moray distillers delightedby chancellor’s u-turn
Darling is forced into whisky tax climbdown
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Chancellor Alistair Darling was forced to reverse his 29p tax rise on a bottle of whisky last night amid claims his mini-Budget has already started to unravel.
The move was welcomed by distillers, who had feared a “grim” new year in the wake of changes to the duty on the spirit earlier this week.
But last night the Scottish Whisky Association said it was “delighted” by Mr Darling’s sudden U-turn.
And Moray SNP MP Angus Robertson, vice-convener of the Commons all party Scotch whisky group, welcomed one of the fastest-yet Treasury climbdowns.
Mr Darling said his revised proposals ensure that, overall, the tax will remain broadly the same as it was before he delivered his pre-Budget report on Monday.
His shift followed fury in the industry after the 59p rise in his last Budget and a 2% fall in sales and a £300,000 drop in the tax take from Scotch whisky since.
The Tories claimed a leaked Treasury document proved Mr Darling was planning to raise VAT to 18.5% after the next general election, 1% more than the 17.5% to which the tax will revert at the end of next year. Shadow chancellor George Osborne said the “secret” VAT rise, which the Treasury claimed Mr Darling ditched before the leak, was needed to fill a £500million black hole in the nation’s accounts.
Mr Osborne also said that despite Treasury claims that only those earning more than £40,000 will lose out, changes in national insurance contributions mean those on more than £19,000 will be hit.
Mr Darling told MPs he had made it clear on Monday he wanted to ensure taxes on alcohol and cigarettes remained “broadly the same” and his temporary reduction in VAT would be offset by increases in duty.
He admitted the original 8% increase in duty on spirits did not achieve that and slashed it to 4% last night.
Scotland Secretary Jim Murphy revealed he intervened as the row escalated and that he is pleased the UK Government’s aims for taxes on alcohol to remain broadly the same is being confirmed beyond doubt.
He said: “The chancellor has acted decisively.”
Scottish Whisky Association government and public affairs director Campbell Adams, who believes any increase in duty will only be a few pence, said: “We are delighted. Hopefully this will send a message to governments around the world to tax whisky fairly.”
David Urquhart, joint managing director of Gordon and MacPhail in Elgin, said: “We welcome the positive action taken by the UK Government to ensure that the overall duty on Scotch whisky remains broadly unchanged when the reduction in VAT is taken into account.”
Mr Robertson, who has 40 Speyside distilleries in his constituency, claimed the Treasury “buckled in the face of the outcry from the whisky industry and the SNP”.
He added: “The way in which the pre-Budget report is unravelling is indicative of the disgraceful and dithering way the UK Government is responding to the economic crisis, bringing chaos and confusion where we need certainty and clarity.”
Perth and North Perthshire SNP MP Pete Wishart said: “The government realised they made a massive blunder.”
Liberal Democrat spokes-man on Scottish affairs, Orkney and Shetland MP Alistair Carmichael, said the “embarrassing” U-turn would not have been necessary if the chancellor had been aware of the impact his original plans would have on a crucial Scottish industry.
And Argyll and Bute Lib Dem MP Alan Reid said it was “a scandal” the tax was raised in the first place, adding: “If the Treasury could not get this right it does not hold much hope for the rest of the economy.”
Mr Osborne said ministers had destroyed public trust in the government's motives – “confirming what everyone suspects that Labour's temporary giveaways now are dwarfed by permanent tax rises later”.
He added: “Normally it takes a week or so for the prime minister’s Budget to come unstuck. This one has completely fallen apart in just 48 hours.”
Mr Darling welcomed the opportunity for a debate on the pre-Budget report and said: “I believe that faced with the extraordinary economic circumstances we have today, there is a choice.
“There is a choice between supporting people, supporting businesses, supporting the economy as countries are now doing across the world, or walking away, saying we will do absolutely nothing and letting recession run its course.”
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