The UK Budget was full of betrayal for Scotland's whisky industry
Standing surrounded by Scotch Whisky casks in Fife on a cold November morning last year, Sir Keir Starmer said: “It’s clear Scotland’s whisky industry isn’t getting the stability it needs … Labour will put growth at the heart of our government and back Scotch producers to the hilt.”
Coming just shortly after the largest duty rise on Scotch whisky in 40 years, this commitment was music to the ears of distillers across Scotland.
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Hide AdThe 10.1 per cent duty increase in August 2023 hurt the industry. More than that, it hurt the economy, with Treasury losing out on hundreds of millions of pounds in revenue with Office for Budget Responsibility forecasts revised down again and again.
A year on, Sir Keir is now Prime Minister and Labour delivered its first Budget in government for 14 years. What of that commitment? Was the tax burden on Scotch whisky reduced? Were the voices of key business organisations, Scottish tourism and hospitality groups, GMB Scotland and others, listened to? Was the government’s avowed intention to build “Brand Scotland” given real substance?
Rachel Reeves delivered the answer. In her first Budget statement, she announced a further duty rise on Scotch whisky, and increased the tax discrimination of spirits versus beer and cider in the on-trade.
The Labour government’s first big opportunity to show that Scotch really would be ‘backed to the hilt’ and, far from delivering change, the Chancellor chose continuity with her predecessor. So much for backing Scotland – which produces 70 per cent of UK spirits – and setting an example to be followed in our export markets.
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Hide AdThis is more than a broken promise, to many it will smack of a betrayal. Scotland’s national drink, and the associated investment and jobs, has been actively undermined and discriminated against.
The staggering thing, and the element which jars with the industry, is this decision not only flies in the face of the commitment to back the industry as a core element of the government’s ‘Brand Scotland’ concept, it also serves no economic purpose.
In March 2023, when the 10.1 per cent duty rise was announced, the official government forecast stated the rise would bring in more revenue into Treasury coffers. Spirits revenue, the magical spreadsheets said, would rise to £4.8 billion this year, and total alcohol revenue would be £13.9bn.
In March 2024, these figures had to be revised down following the negative revenue impact of the 10.1 per cent duty increase. Spirits revenue was now £600 million less than forecast, and £1.2bn less for total alcohol.
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Hide AdSecretary of State for Scotland Ian Murray said during the general election campaign these magical spreadsheets may “help the bottom line, but it doesn’t help the industry, and it doesn’t necessarily raise any more money”.
Time and time again the real-world duty receipts have shown this to be true. Tax goes up, but revenue doesn’t follow.
Conversely, when duty has been frozen or cut, revenue has increased, and along with it investment, employment and, perhaps above all, confidence – which is so crucial in the universal hunt for economic growth.
A year on from Sir Keir’s commitment at Inchdairnie Distillery, confidence has been harmed following this duty hike, and increase of the competitive disadvantage faced by Scottish spirits producers.
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Hide AdThis is further bad news for the Scottish economy. So, in the days and weeks to follow, people here will rightly be asking: why was it allowed to happen? Why was Scotland’s voice ignored by the government in Westminster? Who is fighting Scotland’s corner in this government?
- Mark Kent is the chief executive of the Scotch Whisky Association
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