Budget: Why Chancellor should cut taxes on whisky

On 11 March, the Chancellor has the opportunity to show that this Government is committed to delivering for businesses and communities right across the UK.

The Scotch Whisky industry has been in dynamic growth over recent years. New distilleries have opened, old distilleries have re-opened and tourists have flocked to our state-of-the-art visitor centres.

We’ve invested substantially across the four corners of Scotland and created many new jobs. We now employ over 11,000 people in Scotland, and tens of thousands more across our UK-wide supply chain.

Our growth has been good for the public finances as well as for the communities in which our distilleries and bottling halls are based. Last year alone, Scotch Whisky and other spirits were responsible for the generation of nearly £4 billion in excise duty revenue.

What makes this contribution to the economy remarkable is that it is in the face of a heavy tax burden.

Nearly three-quarters of the cost of an average-priced bottle of Scotch Whisky sold in this country is tax. The fact that our industry continues to thrive has much more to do with exports, and more balanced taxation overseas, than support from HM Treasury.

The Chancellor can start to change this on 11 March. First, he can cut spirits excise duty. This will start to address the UK’s outdated system of excise taxes, which currently give a competitive advantage to imported alcohol over domestically produced spirits.

This will likely increase tax revenues – as recent cuts and freezes to duty have done – as well as create the conditions for further growth.

Second, he can commit to the reform of alcohol taxation now the UK has left the EU.

But that’s not the only reason why we need the Chancellor’s support. For five months now, a damaging 25 per cent tariff has been imposed on imports of Single Malt Scotch Whisky into the United States, our largest global market.

These tariffs are hitting distillers hard, particularly small and medium sized businesses. Cutting domestic excise duty won’t wholly offset the impact of tariffs, but it would help distillers increase market share at home to counter losses in the US.

Last November the Prime Minister recognised our industry’s vital economic contribution and said that the UK government would “continue to back these brilliant businesses that keep our economy growing”.

This commitment must now be acted on by the Chancellor in this week’s Budget. What’s more, it can be a win-win – benefitting both the industry and government revenue.

Following the spirits duty freeze in 2017 and 2018, the Government’s own figures show that revenue increased by 10 per cent.

This was sensible policy in action, showing the route to more money for vital public services doesn’t have to be automatic tax rises and that helping businesses to invest and grow can deliver more for the economy.

The Government can see further benefits by going further on 11 March - it’s time to cut the excise duty tax on Scotch Whisky to boost one of the UK’s most successful export industries and invest in our future growth.

Karen Betts is the chief executive of the Scotch Whisky Association

Budget: Why Chancellor should cut taxes on whisky – Karen Betts