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Agenda: Time to take whisky industry off the punitive alcohol duty escalator

Go to a British supermarket and buy a well-known 70cl bottle of Single Malt Scotch whisky.

It will cost you nearly £35. The same bottle in a French supermarket will cost you just over £22. Why?

It's a question I am often asked. The answer is that, in France, half of that £22 total is tax. But, in Britain, almost £4 in every £5 of the bottle's price is tax. That is, excise duty and VAT.

This makes Scotch whisky one of the most heavily taxed consumer products in the country.

When I tell people this, I am met with disbelief that Scotland's national drink is subject to such a punitive tax regime in its home country.

Why do we do this to one of Britain's major national assets, one which supports 35,000 jobs and exports more than £4 billion a year?

To explain why, we need to go back to the introduction of the alcohol duty escalator in 2008.

The escalator means that duty on Scotch, and indeed on all spirits and wine, has increased at 2% above the rate of inflation every year since 2008. Duty on Scotch whisky has, as a result, gone up by 44% since then.

It is no coincidence that, over the same period, the UK market for Scotch whisky has declined by 12% in volume and is 21% lower than a decade ago.

Yet, over the same period, exports of Scotch whisky (about 80% of Scottish food and drink exports) have almost doubled.

Is it plausible that demand is going up in markets across the globe but not in the UK?

The fact that 79% of the price of a bottle of Scotch whisky is made up of tax and VAT must surely explain some of the difference.

This situation matters for many reasons. It puts more pressure on hard-pressed UK consumers of Scotch whisky.

Crushing the UK market also makes it harder for start-up distillers, of which there are many, to secure a foothold and consolidate their business in the UK before exporting.

And it affects the whole Scotch whisky supply chain: encompassing farmers, packaging, glass and labelling firms and haulage companies.

Finally, heavy taxation sends out the wrong signal overseas: it makes it harder to persuade other countries to implement fairer trading conditions for Scotch whisky and, as a consequence, harms our own exports in the long run too.

In last year's Budget, Chancellor George Osborne showed that the escalator was not set in stone. He removed it from beer and actually cut duty on a pint.

We are asking him to show similar flexibility in next week's Budget for Scotch whisky, other spirits and wine.

The Scotch Whisky Association, the Wine & Spirit Trade Association, and the Taxpayers' Alliance are urging him to "call time on duty" by abolishing the escalator and freezing alcohol duties for 2014.

I believe this move would help consumers and businesses, public finances and the wider economy. Independent research from Ernst & Young supports this view. It found, perhaps not surprisingly, that scrapping the escalator would boost economic activity in the spirits and wine sector, including Scotch Whisky, and that this fairer alcohol taxation would help the hospitality industry across the board.

Pubs, hotels, restaurants and other entertainment venues would all benefit.

The move would produce 6000 jobs and, because more profits bring more tax payments, would also actually boost the industry's contribution to public finances by £230 million in 2014 alone.

I am convinced this is a powerful case. I am not alone. Most consumers sympathise with this view, too.

The Chancellor has it in his power to help a strategic Scottish industry, the consumer, public finances and the economy by removing the duty escalator.

We hope he will do so in his Budget on Wednesday.

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