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Treasury loses nearly £300m in spirits tax revenue

Between 1 August 2023 and 31 July 2024, excise duty on spirits brought in £3.951bn, a decrease from £4.249bn the previous year. This represents a loss of £298m, equivalent to £800,000 per day.

Jeremy Hunt raised excise duty by 10.1% from 1 August 2023 – the largest increase in over 40 years. The UK now has the highest excise duty on Scotch whisky among G7 nations and the fourth highest in Europe, with levels double those of France and quadruple those in the United States.

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The Scotch Whisky Association has called on the new Chancellor Rachel Reeves to reverse the economic impact of this decision in the upcoming Budget on 30 October. Currently, nearly 70% of the cost of a bottle of Scotch whisky in the UK is due to tax.

Scotch whisky contributes £7.1bn annually to the UK economy and is the country’s leading food and drink export.

The Office for National Statistics has indicated that Hunt’s duty increase has led to the largest inflationary impact from alcohol on record. Analysis for the Scotch Whisky Association suggests the tax hike contributed 0.35% to inflation, resulting in £2.3bn in additional government interest payments on public borrowing.

Mark Kent, chief executive of the Scotch Whisky Association, said: “The Treasury has now lost more than a quarter of a billion pounds because of the previous Chancellor’s decision to increase tax on Scotch Whisky and other spirits. It has been a calamitous decision, which has cost the Treasury money that could have been used for public services. It has stoked inflation, and it has hurt business, hospitality and households.

 “We urge the Chancellor to use the Budget to reverse the economic damage caused by her predecessor and deliver on the Prime Minister’s commitment to back Scotch Whisky distillers to the hilt, and in turn boost growth in Scotland.”

The Scotch Whisky Association represents 95% of the Scotch whisky industry, with 151 active distilleries in Scotland supporting 41,000 jobs directly and 25,000 more across the UK. The industry contributes £7.1bn annually in gross added value to the UK economy.

Responding on behalf of the UK Spirits Alliance, Hilary Whitney, co-founder of Sacred Spirits, echoed these concerns. 

“The Treasury is more than a quarter of a billion pounds poorer because of Jeremy Hunt’s decision to increase duty on spirits last August,” Whitney added. “That decision sucked life out of a booming British sector, raised inflation, and put a nail in the coffin of struggling hospitality businesses. 

“The Chancellor has an opportunity in the Budget to reverse the damage caused by her predecessor. By backing the great British spirits industry, she can help generate revenue needed for our public services,” Whitney concluded. 

• The Chancellor
• Jeremy Hunt
• Duty hikes
• The Scotch Whisky Association
• Rachel Reeves