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Last Updated: Wednesday, 12 March 2008, 17:39 GMT
Budget brings rise in whisky duty
Whisky
Distillers hope to invest to meet international demand

The price of a bottle of whisky is set to increase by at least 59p after the chancellor announced the first rise in duty on spirits for more than a decade.

From midnight on Sunday, alcohol duty rates will increase by 6% above inflation. Beer will rise by 4p a pint, cider 3p a litre and wine 14p a bottle.

The Scotch Whisky Association (SWA) said the rise was "much worse than expected".

It was one of the measures outlined in Alistair Darling's first Budget.

The chancellor said duty on a bottle of spirits would rise by 55p, based on a 70cl bottle at 37.5 alcohol by volume (abv).

However, whisky must be at least 40 abv and is often stronger, therefore the duty will increase further.

Mr Darling also said that alcohol duties would increase by 2% above the rate of inflation in each of the next four years.

Labour are penalising an industry that is the backbone of many communities
Stewart Hosie SNP MP

The SWA said a freeze in duty would have helped towards a fairer alcohol system.

It argued that whisky continued to face a disadvantage in the UK, with a higher tax than wine and beer.

Gavin Hewitt, chief executive of the SWA, said distillers were "astonished" by the chancellor's announcement and claimed it worsened the "duty discrimination" against Scotch whisky.

"A tax rise is a blow to international competitiveness when the industry has been investing significantly to meet growing global demand for Scotch whisky," he said.

"It sets a damaging precedent that export markets may follow."

The SWA said it had been braced for a rise in line with inflation, but that a 6% rise over and above inflation meant prices would increase by 9%.

The chancellor failed to mention Scotland even once during his speech
Liz Cameron
Scottish Chambers of Commerce

The Treasury said the Scottish Government would get an extra 26m as a result of the Budget.

The money comes through the Barnett Formula, the mechanism which automatically gives Scotland a share of public spending increases by Whitehall departments.

Scottish ministers have to decide how to share the total between departments.

The chancellor also said changes to some aspects of North Sea oil taxation should help encourage further investment.

According to Budget documents, these reforms to the North Sea fiscal regime include changes to corporation tax losses created by decommissioning and reforms to petroleum revenue tax.

The changes, it was argued, would encourage further investment by providing "certainty" for investors, and would simplify the regime.

Martin Findlay, head of oil and gas tax in Aberdeen for KPMG, said the industry would welcome the measures.

However, the SNP branded it a "a sub-prime Budget from a sub-prime chancellor".

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Stewart Hosie, MP for Dundee East, added: "Despite Alistair Darling being the second consecutive Scottish chancellor, we have another budget that is bad news for Scotland.

"The chancellor's extraordinary hike in spirits duty is a backward step for the Scotch whisky industry, a swingeing blow at a time when whisky is already taxed more heavily than any other alcoholic drink.

"Instead of action to tackle the cider-fuelled binge drinking that is the blight of so many communities, Labour are penalising an industry that is the backbone of many communities."

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said the Budget was "disappointing" for business in Scotland.

"The chancellor failed to mention Scotland even once during his speech, and his talk of the benefit of investment at Heathrow and Stansted Airports, the Channel Tunnel High Speed Link and London Crossrail will mean little to many Scottish businesses facing rising transport and energy costs," she said.

"We are pleased that the chancellor has responded to the call from Scottish Chambers of Commerce to set a procurement target for 30% of public sector contracts to go to small and medium-sized enterprises in the next five years."



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