SWA: Taxing whisky four times more than cider at the bar makes no sense

Part of what makes Scotland’s cities, towns and village communities so beloved by visitors and locals alike, is their hospitality. From cosy pubs to cocktail bars, whisky snugs to restaurants with impeccably chosen drinks lists, any modern hospitality setting worth your time and hard-earned spending money is sure to have a good selection of spirits on offer. Whether you prefer a dram with a drop of water, or you’re exploring the huge array of Scotch Whisky cocktails now being served across the country, chances are you’ll find something tempting on offer.

That’s the point that the Scotch Whisky industry has made consistently in the run-up to this week’s Autumn Budget: that hospitality is more than just pints. Cider and beer represent a shrinking fraction of hospitality profits, with spirits making up well over a third. Yet spirits like Scotch Whisky are taxed four times more than the likes of cider when served at the bar. For Scotch Whisky distillers, that makes no sense: why do two drinks with the same alcohol content, sat side by side on a bar, have a tax difference of 25 pence per unit simply because of what type of alcohol they contain?

Distillers have been routinely frustrated by this disparity, and are now coming to terms with yet another headline tax rise. This is the fourth tax rise in four years, a collective increase of 24 per cent since 2023. For the Treasury, spirits have always been seen as a useful cash cow, with Treasury officials’ logic suggesting that upping the tax burden means upping the revenue for the public purse. The data says otherwise – that actually, over-taxing premium products like Scotch Whisky leads to tumbling Treasury receipts, because it punishes not just the businesses who make those products (and their supply chain, from farmers to hospitality venues), but also the consumers who choose them.

What is even more frustrating for the UK’s spirits industry – 70 per cent of which is based here in Scotland – is that the additional relief announced for “small producers” of beer and cider excludes distillers completely. It means that while the customers opting for a spirit-based drink will see the tax on that drink rise by an additional 4.55 per cent, they may also see the range of spirits shrink in their favourite pub, as hospitality businesses look seriously at what’s workable given the stark tax differential between different categories. These concerns are very real for Scotch Whisky producers, many of whom are smaller, just starting out, and competing fiercely for space at the back of the bar.

If the UK Government is serious about supporting hospitality, a fair and balanced system for taxing drinks according to their alcohol content would be a good place to start. With an evaluation of the UK alcohol duty system now published, distillers here in Scotland will be looking closely to understand whether the strong arguments for a fair duty system have been listened to. For now, the fourth tax hike in as many years is a further blow for the Scotch Whisky industry, its consumers and to communities across Scotland.

Mark Kent is Chief Executive of the Scotch Whisky Association