THE Scotch Whisky Association (SWA) and Chancellor George Osborne are heading for a showdown over the industry’s hopes of a pre-referendum tax cut in his forthcoming Budget.
Campaigners, led by the SWA, argue that abolishing the duty escalator on Scotch could help to create 6,000 jobs and boost the public finances by £230 million this year through increased investment.
Osborne abolished the beer escalator in last year’s Budget and is being urged to use his statement on 19 March to announce he will do the same for whisky. The escalator raises duty by 2 per cent above inflation each year.
According to the SWA, domestic sales by volume have fallen by 12 per cent since the escalator was introduced in 2008, and the only European countries that tax spirits more heavily than the UK are Finland, Ireland and Spain.
David Williamson, government and communications director at the SWA, said: “Tax is undoubtedly having an impact on the industry’s competitiveness in its home market. As of today, if you look at an average priced bottle, the tax on that would be around 79 per cent, which makes Scotch whisky one of the most highly taxed consumer products in this country.”
“We’re looking for the Chancellor to finish the job which he started last year, when he announced he was removing the escalator on beer and cut beer duty by 2 per cent. As a result, a whisky drinker is today paying 48 per cent more excise duty for the same amount of alcohol as a beer drinker.”
Conservative economic secretary Nicky Morgan raised hopes of a cut in whisky duties earlier this year when she told a Westminster Hall debate that she would give the issue “serious consideration” in the run-up to the Budget.
Bill Drummond, chairman of the Scottish Council for Development & Industry, last month wrote to Osborne to press the case for a “fair deal” for Scotch. He argued: “A freeze on duty and the scrapping of the escalator would support business investment and exports and, as independent research has shown, would increase the drinks industry contribution to public finances by £230m in 2014 alone.”
However, Douglas McNeill, investment director at Charles Stanley, put the chances of success at no higher than one in five because “this is not an industry that’s on its knees”.
McNeill said last year’s scrapping of the beer duty escalator was aimed at helping the pubs industry, which employs more than 500,000 people across the UK but is losing 26 pubs a week.
He added: “You have to say that the industry is in pretty good shape at the moment, with export sales in excellent shape.
“If you look at the fortunes of someone like Diageo, which is a pretty good bellwether for the industry as a whole, it’s doing very nicely.”