House of Lords written question – answered on 11th March 2013.

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Photo of Lord Avebury Lord Avebury Liberal Democrat

To ask Her Majesty's Government what estimate they have made of the impact on public spending on (1) health, and (2) criminal justice, of increasing taxation on unhealthy foods, alcohol, tobacco and gambling.

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury

A wide variety of factors are considered when the Government decide alcohol, tobacco and gambling excise duty rates. These include the public finances, the impact on consumption on consumers and business, on any illicit trade and any broader social impacts of taxation. There are no excise duties on foods. VAT applies to food, at either the standard rate of 20%, or the zero rate.

Higher duty rates are usually passed through into higher retail prices and are, therefore, estimated to reduce consumption. On balance, the evidence shows that increases in alcohol and tobacco prices are linked to decreases in harms related to consumption of these products. However, these relationships are not always straightforward and there is no automatic mechanism translating duty rates increases to savings in public expenditure.

All taxes are kept under review and decisions are made by the Chancellor as part of the annual Budget process. The Chancellor has committed that the zero rates applied to everyday essentials like food and children's clothing will remain for the duration of this Parliament.

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