George Osbourne MP in the annual Budget today (March 19) has also cut the duty on beer by 1p but the duty on tobacco has risen by 2% above inflation and this escalator is to be extended beyond the next general election.
The Scotch Whisky Association (SWA) has welcomed the Coalition Government’s decision to scrap the alcohol duty escalator a year early and freeze excise duty on spirits.
The escalator has increased duty on Scotch whisky by 2% above the rate of RPI every year since 2008. He has also by frozen the excise duty on whisky. The SWA says this means that planned increases of 4.8% in excise duty, which would have added another 40p in tax to a bottle of whisky, will not now go ahead.
The SWA said that the decision was a show of support for a major Scottish and British industry, which supports 35,000 jobs, many in economically fragile areas.
The Chancellor described Scotch whisky as a great “British success story”. The move will also benefit the wider hospitality industry and help support investment across the sector, according to independent research by Ernst & Young.
The SWA claimed scrapping the escalator will be welcomed by hard-pressed consumers. The vast majority of UK consumers – almost 70% - said in a poll last week that pre-planned tax increases under the escalator on a bottle of Scotch were too high.
SWA chief executive David Frost, said: “We are delighted that the Chancellor and the Chief Secretary to the Treasury listened to our case for scrapping the unfair alcohol duty escalator and freezing whisky duty.
“This fairer tax treatment in the UK, the third biggest market for Scotch whisky, also sends the right signal on excise policy to the governments of the 200 countries to which we export. So its effects will be felt around the world.”
Andrew Cowan, country director, Diageo Great Britain the UK division of the world’s largest premium drinks company, said: “The Chancellor has today given a huge boost to one of Britain’s most successful industries. From Scotch whisky to London gin, British spirits are admired and enjoyed around the world. In freeing the industry from a debilitating tax policy the Government has given a show of support for these quality products. That will benefit the industry not just at home but also help us as we fly the flag for British business across the world.”
Bibendum Wine managing director, Michael Saunders said: “I am delighted that the Government has listened to the WSTA’s ‘Call Time on Duty Campaign’ and scrapped the alcohol duty escalator.
“However, the decision to increase wine and spirits duty in line with inflation is disappointing. A recent Ernst and Young report had showed that freezing duty on wine and spirits would have created 6,000 new jobs and resulted in £230m extra revenue for the Treasury. Today’s budget may be a step in the right direction but it still represents a missed opportunity, he said.