Budget 2016: Alcohol duties frozen but tobacco duty to rise
The duty on beer, spirits and most ciders will be frozen this year, the Chancellor has announced in today’s Budget.
However, the duty rates on most wines and higher strength sparkling cider will increase by RPI from 21 March 2016.
As announced at Budget 2014, duty rates on all tobacco products will increase by 2% above RPI inflation, while Mr Osborne has today announced a further 3% hike on hand-rolling tobacco, which will rise by 5% above RPI.
The changes to tobacco duty take effect from 6pm today (16 March 2016).
Replaced as the official measure of inflation by the consumer prices index (CPI) in December 2003. Both the Retail Price Index and CPI are attempts to estimate inflation in the UK, but they come up with different values because there are slight differences in what goods and services they cover, and how they are calculated. Unlike the CPI, the RPI includes a measure of housing costs, such as mortgage interest payments, council tax, house depreciation and buildings insurance, so changes in the interest rates affect the RPI. If interest rates are cut, it will reduce mortgage interest payments, so the RPI will fall but not the CPI. The RPI is sometimes referred to as the “headline” rate of inflation and the CPI as the “underlying” rate.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).