Scotch tax cut will boost Treasury coffers by £200 million

10 Nov 2017

Scotch tax cut will boost Treasury coffers by £200 million

  • New analysis predicts huge windfall if Philip Hammond cuts duty in the Budget
  • Scotch industry urges Chancellor to #dropthedramduty and support world-famous export
  • MPs back calls to lower the "Scotch Supertax"

Cutting tax on Scotch Whisky in the Budget will give Chancellor Philip Hammond an extra £200 million to spend over the next five years, according to 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.

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 £42m in tax revenues next year alone - rising to a total of £197m by the end of the Parliament in 2022-23.

Even a more modest 2% cut in duty would bring in an extra £22m for the Treasury next year, and £105m over the next five years.

In contrast, the analysis shows that sticking with inflation-linked duty increases every year will see revenues fall by £290m 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 findings mirror the experience of the duty cut in 2015, which gave a £124m boost to the Treasury. A freeze in 2016 also saw revenues increase by £229m.

HMRC figures show spirits revenue fell by more than 7% in the first quarter 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%.  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."

The findings come after a string of MPs used a Westminster Hall debate last month to demand fairer taxation for Scotch - and have vowed to keep up the pressure.

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."

Ends

For more information on the SWA visit www.scotch-whisky.org.uk and follow us on Twitter @ScotchWhiskySWA.

With media queries, please contact Graeme Littlejohn, SWA Head of External Relations (0207 960 6981 or 07793547574 or email glittlejohn@swa.org.uk)

Notes to editors

  • New modelling, using independently audited elasticities by leading economic consultants, has been used to model revenues and implies that revenue can grow by £42m in year one (up to £197m by the end of the Parliament) if the Chancellor cuts duty in November. £42 million a year is enough to pay the salaries of 1,800 new nurses or teachers.
  • The 3.9% increase in March not only damaged industry confidence but also negatively impacted Treasury revenues - HMRC figures show that spirits revenue was down more than 7% in Q1of 2017/18, falling to £697 million from £751m in the same period the previous year.
  • In contrast, the 2% cut in 2015 saw spirits revenue rise by 4% - giving a £124 million boost to the Treasury. The freeze in 2016 led to a revenue increase of more than 7%, providing an additional £229 million into the Chancellor's coffers.
  • Scotch Whisky sales have also fallen by one million bottles in the first six months of 2017. Official HMRC figures show 36.7 million bottles were released for sale in the first six months of 2017 - down from 37.7 million in the same period last year.
  • MPs including former Scotland Secretary Alistair Carmichael called for ministers to rethink the Scotch "supertax" in a Westminster Hall debate last month.
  • An average priced bottle of Scotch Whisky is £12.77. Of this total, excise duty is £8.05, VAT is £2.13, making total tax £10.18, while the whisky is £2.59.
  • The rate of excise duty per litre of alcohol on Scotch Whisky increased 47% between 2007 and 2017 from £19.56 to £28.74. £4 in every £5 of the cost of a bottle of Scotch in the UK goes straight to the Treasury.
  • Scotch Whisky adds £5 billion annually to the economy, is worth £4 billion in exports and supports more than 40,000 jobs across the UK.