Scotch industry fumes over extr

● Diageo calls for complete overhaul of ‘flawed excise duty system’ as Chancellor announces inflation-linked increase

The Scotch whisky industry reacted furiously to what it claimed was, in effect, a near-4 per cent hike in spirits duties, branding it as deeply unhelpful to one of the UK’S most successful and profitable industries.

Industry body the Scotch Whisky Association (SWA) had lobbied the Chancellor hard for a 2 per cent cut in duty in the run-up to yesterday’s Budget.

The SWA said the inflationlinked rise was based on the Office for Budget Responsibility’s increased forecast for retail price inflation of 3.9 per cent in 2017-18, up from 2 per cent in 2016-17.

As a result, duty on beer, cider, wine and spirits will increase in line with the RPI measure of inflation. This will equate to 2p on a pint of beer, 1p on a pint of cider, 36p on a bottle of whisky and 32p on a bottle of gin.

The extra tax burden follows a freeze on whisky duties in 2016, and a 2 per cent cut in 2015.

In 2014, spirit duties were also frozen as the alcohol duty escalator – where alcohol tax rose 2 per cent above inflation each year – was scrapped.

The SWA said yesterday that the latest increase in the price of a bottle of whisky was a “major blow to a key UK industry, undermining competitiveness at a time when the government should be supporting home-grown exporters”.

As a result of the increase, the total level of tax – including excise duty and VAT – on an average-priced bottle of Scotch whisky is now “an 0 Julie Hesketh-laird: Duty is penalising whisky industry onerous 79 per cent”, the SWA added, one of the highest levels in Europe, and 21 per cent higher than in 2010.

Julie Hesketh-laird, the SWA’S acting chief executive, said: “A nearly 4 per cent duty rise and a 79 per cent tax burden on a bottle of whisky is a major blow, reversing recent progress. Distillers will find it hard to understand why the Chancellor is penalising a strategically important British industry with this tax increase.

“At a time when government should be supporting a key home-grown sector, we face a damaging tax rise on top of the uncertainties of Brexit.

“Looking to the autumn Budget, we will be arguing strongly that it is time for a new approach to excise duty outside the constraints of EU excise law. The system is in need of a fundamental review and reform to make it fair and competitive.”

Diageo, Scotland’s biggest whisky company, also hit out at what one analyst called a “disguised” duty increase.

Charles Ireland, managing director of Diageo GB, said: “Today’s tax blow from the Chancellor is bad for the economy, bad for business and bad for the British public.

“It is staggering that the Prime Minister stood up in Scotland only on Friday and said that Scotch whisky is ‘a truly great Scottish and British industry … and directly supports tens of thousands of jobs’, and just five days later her Chancellor hammers this industry at home.

“Tax on Scotch whisky is now so high nearly 80 per cent of the price of an average bottle will go straight to the government. We believe this duty rate increase will reduce total tax revenue.

“We are calling on the government to reverse this punitive tax hike and fundamentally overhaul what is clearly a flawed excise duty system.”

Miles Beale, chief executive of the Wine & Spirit Trade Association, said: “Between Brexit’s impact on the pound and rising inflation the wine and spirit businesses face a tough trading landscape.

“This is a missed opportunity to back British business and help out struggling consumers.”

Food and drink is the UK’S largest manufacturing sector, and whisky accounts for onequarter of overall food and drink exports. ● There was better news for the drinks industry south of the Border in the Budget, with an estimated 36,000 pubs set to enjoy a one-year-only £1,000 discount to their business rates.

As part of a £435 million business tax relief package of measures for businesses following rate revaluations, the Chancellor said the £1,000 discount will apply to pubs with rateable values of less than £100,000.

Analysts said it was recognition of the vital part public houses – 10,000 of which closed between 2004 and 2010 – played in the community.

0 Almost 80 per cent of the price of a bottle of whisky is made up of taxes, the SWA said yesterday