Julie Hesketh-Laird is acting CEO of the Scotch Whisky Association.
Scotch Whisky is one of the UK’s best known and most successful global exports. It’s a versatile drink – enjoyed differently in various markets, whether it’s as a long drink with iced green tea in China or with coconut milk in Brazil.
Scotch’s success can be surprising. For instance, the French actually consume more Scotch Whisky each year than they do Cognac, and the United States imports more Scotch by value than Taiwan, Spain, and Germany combined.
As an industry, the growth of Scotch Whisky is strategically important to both Scotland and the UK. Scotch Whisky is a major manufacturing sector. It supports 40,000 jobs, adds £5 billion in value across the economy, and is the single biggest net contributor to the balance of trade in goods.
It is testament to the Government over the last two years that it has recognised the importance of the industry and invested in its growth. By tackling the excise duty levied on Scotch Whisky in the UK with a two per cent cut in 2015 and a freeze in 2016, the it has started to reduce the startlingly high level of tax levied on Scotch Whisky in its home market.
But that tax remains too high. Few consumers realise that 77 per cent of the price of an average bottle is pure tax – VAT and excise duty.
The UK has one of the highest tax rates levied on Scotch anywhere in the world, and in Europe is beaten only by Finland, Sweden, and Ireland. Britons actually pay more than a quarter of all EU spirits tax, with a bottle of Scotch people in the UK costing £7.74 in excise duty alone,* compared to an EU average of £4.40.**
The alcohol excise duty system, structured and regulated by the European Union, has created a system in the UK in which imported beer and wine are taxed significantly below Scotch Whisky for the same amount of alcohol.
People who choose Scotch Whisky pay 51 per cent more duty than beer drinkers, 19 per cent more than wine drinkers, and over 300 per cent more than cider drinkers. The Scotch Whisky Association believes that this is not only unfair on responsible drinkers of Scotch, it also damages the growth of one of the UK’s leading food and drink manufacturing sectors.
Recent UK fiscal decisions have supported Scotch Whisky and related supply chain jobs and investment. Since 2013, 14 Scotch Whisky distilleries have opened, and a further eight are set to start production this year.
This is good news for the Exchequer: following the two per cent cut in spirits duty in March 2015, spirits revenue in 2015/16 increased by £123 million to £3.15 billion. Spirits revenue is now £155 million a year higher than when the spirits duty escalator was scrapped in 2014.
As we approach the Budget, and the formal start of the Article 50 process to exit the EU, we urge the Chancellor to be ambitious in his approach to Scotch Whisky. This Budget presents an opportunity for him to set out on a path to delivering a fairer and more competitive excise regime that supports one of the engines of the UK economy and premier exports.
We urge the Chancellor to ‘Stand Up for Scotch’ at this year’s Budget and signal the start of this long-term review by introducing an immediate two per cent cut.
The continuing growth of Scotch Whisky will be a litmus test of the success of the UK’s exit from the European Union. A fair tax for whisky at home will provide the positive foundation for continued success abroad. If it will also boost spirits revenue to the Treasury, then surely a cut to duty it is the common-sense approach?