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SNP’s double-take on whisky is a taxing issue

Terry Murden, Scotland's Programme for GovernmentWhisky bosses must be scratching their heads in disbelief after SNP MP Brendan O’Hara damned the Chancellor over reports that he will raise excise duties in his forthcoming budget.

Mr O’Hara said Philip Hammond, supported by Scottish Tory MPs, would be delivering an “economic body blow” to an industry which is responsible for a fifth of UK food and drink exports.

An “unnecessary tax hike would seriously jeopardise the sector’s ability to thrive and grow in an already challenging economic environment”, said Mr O’Hara.

How astonishing that the SNP is demanding fair pricing for the whisky industry. This is the same party that spent months fighting the Scotch Whisky Association (SWA) in the courts over its minimum unit price (MUP) policy which put £2 on a £12 bottle of Famous Grouse in the face of warnings that it would damage the sector.

The industry has long argued that hiking the price of alcohol does not tackle health issues – it is too early to know whether the introduction of MUP in May is having any effect – and that it sends out the wrong message to other countries with whom it is negotiating to reduce their own high levels of duty.

Karen Betts, the chief executive of the SWA, was in Downing Street last week making the latest appeal on behalf of the industry ahead of Mr Hammond’s statement on 29 October. Last Thursday marked “Duty Paid Day”, marking the first day that consumers of Scotch Whisky have theoretically paid off excise duty and VAT on Scotch sold in the UK this year.

With nearly three quarters (74%) of the cost of an average priced bottle of Scotch being collected in duty and VAT, Scotland’s national drink is already one of the highest taxed consumer goods in the UK – more than any other alcoholic product.

While appeals for tax neutrality is part of the annual Budget ritual, the warnings over the impact on the industry take on an additional concern because of the Brexit uncertainty. There are worries that food and drink products imported from the EU will face an additional £9.3bn annual tariff bill if a deal isn’t reached.

Mr Hammond has brought forward his budget to avoid clashing with key meetings in the Brexit negotiations and, notwithstanding the SNP’s sleight of hand, he should take note of its concerns and those of an industry that he cannot afford to undermine.

The spirits duty freeze in November 2017 generated an extra £163 million in revenue between February and August 2018, according to the SWA.

Furthermore, a study by the Centre for Economic and Business Research suggests that a continued duty freeze on spirits could increase revenue by an extra £64m in 2019/20, and by almost £200m by 2021.

This extra revenue is being poured back into the sector with more distilleries now operating across Scotland than in the past seventy years.

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