Whisky industry in plea to scrap excise duty escalator

By CLAIRE SMITH
Published on 16/03/2013 15:09

Distillers say rising prices destroying a key industry, says Claire Smith

MANUFACTURERS of Scotch whisky have called for levels of duty to be reconsidered in the forthcoming budget, saying the Government is being too hard on drinkers.

The Scotch Whisky Association says it is time to call a halt to the excise duty escalator, which has now risen for five years.

It says the rise in duty, which has increased by 2 per cent above the rate of inflation for the last five years, is a burden on drinkers and is squeezing manufacturers in a key Scottish industry.

The duty has also come under fire from real ale campaigners, who say the above-inflation rise in duty on alcohol is having a devastating effect on the licenced trade.

Rosemary Gallagher, comm­unications manager for the Scotch Whisky Association, said: “The duty escalator has meant an increase in duty every year for the past five years.

“This increases the pressure on ordinary people at a time when household budgets are already under pressure.

“It is not good for the Scotch whisky industry, which employs 10,000 people in Scotland dir­ectly and supports 35,000 jobs across the UK as a whole and is worth £4.2bn a year to the economy.

“We think the duty escalator needs to be reviewed, given the state of the economy at the moment.”

The Scotch Whisky Association argues the effect of increases in tax are felt more by whisky drinkers as the current tax on a unit of Scotch whisky is 250 per cent higher than on cider, 30 per cent higher than on wine and 37 per cent higher than on beer.

The average price of a bottle of Scotch is currently £12.60. Of this ,VAT is £2.10 and excise duty is £7.50 – making the total tax paid on each bottle £9.60 – which the SWA say is too much.

“After half a decade the government should review the escalator rather than maintining the mantra that it should run for the remainder of this Parliament,” Gallagher said.

The SWA argues that the rise in excise duty has accelerated the declining sales of alcohol as well as putting pubs and other lic­enced premises under pressure.

In voicing its opposition to rising duty, the Scotch Whisky Association adds its voice to the concerns raised by the Campaign for Real Ale, which has campaigned for the duty escalator to be dropped in the forthcoming Budget, saying rising prices are having a ruinous effect on the UK licenced trade. Camra figures show 18 pubs in the UK and two pubs in Scotland are closing every week – with drinkers choosing to buy alcohol to drink at home rather than going out to pubs.

A Camra spokesman said: “Camra’s evidence shows that higher taxes do not encourage people to drink less.

“Instead, consumers are changing their drinking behaviours. The beer duty escalator has had the reverse effect of its original intentions to tackle cheap alcohol sales in supermarkets.

“With beer on the off-trade now selling for as cheap as 50p a pint, the beer duty escalator encourages consumers to buy cheaper alcohol from off-licences and supermarkets. The increasing cost of beer also encourages consumers to opt for wines and spirits which typically have much stronger alcohol content by volume.”

At the end of last year Camra said Alastair Darling, who introduced the escalator while chancellor, agreed to write to George Osborne backing a review of the duty on the grounds it could be damaging the economy.