Why does the government want to tax whisky so much?

Written by David Frost is chief executive of the Scotch Whisky Association  on 7 January 2014 in Diary
Ahead of the Scotch whisky excise duty debate today, the chief executive of the Scotch Whisky Association argues that an increase in duty on Scotch whisky is bad for public finances, business and ordinary people

I am lucky enough to represent the industry that produces one of the United Kingdom’s most successful and iconic products - Scotch whisky.  The Scotch industry is that rare thing - an industry steeped in history, but thoroughly modern in outlook, and with a positive future.  It contributes around £4 billion to the UK’s balance of trade and supports 35,000 jobs.  

So why does the Government want to tax it so much?  

I hope MPs will ask that question when they debate, today, the level of excise duty imposed on Scotch whisky.  Not many people realise quite how much a bottle of Scotch whisky is taxed.  Excise duty and VAT make up 79% of the price of the average bottle.  The alcohol duty escalator - introduced in 2008, but maintained under the coalition - automatically increases duty by inflation plus 2%. That is why excise duty is now 44% higher than it was in 2008.

This is bad for all sorts of reasons.  

For public finances.  While Scotch exports have increased, the UK market has actually declined by 12% over the last five years.   Research from Ernst & Young shows that scrapping the duty escalator would boost GDP by half a billion pounds and increase the tax take from the drinks industry by £230 million in 2014, by stimulating extra activity.  So heavy taxation actually loses the nation money.

For business.  High excise duties affect not only Scotch Whisky producers, but also the retailers, pubs, and restaurants that sell it. Many of these are SMEs - exactly the type of businesses that the Prime Minister describes as “the lifeblood of the economy”.

And for ordinary people.  British consumers - the hardworking people that the Government wants to help - pay nearly 40% of all alcohol duty paid in the whole of the EU.   Moreover, whisky drinkers pay about 50% more duty than beer drinkers for the same amount of alcohol; and in 2013 the Chancellor reinforced this difference by removing the escalator from beer and cutting beer duty.  

Today’s debate comes shortly after the launch of the Call Time on Duty campaign. This asks the Government to extend what it did last year, by freezing alcohol duty in 2014 and scrapping the escalator.  Anyone who agrees can write to their MP via the website – www.calltimeonduty.co.uk.  I hope the Government will listen, and then safeguard and support the Scotch Whisky industry by acting accordingly.

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