George Osborne shocked smokers with a higher than expected hike in the duty on cigarettes today.



The Chancellor ordered an increase of five per cent above the rate of inflation, effective from 6pm tonight.

The hike today will see prices will go up 37p. He has previously pledged to hike tobacco duty, as part of an escalator lasting until 2014, by at least 2 per cent above the rate of inflation every year.



Drinkers will also face added pain with the Chancellor confirming that alcohol will be subject to a rise in duty of 5.7 per cent – this will see the price of a pint of beer rise by an average 5.4p, effective from March 26.

Scroll down for reaction from a brewer



Cigarettes and alcohol: Prices of cigarettes will go up 37p from 6pm tonight

The average bottle of wine will now rise by 9p to around £5 for the first time, according to industry figures, with duty increasing from £1.81 for every bottle, to £1.90.

Drinkers and smokers have faced steep increases in duty in recent years after the 2010 Budget set two years of rises at inflation (the higher Retail Prices Index measure) plus two per cent.

The rise of five per cent plus inflation on the cost of cigarettes will answer the call by health campaigners to increase prices, as the cost of smoking related illness to the NHS remains one of the highest.

The Chancellor said: 'Smoking remains the biggest cause of preventable illness in this country.

'There is strong evidence that increasing the price of cigarettes deters people from smoking.'

Economists believe that an extra one per cent in alcohol duty benefits the Government finances by £60million and £30million is gained from adding one per cent to cigarette duty.

The extra revenue will help to offset raising the income tax threshold for millions of workers, which will cost the Treasury £3billion a year.

Increase on alcohol duty is being introduced under the duty escalator announced in 2008 by the previous Government. Beer taxes have increased 42 per cent since the Budget that year.

The 'sin taxes' come despite official inflation figures showing that prices of alcohol had leapt by 2.6 per cent in February — the biggest ever increase for the month.

The latest inflation figures published yesterday show the rate of inflation on most types of alcoholic drink has risen significantly since December 2011.



The rises are likely to anger those in the pub and brewing industry who have accused the Coalition of putting up to 1million jobs at risk with the changes.

Research in parliamentary constituencies showed that London and Westminster had the most pub-based jobs in the country at 11,000, followed by Manchester Central (5,700), Birmingham Ladywood (5,500) and Liverpool Riverside (5,300).

It added that the beer and pub trade adds more than £21billion to the UK economy every year and £13.4billion in UK wages are dependent on the trade each year.

Brigid Simmonds, chief executive of the British Beer & Pub Association, said: 'This is a huge lost opportunity to put British jobs and pubs first. Beer tax has now risen by 42 per cent since the misguided ‘escalator’ policy was introduced just four years ago.



'It means the loss of over 5,000 jobs this year, and hundreds of pub closures.'



Key beer facts: British Beer & Pub Association



Average new price of a pub pint of lager (5 per cent abv) - £3.17

Increase in the price of a pint - 5.4p

New duty on a 5 per cent pint of beer - 55.4p

New typical VAT on a pub pint - 52.9p

Beer Tax increase since March 2008 - 42.2%

British Beer Tax, times higher than France - 9

British Beer Tax, times higher than Germany - 12

Alcohol duty rises, per pub - £2,800