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As my hon. Friend Kirsty Blackman said so eloquently, there is so much wrong with the Budget that it is difficult to know where to start. In the little time available to me, I would like to look at the Chancellor’s decision to reinstate the alcohol duty escalator and raise duty by 4%. I should declare an interest as the chair of the all-party parliamentary group on Scotch whisky.
“a truly great Scottish and British industry”,
only for her Chancellor to undermine that same industry with a huge tax-grab just five days later. The Chancellor’s decision to raise duty is a major blow to an industry on which so many in my Argyll and Bute constituency depend. He has undone, in one fell swoop, all the good done in the last couple of years, in which the previous Chancellor, Mr Osborne, cancelled the duty escalator, cutting duty by 2% in 2015, and freezing it the following year. When he cut duty by 2%, it was estimated in the Treasury’s own Red Book that it would create a revenue shortfall of £185 million. However, the reality was very different, because that 2% cut in 2015 actually increased the tax take to the Treasury by more than £100 million, with a further 4.2% rise in revenue from spirit duty in 2016. In cutting duty, the Chancellor sent out a message to potential investors that confidence in the industry was high.
The initial duty freeze followed by the cut gave confidence to investors who, for the first time in decades, believed that the Government no longer saw the whisky industry as a cash cow. Their investment saw more than a dozen new distilleries opening in the past two years, with no fewer than 40 in various stages of planning, hoping to come on stream over the next two decades. It allowed existing production sites to grow and it helped distilleries to expand the very lucrative tourist/visitor side of their business. I fear that the signals sent out by this excise duty increase threaten to stall that investment and damage industry confidence.
In this Budget, 36p was put on a bottle of Scotch whisky, which means that the excise duty paid on 70 cl bottle of scotch is a whopping £8.05, taking the total tax take on a bottle to £10.20. That means that the tax on an average priced bottle of Scotch whisky now sits at an eye-watering 79%. A total of £4 in every £5 spent domestically on Scotch whisky now goes directly to the coffers of the Treasury in either duty or VAT. Sadly, this tax hike is little more than a cash grab by the Chancellor because, as I have said, it goes against the evidence of the past couple of years when duty was cut and then frozen. I fear that the days of the Chancellor using Scotch whisky as a cash cow have returned with a vengeance.