FDBusiness.com

The Scotch whisky industry has met with the Treasury in advance of next month’s UK Budget to explain why it is calling for the removal in 2014 of the alcohol duty escalator and for duty to be frozen.

Representatives from the Scotch Whisky Association (SWA) discussed the pressures on the industry caused by above-inflation excise duty increases with Economic Secretary to the Treasury Nicky Morgan MP.

Since the alcohol duty escalator was introduced in 2008, the UK market for Scotch whisky has declined 12% in volume and is now 21% lower than a decade ago. The last 10 years have seen a loss of more than 23 million bottles of Scotch from the market. With the escalator increasing duty by 2% above inflation each year, duty on Scotch has increased by 44% in the last six years. Some 79% of the average price of a bottle of Scotch whisky is now made up of tax and Vat.

Scotch whisky is vital to the UK economy. Despite decline at home, exports have been increasing and hit a record level of £4.3 billion in 2012 to earn £135 per second for the UK balance of trade. The industry supports 35,000 jobs and underpins many communities.

The SWA has re-iterated its view that it was unfair to single out one part of the drinks industry last year by removing the escalator from beer and cutting duty. Whisky drinkers now pay 48% more duty than beer drinkers for the same amount of alcohol. The level of duty is also an increasing burden on already hard-pressed consumers.

Scrapping the escalator on spirits and wine this year would create 6,000 jobs and deliver £230 million in extra revenue to the UK’s public finances in 2014, according to independent research by Ernst & Young.

David Frost, chief executive of the Scotch Whisky Association, said: “We had a good meeting and a constructive discussion with the Economic Secretary to the Treasury Nicky Morgan MP. In the UK, Scotch Whisky is under sustained pressure from taxation. We hope the government will listen to our concerns about the negative impact of the alcohol duty escalator and agree that enough is enough.

“Scotch whisky, along with all other spirits, faces a more punitive tax burden than any other consumer product in the UK. An unfair tax system, penalising an important domestic industry, sends the wrong signals to overseas governments.

“Scrapping the duty escalator and freezing alcohol duty this year would benefit the UK economy and hard-pressed consumers.”