Britain's drinks industry has heavily criticised Chancellor Gordon Brown's decision to raise excise duties on beer and wine, while distillers responded angrily to a proposed introduction of 'strip stamping' on spirits to help cut smuggling and VAT fraud.

The industry had been calling for a 'modest reduction' in alcohol excise duties, but Brown today put a penny on a pint of beer and 4 pence on a bottle of wine.

He made similar duty increases on beer and wine last year.

'Once again, Britain's beer drinkers have had their pockets picked by the Chancellor,' said Mark Hastings, director of communications at industry trade body the British Beer & Pub Association (BB&PA).

'Beer is to Britain what wine is to France,' Hastings continued.

'It is our national drink, brewed from home grown cereals, and makes a vital contribution to our economy and society. We are extremely disappointed to see the chancellor undermining the competitive position of the nation's brewing and pub sector,' he added.

Tax on spirits was frozen for the seventh year in succession, but the move to introduce 'strip stamping' from 2006 -- effectively tagging each bottle to show that duty has been paid before it leaves the distillery -- brought howls of protest from the industry.

The Wine & Spirits Association (WSA) described it as a 'devastating blow' to the industry, while the Scotch Whisky Association (SWA) said it was 'bitterly disappointed' at the move.

'We're upset that the chancellor has not joined with us and taken advantage of the very real benefits of our alternative anti-fraud package,' said Gavin Hewitt, chief executive of The Scotch Whisky Association.

'We put forward alternative proposals which offered the treasury an effective solution to fraud, and more money, more quickly, than tax stamps. Tax stamps will impose financial pain on legitimate businesses, particularly smaller enterprises, but will not defeat the fraudster,' he added.

'This is a decision that will damage scotch whisky's competitiveness at home and abroad but do little to tackle spirits fraud,' he added.

The government reckons that one in every six bottles of spirits is evading duty and Treasury figures reckon this equates to around 500-600 mln stg of lost revenue every year.

Hewitt welcomed the freeze on spirits tax, but said it would do little to help small distillers who will face increased costs as a result of strip stamping.

Recent industry estimates reckon the introduction of strip stamping could cost the industry in excess of 250 mln stg in terms of the extra working capital needed to implement the changes which would include new labelling, warehousing and distribution measures.

The WSA said this would be a 'big hit' for smaller businesses.

'In a Budget claiming to support small firms and encourage enterprise, this announcement is a cruel irony,' said WSA director Quentin Rappoport.

Bill Oddy, managing director of small importer The Drinks Company, said the change would be a 'nightmare'.

'Our costs will rocket and the chancellor's offer of 3 mln stg to aid small firms with capital investment is totally out of proportion to the impact strip stamps will have in our sector. It potentially creates barriers to entry, restricts competition, pushes up prices and reduces ranges,' he said.

'The irony is that it favours the large established multinationals whose high profile consumer brands are most easily traded in the black economy,' he added.

On the reaction to excise duty changes, the WSA said the 4 pence duty increase on wine is not as innocuous at it may seem.

'Last year's rise at the same level had a devastating effect, cutting sales growth in the sector by three-quarters. Today's increase will inflict further significant damage, both to the trade and to Treasury revenues, as even more shoppers will go abroad to buy cheaper. They will be dancing in streets of Calais tonight,' he told AFX News.

'It is also galling that, having asked for our advice on the appropriate timing for introducing duty increases, the treasury has totally disregarded our recommendation of a four week minimum. The trade yet again will have to move heaven and earth to implement the changes virtually overnight. Again, it will be the smaller firms which will be hit most, he added.

Despite the disappointment on strip stamping the WSA welcomed the duty freeze on sparkling wine, while the BB&PA was cheered at the extension of the special tax relief for small brewers.

'The chancellor's decision to double the threshold for Progressive Beer Duty is a step in the right direction. More small brewers will benefit and it will be a welcome boost to the sector,' said Hastings.

'We look forward to the same principle being extended to all the nation's brewers,' he added.

1p on a pint - you'd have to drink a hundred before you parted with a quid, by which time you'd be hospitalised!!

Paddington Bear :- Very witty
rgds aj