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Freeze on whisky tax viewed as bid to win No votes

TAX on Scotch whisky has been frozen and the controversial duty escalator has been scrapped for all types of alcohol in what has been seen as a political move by the UK Government with the independence referendum less than six months away.

The announcement in ­yesterday's Budget means an expected 4.8% hike in whisky duty, equal to a 40p tax rise on a bottle of Scotch, will no longer go ahead.

The Scotch Whisky ­Association (SWA) said the tax freeze on spirits would give confidence to distillers and consumers, noting that jobs and investment will be boosted if it leads to higher demand for Scotch in UK pubs and shops.

With its lawyers continually locked in negotiations aimed at reducing import tariffs in markets abroad, the SWA also said it would send a signal to governments overseas that the Treasury treats one of its most prized exports fairly.

Chief executive David Frost said: "It is a move that supports hard-pressed consumers, a major manufacturing and export industry and the wider hospitality sector.

"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."

The SWA's views were endorsed by Stewart Laing, boss of Glasgow-based whisky blending and bottling company Hunter Laing and Co.

Mr Laing, whose company sells in Taiwan, Japan, Russia, Ukraine, Germany and across Scandinavia, said: "We are all delighted. We are all encouraged and hopefully this will last over the coming years.

"It is a vote of confidence in Scotch whisky [and] it can only be of benefit to the industry."

However, Mr Laing is not convinced the Scotch whisky industry can suddenly dictate how governments overseas should approach spirits tax, noting this is the first year in many that whisky duty has not been increased at the Budget.

With the independence referendum looming in September, it has been suggested the concessions given by the UK Government to the whisky industry were politically driven.

A spokeswoman for the SWA said it was for government ministers to comment on the motivation for the decision, and chose to emphasise the economic case behind it instead. She said: "The Chancellor makes it very clear in his announcement the revenue and fiscal reasons that he bases his Budget on.

"It makes sense that if you can increase revenue from more spending on whisky that will boost the economy as a whole, it will help create new jobs.

"We're a neutral organisation and our whole argument for the Budget was based on business and economic reasons."

However publican Paul McDonagh, who runs The Bon Accord in Glasgow, suspects there was a political dimension to yesterday's announcement.

He said: "I had a funny feeling he was going to do that. I think that's political, the Scotch thing, playing into the Yes and No vote, but I'm delighted with it."

Mr McDonagh also welcomed the moves to take a further penny off beer duty and freeze duty on cider duty, with the latter designed to help producers hit by flooding this winter.

He said: "Hopefully it will bring more people out. Overall I think the economy is getting better. We sell a bit of cider but whether that [duty freeze] comes through to us is a different story.

"I don't think it will. I think they [producers] will be trying to recover things down there."

The decision to scrap the ­alcohol duty escalator ends a controversial policy that was introduced by the Labour government in 2008.

It has seen alcohol duty rise by 2% above the rate of ­inflation each year since, though it was abolished for beer in last year's Budget.

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