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Implementation in 2011/12 of measures announced in the March 2011 Budget,

Previous Budgets and Pre-Budget Reports: Estimated impact on the


Consumer Prices Index (CPI) and Retail Prices Index (RPI)
Table 1
Changes Percentage points contribution Timing of
to one-month change effect
CPI RPI
Changes to excise duties1
Tobacco
As announced in the March 2010 Budget, +0.15 +0.18 23 March 2011
specific duty on tobacco has increased by 2
per cent above the RPI whilst duty on
hand-rolling tobacco will increase by an
additional 10 per cent. In addition the
cigarette duty regime is being restructured.
As a result, ad valorem duty on cigarettes
will decrease to 16.5 per cent whilst
specific duty will increase by 25 per cent
above the RPI. These measures will add
50p to a packet of economy cigarettes and
33p to a packet of premium cigarettes.
Alcohol
As first announced in the March 2008 +0.10 +0.11 28 March 2011
Budget, alcohol duty rates have increased
by 2 per cent above the RPI. This measure
adds 4p to the price of a pint of beer, 15p
to the price of a bottle of wine, and 54p to
the price of a bottle of spirits.

Vehicle Excise Duties2


The March 2011 Budget announced that n/a +0.03 1 April 2011
VED rates will increase in line with the
RPI. The discount of £10 for the use of
alternative fuel will, though, remain.

[Please note: This note is prepared simply as a helpful guide to users of the consumer prices
index and retail prices index. The Office for National Statistics accepts no liability whatsoever
for losses of any kind arising as a result of reliance on this note. ]
Changes Percentage points contribution Timing of
to one-month change effect
CPI RPI
Road Fuel
The March 2011 Budget announced that -0.04 -0.04 23 Mar 2011
the main fuel duty would reduce by 1p per +0.08 +0.09 1 Jan 2012
litre from 6pm on 23 March. In addition
the increase in duty in line with the RPI
will be deferred until January 2012.
Air Passenger Duty
The March 2011 Budget announced that n/a n/a
the planned increase in the rates of APD in
April 2011 in line with the RPI will be
deferred until April 2012.

Changes Percentage points contribution Timing of


to one-month change effect
CPI RPI
Changes to indirect taxes

Value Added Tax n/a n/a


The March 2011 Budget announced that
there would be no changes to the main
rates of VAT.

Insurance Premium Tax


The March 2011 Budget announced that n/a n/a
there would be no changes to the standard
or higher rates of IPT.

Table 1 Footnotes
1. Changes in duty rates are inclusive of VAT, and, for cigarettes, ad valorem tax.
2. Vehicle excise duty is not included in the CPI.

[Please note: This note is prepared simply as a helpful guide to users of the consumer prices
index and retail prices index. The Office for National Statistics accepts no liability whatsoever
for losses of any kind arising as a result of reliance on this note. ]
Comparison of the impact on the CPI and RPI 1-month rates of the Budget and Pre-Budget
Report measures that were implemented in 2010/11 and those that have been or will be
implemented in 2011/12

Table 2
Changes Percentage points contribution to 1-month change

Consumer Prices Index Retail Prices Index


Implemented Implemented Implemented Implemented
in 2010/11 in 2011/12 in 2010/11 in 2011/12

Excise duties
Tobacco +0.06 +0.15 +0.07 +0.18
Alcohol +0.07 +0.10 +0.08 +0.11
Road Fuel1 +0.11 +0.04 +0.14 +0.05
Vehicle excise duty2 n/a n/a +0.06 +0.03
Air passenger duty +0.05 n/a +0.04 n/a

Indirect Taxes
Value Added Tax +1.47 n/a +1.24 n/a
Insurance Premium Tax +0.01 n/a +0.04 n/a

Total effect of Budget


measures3 +1.77 +0.29 +1.67 +0.37

Table 2 Footnotes
1. The estimate for the measures implemented in 2010/11 reflects the increases in fuel duty implemented on 1
April 2010, 1 October 2010 and 1 January 2011. The estimate for the measures that will be implemented in
2011/12 reflects the decrease in fuel duty implemented on 23 March 2011 and the increase that will be
implemented on 1 January 2012.
2. Vehicle excise duty is not included in the CPI.
3. The overall effect is calculated as the sum of the individual rounded effects shown in the table.

Effects on the CPI and RPI 1-month rates

The measures that will be implemented in 2011/12 are estimated to increase the CPI 1-
month rate by approximately 0.29 percentage points and the RPI 1-month rate by
approximately 0.37 percentage points.

Both impact assessments are based on changes in duties being passed on, in full, to
consumers as soon as they come into effect.

