Spirits braced for inflation fuelling tax hike

As the largest duty increase on Scotch Whisky in 40 years comes into force, the Scotch Whisky Association (SWA) has said the UK government has failed to keep the commitment it made when it promised to “ensure the tax system is supporting Scottish whisky.”

The double-digit tax rise takes the tax burden on the average priced bottle of Scotch Whisky from 70% to 75% and the reforms HM Treasury have implemented on the UK’s duty system deepens the competitive disadvantage faced by distillers in pubs, bars and restaurants.

Following the Spring Budget, the SWA launched the #KeepTheCommitment campaign to urge the Chancellor to reconsider the duty increase. Despite the campaign, and the HMRC revenue data that shows that spirits duty revenue to the Treasury has increased by 40% over the past decade following cuts and freezes to spirits duty, the UK government has chosen to continue with the duty hike. This will further fuel inflation at a time when businesses are trying to continue to invest in future growth and households are struggling with the rising cost of living.

Ahead of a further budget in the autumn, the SWA has called on the Chancellor to rule out a further tax increase over the duration of this Parliament, and work with the industry to ensure the tax breaks available to beer and cider in the on-trade are open to the spirits industry.

Commenting on the tax increase, SWA Director of Strategy Graeme Littlejohn said:

“The 10.1% duty increase is a hammer blow for distillers and consumers. At a time when inflation has only just started to creep downwards, this tax increase will continue to fuel inflation and make it more difficult for the Scotch Whisky industry to invest in growth and job creation in Scotland and across the UK supply chain.

“HM Treasury had a choice to make. Rather than choosing to back an industry which the UK government promised to support through the tax system, the government has chosen to impose the largest duty increase in almost half a century, increasing the cost of every bottle of Scotch Whisky sold in the UK by almost a pound and taking the tax burden on the average priced bottle to 75%.

“In a further blow, distillers will now face a further competitive disadvantage in pubs, restaurants and bars by being unfairly excluded from tax breaks available to beer and cider. Pubs and other on-trade businesses are about far more than beer and cider. Today’s consumers are looking for high quality products when they socialise, often choosing to pay for an expertly crafted drink but fewer of them when they are socialising. Scotch Whisky and spirits are at the heart of this trend towards premiumisation, which supports our ambition around moderation while also supporting public finances.”

“The industry is resigned to the tax increase but determined to continue the campaign for fairer treatment. We urge the Chancellor to ensure that there are no further tax rises on Scotch Whisky for the remainder of this Parliament and work with the industry to repair some of the damage inflicted on Scotland’s national drink.”