

http://www.hm-treasury.gov.uk/d/bud08 completereport.pdf.

The following formulae are used to measure the effect of alcohol duty on typical items of alcohol:

(i) Pint of beer—Duty/100*0.568*4.2 (assumes that a pint is 0.568 litres and the average strength of a pint of beer is 4.2 per cent.).

(ii) 75cl Bottle of wine—Duty/100*0.75

(iii) 70cl Bottle of Spirits—Duty*0.7*0.3877 (assumes the average strength of a bottle of spirits is 38.77 per cent.).

Average strengths have been calculated using market data.