Budget Special: Alcopops lose their fizz as smokers hit again

Alcoholic soft drinks such as Hooper's Hooch and Two Dogs will be more expensive from the new year after the Chancellor announced a widely expected hike in duty on the so-called "alcopops". The move is intended to combat concerns over under-age drinking.

However, there was better news for the spirits industry with a surprise move to cut duty on whisky, gin and other spirits by 4 per cent for the second consecutive year. The reduction is equivalent to 26p a bottle.

The drinks industry was braced for a sharp increase in duty on alcopops after a year of controversy for the brightly coloured drinks. The duty will rise by 40 per cent from 1 January, the equivalent of 7-8p a bottle. The increase moves alcopop duty broadly in line with the levy on beer.

The Government had been under pressure to increase duty on the popular drinks after concerns that their cartoon-style labels, bright colours and fruit flavours encouraged the under 18s to dabble with alcohol.

Bass, makers of Hooper's Hooch, described the increase as "depressingly predictable". A spokesman added: "These brands are already less popular with the under 18s than white ciders [such as Diamond White] and spirits. What the Chancellor is doing is driving young people towards stronger drinks than Hooper's Hooch."

The duty increase is not expected to halt the meteoric growth of the alcopops sector, now estimated to be worth pounds 300m a year. But analysts said it could kill off some of the lesser brands. "It will sort out the men from the boys," said Geof Collyer at NatWest Securities.

Since their launch in the UK less than two years ago, almost 100 copycat products have been launched, with brands such as Moscow Mule and Rhubarb Rhubarb flooding the market.

There was better news for beer drinkers, with the duty on both beer and wine held for the second consecutive year. However, the brewing industry was disappointed as it had been hoping for a cut of 5-6p per pint to help combat the burgeoning cross-channel booze run, which now accounts for 1.1 million pints a day.

Bass complained that a duty freeze would do nothing to halt the bootleg problem. The Campaign for Real Ale (Camra) criticised the Chancellor for failing to offer more assistance to the brewing and pub trade, which employs almost 1 million people. Camra said the cut in spirits would not help pubs because these drinks accounted for just 8 per cent of pub sales compared to beer's 60 per cent.

The spirits industry was sent an early Christmas present with a surprise 4 per cent duty cut designed to bring UK and continental rates closer together.

The cut was welcomed by the industry, which faces stiff competition from smugglers in the UK and copycat brands in Japan and Chile.

Smokers were again hit as the Government pursued its policy of increasing tobacco duty at more than the rate of inflation. The tax on a packet of 20 cigarettes rises by 15p, with a pack of small cigars increased by 7p. Pipe tobacco rises by 8p a pack. However, the duty increase on hand-rolled tobacco has been held to the level of inflation to combat the smuggling problem. The increase on cigarettes takes the average pack of 20 to around pounds 3.08. Of that, a total of pounds 2.42 is duty and VAT.

The Tobacco Manufacturers Association criticised the moves, saying smugglers would increasingly turn to cigarette smuggling for extra profits.

"It will increase smuggling dramatically. The criminals are probably dancing in the streets," a spokesman said.