The government has scrapped plans to introduce a tobacco levy on UK manufacturers, which would have resulted in higher prices for retailers and consumers.

Chancellor George Osborne made the announcement in the summer Budget revealed today (8 July).

The news comes just weeks after a consultation into a new tobacco levy closed.

“Analysis of the responses shows that the impact of a tobacco levy on the tobacco market would be similar to a duty rise, with tobacco manufacturers and importers passing the levy onto consumer prices,” the Budget document said.

“HMRC analysis shows that a levy of £150m would only raise £25m after behavioural effects.

“As tobacco duties have already increased this year and will continue to increase by more than inflation each year in this Parliament, the government has decided not to introduce a levy on tobacco manufacturers and importers,” it added.

The consultation responses will be published shortly.

Imperial Tobacco welcomed the news that the levy had been shelved.

“We are pleased that the government’s analysis of a ‘tobacco levy’ has concluded that it would be unnecessary,” a spokesman said. 

“An effective system for raising revenue from tobacco consumption already exists, with excise and other taxes accounting for up to 90% of the price of a pack of cigarettes in the UK.

 “Smugglers and counterfeiters who deal in illicit tobacco products make no such contribution. We’re therefore particularly pleased with today’s announcement of additional resources for HMRC to tackle the organised crime gangs behind this lucrative trade.”