The UK Chancellor George Osbourne has delivered the Conservative/Liberal Democrat’s first budget, in which he did not increase tax on cigarettes or alcohol.
However, VAT is to rise to 20% from 17.5%, from January 4 2011.
The trade has welcomed the move not to add more tax to alcohol and cigarettes and this is the first time the Government has frozen excise duty since 2001. Former government Labour’s plan to increase duty of cider by 10% above inflation will be scrapped from July. The Scotch Whisky Association urged the government to press ahead with a review of the excise duty system, which is supposed to happen during the last quarter of 2010.
Wine and Sprit Trade Association (WSTA) chief executive Jeremy Beadles said: “Today’s announcement provides some relief for a sector that has faced substantial tax increases in recent years and I welcome the Chancellor’s decision.
“Repeated tax hikes have produced less revenue for the Treasury and punished responsible drinkers, while failing to tackle the problem of binge-drinking.”
Brigid Simmonds, British Beer & Pub Association chief executive, agreed with Beadles. She said: “We applaud the Government’s decision to freeze beer tax and deliver on its promise made in the coalition agreement to not penalise pubs, responsible drinkers and important local industries. This is a welcome relief for struggling pubs during difficult times.
“A beer tax freeze will also help the beer and pub sector’s ability to play its part in contributing to much needed economic growth and generating valuable private sector jobs.
“The VAT rise is a price to pay for tackling the deficit and bringing Britain’s balance sheet back in order. This tax increase is not welcome, but is understandable and applies to everybody. We hope this will be short-term pain for long-term gain.
“Once the nation’s finances are back on a more even keel, we look forward to VAT rates returning to more favourable levels. We also look forward to the promised review of our alcohol tax system tax as an opportunity to rebalance our tax system to one that is more fair towards community pubs and our national drink – beer.”
The Scotch Whisky Association welcomed the Chancellor’s decision to freeze the excise duty on alcohol and to press ahead with a review of the system this autumn. But it said the VAT increase would ‘increase discrimination’ faced by the whisky industry.
According to the SWA, the current alcohol duty regime discriminates against Scotch whisky – the drink carries 37% more duty than the same amount of alcohol served as beer, 19% more duty than wine and 224% more duty than cider.
The SWA said that the VAT rise in January 2011 will increase the discrimination faced.
Gavin Hewitt, chief executive of the Scotch Whisky Association said: “The Chancellor has made a sensible and welcome decision to freeze excise duty. He is also right to press on with an early review of the current excise duty system.
“We encourage the Government to look closely at taxing all drinks at the same rate according to alcohol content, coupled with a ban on below tax sales. We believe this route would help the Government address its concern over the pricing of alcohol, would secure greater social responsibility and would offer increased revenue.
“Today’s announcement on corporation tax will also help Scotch Whisky play its part in growing the UK’s manufacturing and export sector.”