[Please note: This note is prepared simply as a helpful guide to users of the consumer prices
index and retail prices index. The Office for National Statistics accepts no liability whatsoever
for losses of any kind arising as a result of reliance on this note. ]
Cumulative effects on the all items CPI and RPI 12-month rates of the Budget and Pre-
Budget measures that were implemented in 2010/11 and those that have been or will be
implemented in 2011/12

Tables 3 and 4 show the likely timing of effects on the CPI and RPI 12-month rates, assuming all
announced changes are passed on immediately and in full to consumers as soon as they come
into effect. In practice, this is unlikely: for instance, changes to tobacco and alcohol duties
generally affect the index over a period of several months as stocks deplete.

Table 3: CPI all items


CPI Date Change Effect Cumulative
Effect1
April 2011 Increases in tobacco duties +0.15
Increases in alcohol duties +0.10
Decreases in road fuel duties -0.04
Last year’s increases in tobacco duties -0.06
drops out of the 12 month comparison
Last year’s increases in alcohol duties drops -0.08
out of the 12 month comparison
Last year’s increases in road fuel duties -0.04 +0.03
drops out of the 12 month comparison
July 2011 Last year’s decrease in alcohol duty drops +0.01 +0.04
out of the 12 month comparison
October 2011 Last year’s increases in road fuel duties -0.04 0.00
drops out of the 12 month comparison
November 2011 Last year’s increases in air passenger duties -0.05 -0.05
drops out of the 12 month comparison
January 2012 Increases in road fuel duties. +0.08
Last year’s increases in road fuel duties -0.03
drops out of 12 month comparison
Last year’s increase in the standard rate of -1.47
VAT drops out of the 12 month
comparison
Last year’s increases in the standard and -0.01 -1.48
higher rates of IPT drops out of the 12
month comparison

Table 3 Footnote.
1. The cumulative effect is calculated as the sum of the individual rounded effects shown in the table.

[Please note: This note is prepared simply as a helpful guide to users of the consumer prices
index and retail prices index. The Office for National Statistics accepts no liability whatsoever
for losses of any kind arising as a result of reliance on this note. ]
Table 4: RPI all items
RPI Date Change Effect Cumulative
Effect1
April 2011 Increases in tobacco duties +0.18
Increases in alcohol duties +0.11
Decreases in road fuel duties -0.04
Increases in vehicle excise duties +0.03
Last year’s increases in tobacco duties -0.07
drops out of the 12 month comparison
Last year’s increases in alcohol duties drops -0.09
out of the 12 month comparison
Last year’s increases in road fuel duties -0.05
drops out of the 12 month comparison
Last year’s increases in vehicle excise -0.06 +0.01
duties drop out of the 12 month comparison
July 2011 Last year’s decrease in alcohol duty drops +0.01 +0.02
out of the 12 month comparison
October 2011 Last year’s increases in road fuel duties -0.05 -0.03
drops out of the 12 month comparison
November 2011 Last year’s increases in air passenger duties -0.04 -0.07
drops out of the 12 month comparison
January 2012 Increases in road fuel duties. +0.09
Last year’s increases in road fuel duties -0.04
drops out of the 12 month comparison
Last year’s increases in the standard rate of -1.24
VAT drops out of the 12 month comparison
Last year’s increases in the standard and -0.04 -1.30
higher rates of IPT drops out of the 12
month comparison

Table 4 Footnote.
1. The cumulative effect is calculated as the sum of the individual rounded effects shown in the table.

Background Notes

1. The CPI is the main United Kingdom domestic measure of inflation for macroeconomic
purposes; the inflation target for the United Kingdom is expressed in terms of the CPI. From
April 2011 the CPI will also be used for the indexation of benefits, tax credits and public
service pensions. The RPI uses include the indexation of various prices and incomes, the
uprating of index-linked gilts, as well as the revalorisation of excise duties.

2. The effects of the Budgets shown in this note are estimates only.

3. Percentage point contributions to the CPI and RPI one-month change are based on average
retail prices as measured in the February 2011 indices, the latest available. The effects
expressed in pence may differ from those calculated by other sources or as announced in the
Budget.

4. No estimate has been made of any price changes resulting from other Budget measures,
direct or otherwise.

[Please note: This note is prepared simply as a helpful guide to users of the consumer prices
index and retail prices index. The Office for National Statistics accepts no liability whatsoever
for losses of any kind arising as a result of reliance on this note. ]
For more information

Contact either:
• Ray Harris Tel: 01633 455825 / E-mail: raymond.harris@ons.gsi.gov.uk
• Darren Morgan Tel: 01633 455666 / E-mail: darren.morgan@ons.gsi.gov.uk

[Please note: This note is prepared simply as a helpful guide to users of the consumer prices
index and retail prices index. The Office for National Statistics accepts no liability whatsoever
for losses of any kind arising as a result of reliance on this note. ]