UK Chancellor of the Exchequer George Osborne presents his budget to Parliament March 18, 2015. Photo courtesy BBC News. March 18, 2015 – The “Drop the Duty” campaign led by the Scotch Whisky Association and other UK spirits industry leaders has claimed a victory, as Chancellor of the Exchequer George Osborne announced plans to cut duties on spirits by two percent in the next fiscal year. Osborne told Parliament today that the British economy is “walking tall again” after five years of austerity measures forced by the global economic crunch in recent years. His budget also freezes wine duties for the second straight year, cuts beer taxes by one percent for the third consecutive year, and also freezes taxes on fuel and tobacco in what observers see as a paean to voters ahead of Parliamentary elections May 7.

The tax cut on Scotch whisky and other spirits is only the fourth in the last century, and SWA spokeswoman Rosemary Gallagher praised the move. “We’ve been campaigning for that now for the last few months, and it’s good that we’ve been listened to,” she said in a telephone interview with WhiskyCast’s Mark Gillespie following the budget address. “There’s been quite a lot of media coverage that a cut was coming, but until the Chancellor actually stood up and spoke today in the House of Commons, we had no guarantee that it was actually going to happen.” Gallagher termed the cut a “good start” and said the industry will keep pushing for additional cuts in future years.

Listen to Mark Gillespie’s interview with Rosemary Gallagher:

During his address, Osborne cited the importance of Scotch Whisky exports to the UK economy in justifying his decision to lower the duty. Last month, the SWA released a study showing the whisky industry generates £5 billion ($7.3 billion USD) in economic impact annually for the UK and predicted that a two percent cut would increase that impact by up to £1.5 billion per year. Before the cut, taxes made up 78% of the price of an average bottle of whisky sold in the UK, and the cut only reduces that to 77%. However, Gallagher noted that the cut should help increase consumer confidence and result in more sales.

The push for a duty cut was criticized by health groups, who told British news organizations before the budget announcement that lowering the tax rate on alcoholic beverages would only increase the nation’s problems with alcohol abuse. Opposition party leaders also criticized the overall budget plan, including the Scottish National Party, which is upset over more cuts in public spending and a continued focus on austerity measures. SNP officials did not mention the cut in whisky taxes in their response to the budget address. The Liberal Democrats, which are coalition partners in the Conservative-led government, will present their own budget plan tomorrow. Observers expect that if the May 7 election produces a change in government, a new budget will be presented that could reverse the whisky and spirits tax cut as part of a much larger package of changes to Osborne’s budget package.

Links: Scotch Whisky Association