Chancellor urged to cut Scotch tax for £200m gain

Karen Betts

The Scotch Whisky Association said that cutting tax on Scotch Whisky in the Budget will give Chancellor Philip Hammond an extra £200 million to spend over the next five years, citing new analysis of the UK spirits market.

“The revenue modelling based on elasticities independently calculated by leading economic consultants shows Philip Hammond can pour this huge sum into Treasury coffers by cutting excise duty on spirits by 3.9% next month — the amount he hiked it by in his March Budget in a move that hit the industry and public finances,” said the SWA.

“A reduction of the onerous 80% tax on an average-priced bottle of Scotch would add to government revenues, boost the industry and help consumers.

“The research shows a 3.9% cut would generate an extra £42 million in tax revenues next year alone — rising to a total of £197 million by the end of the Parliament in 2022-23.”

The SWA argued that even a more modest 2% cut in duty would bring in an extra £22 million for the Treasury next year, and £105 million over the next five years.

In contrast, the analysis shows that sticking with inflation-linked duty increases every year will see revenues fall by £290 million by 2022-23.

The new modelling, using independently audited elasticities, has been presented to the Treasury as Philip Hammond prepares to unveil his Budget on November 22.

The SWA said the findings mirror the experience of the duty cut in 2015, which gave a £124 million boost to the Treasury.

A freeze in 2016 also saw revenues increase by £229 million.

HMRC figures show spirits revenue fell by more than 7% in the first quarter of this year after the Chancellor increased duty in March.

“The April 2017 increase took the level of tax on a bottle of Scotch up to a staggering and unprecedented 80%,” said the SWA.

“Of an average bottle sold at £12.77, more than £10 goes straight to the Treasury.”

Karen Betts, chief executive of the Scotch Whisky Association, said: “These figures show that cutting spirits duty in the Budget will be good for the Treasury, good for the UK economy and good for our world-famous Scotch Whisky industry.

“The Chancellor has the chance both to back a leading UK manufacturing industry which supports 40,000 jobs and to generate more money for public services.

“We are urging him to Drop the Dram Duty and show how much the Government believes in home-grown global success stories like Scotch.”

Kirstine Hair, Conservative MP for Angus, said: “I am fully aware of the importance of the whisky industry across Angus, Scotland and the UK.

“There is a perception that this is only a Scotland-only issue, when virtually every one of the UK’s 650 constituencies benefit in some way, with a large proportion involved directly in supply.

“In addition to raising this issue with Treasury Ministers in debates, I have been lobbying to ensure that spirit duty does not penalise manufacturers and the jobs they create.”