Jeremy Hunt’s war on Scotch whisky is bad politics

The Chancellor’s decision to slap a ten per cent duty hike on Scotch whisky is bad economics. Exports broke the £6 billion mark last year and the industry employs 11,000 people in Scotland while supporting 42,000 jobs across the UK. But whisky is a luxury item in a competitive global market where increases in retail price impact consumer behaviour. Five of the top ten export destinations by value (United States, France, Germany, Japan and Spain) are economies experiencing sharp declines in household income. 

Driving up the industry’s costs also hampers one of the biggest export challenges facing Scotch whisky today: breaking India. Per bottle sales rose 60 per cent last year but Scotch still only accounts for two per cent of the Indian whisky market. Given India’s rapid population growth, forecast to overtake China this year, it is a highly desirable market with the potential to create additional profits and jobs in the UK. Against this backdrop, increasing tax on the average bottle from 70 to 75 per cent is an act of economic vandalism. 

As well as bad economics, Jeremy Hunt’s tax raid is bad politics. Not simply because the Tories previously pledged to ‘review alcohol duty to ensure our tax system is supporting Scottish whisky’, but because whisky producers — and the rest of the bottled drinks sector — are already being hammered by the Scottish government. 

Six months out from launch, the SNP-Green administration’s deposit return scheme has failed to convince swathes of the industry to sign up and has only belatedly applied for a trading exemption as required by the UK Internal Market Act. Drinks firms have complained about a lack of detail and ongoing uncertainty over whether the scheme might collapse altogether. The Scottish government is also consulting on whether to ban the advertising and promotion of alcohol, which would inflict further damage to the sector.

The Budget was an opportunity for some fleet-footed politicking. The Chancellor could have demonstrated that, even as the SNP and its Green coalition partners continue to hammer a much-loved and economically crucial Scottish industry, the UK government would have Scotch whisky’s back. Westminster is rarely handed easy wins when it comes to Scottish politics and so to spurn one like this confirms that these people simply can’t be helped. Treasurybrain thinks very highly of itself but when it comes to politics — and especially devolved politics — it is amateur, insular and slow-witted.

Whitehall is forever banging on about ‘the need for Scotland’s two governments to work together’. Well, they’ve finally found a project where they can work in tandem. Unfortunately, it’s putting Scottish drinks firms out of business.