Osborne warned alcohol tax hikes ‘will hit recovery’

David Frost: Budget opportunity to support vital Scottish industry. Picture: Contributed

Pubs, producers, retailers and industry groups have warned that a planned hike in alcohol taxes threatens recovery across the UK’s hospitality sector, having returned to growth after years of stagnant trade.

They are calling on Chancellor George Osborne to scrap the alcohol duty escalator in next week’s Budget in a move that they claim would boost both the industry and government revenues.

Introduced in 2008, the escalator increases the duty on all alcohol other than beer by 2 per cent above inflation annually.

Supporters from the TaxPayers’ Alliance and the Call Time on Duty campaign say independent research from accountancy firm EY suggests a duty freeze could raise an extra £230 million for the public finances by generating an additional £1 billion in economic activity. Jonathan Isaby, chief executive of the TaxPayers’ Alliance, said this would create more than 6,000 jobs.

“The UK’s hospitality sector is key to the UK’s economic recovery,” he added. “Punitive tax rates are strangling the growth ambitions of businesses across the UK and hurting hard-pressed taxpayers.

“Given that the evidence overwhelmingly suggests that scrapping the escalator will boost the public finances, calling time on the alcohol duty escalator should be a no-brainer.”

The campaign has attracted support from an array of producers, distributors and retailers, including the Scotch Whisky Association (SWA), which revealed a further decline in domestic sales. The UK market for whisky fell by 3 per cent last year, with the number of 70cl bottles dropping to 87.5 million from 90 million previously. Since the introduction of the escalator, the UK sales volumes have shrunk by a total of more than 15 per cent.

SWA chief executive David Frost said a duty freeze would help address this decline while also creating a fairer system. Tax on whisky has increased by 44 per cent during the past five years, with nearly 80 per cent of the average price of a bottle now made up of tax and VAT.

“In next week’s Budget, the Chancellor has the perfect opportunity to support a vital Scottish industry,” Frost said. “He should scrap the unfair alcohol duty escalator and freeze duty this year. The move would also benefit consumers and public finances.”

Miles Beale, chief executive of the Wine and Spirit Trade Association, which launched the Call Time on Duty campaign at the end of last year, said scrapping the escalator would help the Chancellor “do what he says he cares about most – driving down the deficit”. He added: “We know from speaking to our members, particularly the SMEs, that it would also help the Chancellor’s next great concern: investment. Inflation-busting tax increases year on year have decimated their confidence to invest. ”

According to figures released this week by Caterer.com, the UK’s biggest hospitality job board, the number of positions across the sector rose by 8 per cent last year. That included jobs in food service, pubs, hotels and restaurants.