Scotch Whisky Excise Duty

Debate between Grahame Morris and Brian H. Donohoe

Wednesday 8th January 2014 Westminster Hall

[Mr Donohoe]

I will take interventions towards the end of my speech, if I may. I will give everybody who has made a representation to me an opportunity to speak. I also have an eye for the chair of the all-party group on Scotch whisky and spirits.

As I said, this is the year of separation, so it is important to have this debate as we move towards the Budget on 19 March. I fully support the “UK okay” campaign. One of the areas of vulnerability is the current disproportionate tax on Scottish whisky compared with English beer or cider. Whisky is taxed at 48% more than the same amount of alcohol served as beer. That is the difference in terms of the taxation on whisky and spirits. The beer duty escalator was abolished last year, but the spirits escalator continues at 2% above inflation. That should be addressed and I will come to the reasons why.

Excise duty on Scottish whisky is now 44% higher than in 2008. The escalator in 2014 will mean an increase in duty of 4.8%, or, in terms that I understand, 38p per bottle. That is what the escalator will bring. As I said, taxation as it stands now is more than £10 a bottle. Scotch whisky exports are growing, but the home market remains important, and the UK is the third largest market for Scotch whisky by volume.

However, volumes in the UK have declined by some 12% in the UK since the escalator was introduced—as a result of it, I would argue, and I am sure some of my colleagues would, too. The UK tax on spirits, which of course includes Scotch whisky, is the fourth highest in Europe. When we compare that with Sweden, Finland and Ireland, which have particular reasons for having high taxation, we can see the unfairness of the tax for the spirits industry.

The Scotch Whisky Association, which helped the all-party group, has called on the Chancellor to freeze duty on Scotch whisky in the 2014 Budget and to scrap the escalator. It should be scrapped because UK consumption has declined since it was introduced, and we want to see the UK market expand. Ernst and Young research shows that scrapping the escalator in 2014 would boost the drinks industry contribution to public finance by some £230 million in 2014 alone.

Consumers should be treated fairly across the range of alcohol products, but Scotch whisky drinkers are being heavily penalised. The sales of Scotch whisky form a significant part of the pub trade. Scrapping the escalator would boost UK sales, and therefore UK jobs in the industry. The industry is good not only for Scotland, but for the whole of the United Kingdom, because it accounts for more than 25% of all UK food exports. That is a significant figure that should not and must not be lost on the Treasury. It is good to see the Minister in her position this afternoon.

In 2012, the industry generated £4.27 billion for the UK balance of trade and 35,000 jobs. I can see there are Members present from the remote areas of Scotland; the industry has been the main employer in many small towns and villages in their constituencies. It has always been a major contributor to the support of the infrastructure within such communities, and I do not think that that has been taken into account by the Government.

Some 10,000 of those jobs are directly within the industry. Most of them, if not all of them, are in areas of most need, and they have supported the towns and communities for many years. The jobs are in rural and urban areas, and the industry is the sole employer in some of the smaller areas in Scotland.

The Scotch Whisky Association has called on the Chancellor to freeze duty on Scotch whisky in 2014—I am sure the Minister has seen that request—and also to scrap the escalator. The Chancellor took the decision last year on the basis that he would cancel the escalator for beer and cider, but not for spirits. I think that that is unfair and it does not really stack up when one considers that the reasoning was to safeguard the jobs in the pub industry. In fact, 40% of the pub industry is down to the sale of spirits, so the matter of unfairness between the pint and the wee dram needs to be looked at.

Taking action on Scotch whisky would show that the Government support that major industry both at home and abroad—that they support the jobs it creates and do not disproportionately penalise Scotland’s national drink.

[Grahame M. Morris (Easington) (Lab)]

My hon. Friend is making an excellent point about the benefits of the Scotch whisky industry to the Treasury and to Scotland in terms of jobs. Does he recognise the broader benefits that accrue from jobs in transportation and shipping? South of the border, in my region in the north-east, jobs are derived from transporting Scotch whisky to Teesport and there are jobs in shipping as the product is exported all over the world.