March 19, 2014 – Chancellor of the Exchequer George Osborne is yielding to the Scotch whisky industry’s calls for tax relief in the UK Government’s 2014 budget, freezing taxes on Scotch whisky at their current level for the first time since at least 2008. In the final budget before Scottish voters go to the polls for September’s independence referendum, Osborne scrapped a planned 4.8% increase in excise taxes on whisky and the standard escalator on alcohol duties that adds 2% above the rate of inflation each year. Osborne also froze taxes on ordinary cider and lowered the taxes on beer by one pence for the second consecutive year. However, all other spirits and wines will see additional increase in excise taxes, and Osborne pledged that the escalator clause will be extended after its scheduled expiration next year.

“Scottish whisky is a huge British success story. To support that industry, instead of raising duties on Scotch whisky and other spirits, I’m today going to freeze them.”

Scotch whisky sales fell 3% in the UK last year, and Scotch Whisky Association leaders placed much of the blame on Westminster’s tax policy since the escalator clause was introduced in 2008. SWA Chief Executive David Frost praised Osborne’s decision in a news release:

“We are delighted that the Chancellor and the Chief Secretary to the Treasury listened to our case for scrapping the unfair alcohol duty escalator and freezing whisky duty. 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.”

In addition to going along with the whisky industry’s calls for a tax freeze, Osborne also announced other budget moves aimed directly at Scotland, including pension and savings tax cuts, economic development assistance for Scottish airports, and a review of taxes on the North Sea oil and gas industry. The moves are seen by many analysts as part of the coalition government’s campaign to urge Scots to vote against independence in the September 18 referendum. Scottish National Party leaders welcomed the budget changes, while continuing to criticize the government in London. Moray MP Angus Robertson represents the Speyside area, and noted in a SNP news release that even with the one-year duty freeze, approximately 80% of the price of a bottle of whisky goes to taxes.

“It’s worth remembering that UK Governments have repeatedly acted against the interests of the Scotch whisky industry, with Labour introducing the duty escalator, and the Tory/Lib Dem coalition keeping it going for years. The escalator has meant duty increasing by 2% above the rate of inflation each year since 2008. Tax on Scotch whisky has risen by 44% over five years.”

The SWA had projected that Osborne’s planned increases would have raised the average price of a bottle of blended Scotch whisky to more than £20 ($33 USD), with prices for single malts rising to more than £40 ($66 USD).

Links: Scotch Whisky Association