Autumn Budget 2017: Freeze on alcohol, fuel, and air passenger duties but tobacco duty to rise

22 November 2017
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Drinkers, drivers, and economy flight passengers may welcome news that alcohol, fuel, and air passenger duties have been frozen, Chancellor Philip Hammond has announced in his Autumn Budget.

However, it’s bad news for smokers as tobacco duty will continue to rise using the Retail Prices Index (RPI) measure of inflation plus 2%. The Chancellor has announced that the duty on hand-rolled tobacco will also increase by 3% above RPI inflation each year. The Treasury has confirmed to Moneywise that this will be linked to the current RPI of 4%

Moneywise explains what’s been announced.

Alcohol duty frozen but white cider crackdown announced

Alcohol duties on beers, spirits, and wine will be frozen. This means a bottle of whisky will cost £1.15 less in 2018, while a pint of beer will on average be 12p cheaper, according to the Chancellor.

However, there is a particular type of alcohol that the Chancellor has decided to target for duty increases. The Chancellor says: “Excessive alcohol consumption by the most vulnerable people is all too often through cheap, high strength, low quality products – especially so-called white ciders.”

Currently, cider with a strength of 1.3% ABV alcohol attracts the same duty as a cider with 7.5% ABV. According to the Chancellor, this incentivises cider makers to produce higher alcoholic drinks, which are often associated with underage drinkers and alcoholism. For example, a three-litre bottle can be bought for as little as £3.50 currently, containing more than 20 units of alcohol – equivalent to 10 pints of beer or 22 shots of vodka.

The Chancellor has therefore announced that white ciders will be targeted by a new higher duty band on cider with between 6.9% and 7.5% alcohol by volume (ABV). This will take effect from 1 February 2019.

These changes are UK-wide, afeccting all the home nations. 

Petrol and diesel duty frozen but VED changes announced for diesel cars

Fuel duty will continue to be frozen for petrol and diesel from April 2018, for the eighth year in a row. According to Mr Hammond, this will save drivers £160 per year on average.

RAC head of external affairs, Peter Williams, comments: “We welcome the news that the Chancellor will freeze duty again this year. He has listened to motorists and business owners who are struggling with higher prices at the pumps.

“Since January 2016, a litre of petrol is an average of 18p more expensive, and this is borne out with 61% of drivers telling us their expenditure on fuel has increased this year.”

However, the Chancellor has also announced that from April 2018, the first-year Vehicle Excise Duty (VED) rate for new diesel cars that don’t meet the most up-to-date standards will increase up by one tax band.

Mr Williams explains: “The Chancellor has chosen to be relatively light touch when it comes to taxing new diesel cars. Any new diesel car registered from 1 April 2018 will be hit with a higher first year tax rate unless they conform to the latest real-world driving standards.

“So current beleaguered owners of diesel cars can breathe a sigh of relief that they will not be punished further by the Treasury – but they will need to keep their eyes on local authorities which may be introducing clean air zones in the near future. The side effect of today’s announcement however might be that there is a risk therefore that it might encourage some to stay with their older diesel vehicles.”

Air Passenger Duty frozen for 95% of travellers

Air passenger duty (APD) on short-haul flights will continue to be frozen and the Chancellor has also pledged to freeze long-haul air passenger duty too.

The government says that this means that 95% of air passengers who fly out of the UK every year will not see a rise in fares as a result of APD. The Chancellor says this new freeze will be paid for by increases in air passenger duty on premium class tickets and private jets.

Hannah Maundrell, editor in chief of price comparison site Money.co.uk, comments: “As a keen traveller I breathed a big sigh of relief when I heard the Chancellor announce a freeze to air passenger duty on short haul and economy flights. This is good news for anyone planning to travel abroad on a budget in the next year. If you’re one of the few with a private jet or you fly upper class, I’m afraid you may find yourself paying a little more for your long-haul luxury flights.” 

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