No cheer for drinks group Diageo

DRINKS giant Diageo will bear the brunt of a tax rise on alcopops, which are spirits based. The move - justified by the Chancellor as a clampdown on the binge drinking habits of young people - is aimed at bringing in an extra £210m a year by 2004.

It is a blow to drinks firms, which otherwise escaped duty increases on spirits, wine and beers. Diageo, led by Paul Walsh, has enjoyed great success with its trendy vodka-based Smirnoff Ice and Smirnoff Mule. Duty on a standard 275ml bottle of Smirnoff Ice, priced £2.25, will rise 11p to 29p. According to analysts, the brand contributed £100m of global operating profits in the first half.

Don Goulding, managing director for Diageo GB, said: 'This decision discriminates against these products which opens up a significant gap between them and premium packaged lagers of comparable alcohol levels.'

Rival drinks such as Bacardi Breezer, and Reef and Red Square made by Bass Brewers' owner Coors, will also be affected. They were previously taxed at the same rate as low-alcohol wines.

Plans to halve duty for tiny village breweries will not help independent brewers. Stuart Ross, chief executive of Belhaven Brewery, said: 'I'm disappointed. This measure will help hobby breweries, employing one or two people.'

On a positive note for the drinks industry, the Government plans tougher measures to stop tax-free booze coming through Channel ports.