Hunt tax hike on Scotch cost nearly £2.5 billion – new analysis

New Chancellor Rachel Reeves MP has been urged to reduce the tax burden on Scotch Whisky and spirits in the October budget, after new analysis revealed a 10.1 percent hike in excise duty by Jeremy Hunt last year added £2.3 billion to government interest payments.

Excise duty on Scotch Whisky was increased by 10.1 percent exactly 12 months ago by Mr Hunt, the former Chancellor, the biggest such tax increase in more than 40 years. Analysis on behalf of the Scotch Whisky Association has found that the increase in alcohol duty added 0.35 percentage points to inflation in the period 1 August to 30 June, resulting in £2.3 billion in additional interest payments on government borrowing.

The Office for National Statistics concluded last September that the increase in excise duty by Mr Hunt had made the biggest contribution to inflation by alcohol on record.

Recent figures from HM Revenue & Customs also show that revenue from excise duty fell by £132 million between 1 August and 30 June, compared to the same period in 2022/2023.

The Scotch Whisky Association has urged the Chancellor to reduce the tax burden on Scotch Whisky and spirits to reverse the economic damage of her predecessor’s tax hike. Duty on Scotch in the UK is the highest in the G7 and fourth highest in Europe, with nearly 70 percent of the cost of a bottle claimed in tax.

Scotch Whisky remains the country’s number one food and drink export and Scotland’s number one tourist attraction, generating £7.1 billion a year for the UK economy.

Mark Kent, Chief Executive of the Scotch Whisky Association, said:

“We said last August that increasing excise duty on Scotch Whisky would be inflationary and bad for the economy. The evidence a year on is very clear – the tax hike imposed by Jeremy Hunt has been calamitous, with a price tag of nearly £2.5 billion given the impact on government interest payments and lost tax revenue. Raising excise duty has significantly contributed to the fiscal gap which the Chancellor is now trying to plug.

“The Chancellor should use the October budget to support Scotch, support Scotland and reverse some of the damage caused to the UK economy. This means reducing the tax burden on spirits, which is one of the highest in the world, which will increase tax revenue. The new Labour government has promised to back Scotch producers to the hilt, and the first budget of the new Parliament is the first opportunity to make good on that commitment.”