What the Budget means for Scotch
08 Mar 2017
Commentators could be forgiven for some initial confusion about
what is really happening to alcohol duty, including excise on
Scotch Whisky, following today's UK Budget statement. Rosemary
Gallagher, SWA head of communications, sets out what today's Budget
means for the industry.
This afternoon, Chancellor Philip Hammond delivered what sounded
like a throwaway line about half-way through his inaugural Budget
statement. He announced there would be 'No change to previously
planned upratings of duties on alcohol …'.
Some people immediately tweeted that alcohol duties had
therefore been frozen. We decided to wait until we could read the
small print once the Chancellor sat down in the House of Commons
before we issued our reaction - and that's when the reality became
Excise on spirits, including Scotch Whisky, is being hiked by
3.9%. Tax - excise and vat - on an average priced bottle of Scotch
in the UK now stands at an exorbitant 79%, i.e. four pounds in
every five a consumer spends on whisky goes straight to the
Treasury. This isn't, as some have been saying, a previously
announced increase. While the Treasury forecasts several years in
advance the revenue it wishes to raise, it is always open to a
Chancellor to make annual choices about how to do so. In
other years, Chancellors have decided to freeze duty rather than
impose the inflationary increase. In 2015, George Osborne went as
far as cutting excise by 2%. And this year's increase isn't even in
line with current levels of inflation - it's based on the OBR's
forecast for retail prices inflation (RPI) to reach 3.9% in
2017/18, up from around 2% in 2016.
This excise increase is therefore an unwelcome blow to a
successful home-grown industry that supports 40,000 jobs and adds
value of £5 billion every year to the UK economy.
No matter how you look at this there are no winners from today's
- Scotch in the UK is now taxed more than 80% higher than the EU
spirits tax average.
- Scotch would face an extra £31 million excise bill in the UK on
the basis of 2016 volumes.
- The tax burden on an average priced bottle of Scotch will now
be nearly 80%.
- The excise duty on Scotch is now 21% higher than in 2010.
It's puzzling to try to work out why the government has decided
to punish an industry that contributes so much at home and abroad -
with exports worth £4 billion annually - especially as we prepare
for the seismic changes heralded by Brexit. A fair and
competitive domestic tax regime - providing a strong platform for
investment and growth - is an important part of that Brexit
And this move comes just days after the Prime Minister Theresa
May told an audience in Glasgow that Scotch Whisky is a 'truly
great Scottish and British industry' and the 'world's pre-eminent
The increase also doesn't make sense in terms of the likely
impact on government revenue. The government's own figures show
that the public purse has benefited from a previous excise cut and
freeze. Last year spirits excise was frozen and revenue from
spirits duty increased by 4.2%, or £132 million, to £3.25bn.
Spirits revenue accounted for 56% of total alcohol income growth
which was up 2.2%, or £132m, to £10.9bn.
Consumers who enjoy a dram will tonight be reflecting on the
fact that from Monday they will be paying 36 pence more to buy a
bottle of Scotch.
Looking ahead to the autumn Budget, it is clear that it is time
for change. We'll be arguing strongly for a fundamental review of
the excise duty system once the UK leaves the constraints of EU
excise law and finally deliver a 'Fair tax for Whisky'.