Chancellor Jeremy Hunt announces freeze on alcohol and fuel duty in Spring Budget in move welcomed by Scotch Whisky industry

The freeze on alcohol duty announced by Chancellor Jeremy Hunt in the Spring Budget is set to be welcomed by Scottish businesses

Chancellor Jeremy Hunt has announced alcohol duty will be frozen until February next year in a major Spring Budget decision as he confirmed the expected 2p cut to National Insurance.

But the announcement the windfall tax on the profits of oil and gas companies would be extended until 2029 has set up a potential showdown with the Scottish Conservatives, with party leader Douglas Ross reportedly having confronted Prime Minister Rishi Sunak – with speculation he had even offered to quit – over the decision.

Mr Hunt has estimated the extension of the windfall tax will raise a further £1.5 billion.

Chancellor of the Exchequer, Jeremy Hunt, leaves 11 Downing Street with the despatch box to present his Spring Budget to Parliament. Picture: Carl Court/Getty Images

Standing in the House of Commons to announce the Budget, Mr Hunt confirmed the fresh cut to National Insurance contributions for employees from April 6. Mr Hunt said he would reduce the rate by a further 2p, worth around £450 a year for someone on an average salary.

He also announced a freeze in duty on alcohol that was due to end in August had been extended to February 2025.

And the Chancellor moved to freeze fuel duty – a move that had been mooted in the build-up to the Budget – in a decision he said would save the average motorist £50 a year.

In other key commitments, the Chancellor announced:

- A new “British Isa” giving investors a £5,000 extra tax-free allowance to “encourage more people to invest in UK assets”;

- VAT registration threshold will be increased from £85,000 to £90,000 from the start of April, saying it would help “tens of thousands of businesses”;

- More than £1 billion in extra tax breaks for the creative industries over the next five years;

- He was scrapping and reform the tax break for wealthy foreign residents in the UK who have non-domiciled tax status;

- Updated MPs on investments by firms including AstraZeneca, which has plans to pump £650 million into facilities in Cambridge and Liverpool.

The freeze on alcohol duty is set to benefit 38,000 pubs across the UK and was quickly welcomed by the Scotch Whisky Association (SWA).

SWA chief executive Mark Kent said: “The industry welcomes the Chancellor’s recognition of the benefits of continuing the duty freezes beyond August this year. That decision supports the Scotch Whisky industry, will incentivise investment and, as with previous cuts and freezes, boost Treasury revenue. With cost pressures hurting our bars and pubs, not to mention hard pressed consumers, the Treasury has provided some much-needed certainty and stability for the year ahead.”

“Despite this freeze, Scotch Whisky is still put at a disadvantage by the duty system, based on a fundamental misunderstanding of how people consume alcohol and modern drinking trends. With today’s freeze cider is still taxed four times less than a spirit like Scotch Whisky and responsible consumers who enjoy a Scotch are paying too much tax compared with a beer or cider.”

The Chancellor said fuel duty would remain at its existing rate and be frozen for the next 12 months. He will also extend a "temporary" 5p cut on fuel duty which was due to end this month.

Motoring groups similarly welcomed Mr Hunt’s decision to freeze fuel duty. Government figures show the average cost of a litre of petrol and diesel at UK forecourts is around £1.45 and £1.55 respectively.

RAC head of policy Simon Williams said: “With a general election looming, it would have been a huge surprise for the Chancellor to tamper with the political hot potato that is fuel duty in today’s Budget.

“It appears the decision of if or when duty will be put back up again has been quietly passed to the next government."

Mr Hunt said gross domestic product (GDP) – a measure of the size of the economy – was also set to grow faster than previously forecast by the budget watchdog.

The Office for Budget Responsibility forecast growth of 0.8 per cent in 2024, up from the 0.7 per cent forecast in November, and 1.9 per cent next year – up from 1.4 per cent on the autumn forecast.

Growth was expected to be 2.2 per cent in 2026, again higher than previously expected, 1.8 per cent in 2027 – a 0.2 percentage point decrease – while the forecast for 2029 remained unchanged on 1.7 per cent.

“Because we have turned the corner on inflation, we will soon turn the corner on growth,” Mr Hunt said.

Mr Hunt had earlier briefed the Cabinet on the contents of the statement, which is expected to include a 2p cut to National Insurance to ease the tax burden on workers.

In a promotional video released by the Treasury, Mr Hunt pleaded with the UK to back him and not “throw away” the work done to repair the economy.

The economy slipped into a technical recession at the end of 2023 and the Tories are around 20 points behind in the polls, meaning Mr Hunt is under pressure to revive both growth and the Conservatives’ election prospects.

The Chancellor, who has faced pressure from Tory MPs to ease the record-high tax burden, will use his Commons speech to promise “permanent cuts in taxation” that would bring “higher growth”.

A 2p cut to National Insurance could save the average worker £450 a year, adding up to £900 when combined with last year’s move.

Mr Hunt was widely reported to have defied calls from some in Downing Street and many Conservative MPs to reduce income tax, which is more expensive as it also covers pensioners, but better understood by many voters.

The Chancellor had opened his Budget address with a nod to the "tragic loss of life in Israel and Gaza", committing £1 million towards a memorial to remember Muslims who died in two world wars "in service of freedom and democracy".