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Whisky duty rise 'to be revised' Darling admits whisky duty error
(about 13 hours later)
The chancellor is revising his alcohol tax plans to prevent a big increase in the cost of whisky. The chancellor has admitted to MPs that he made a mistake in raising duty on Scotch whisky, which would have led to a 29p rise in the price of a bottle.
Alistair Darling has ordered changes to the details of his pre-Budget report following an outcry from the industry. Alistair Darling caused an inadvertent storm with his proposals to offset the cut in VAT by raising duty on spirits.
The Scotch Whisky Association warned the average bottle of whisky would cost 29p more after the pre-Budget report. His intention, he said, was to keep prices the same. The Scotch whisky industry reacted angrily.
Mr Darling said the increase in duty on sprits was only supposed to offset the cost of his cut in VAT. He has ordered Treasury officials to change the plans. Now the chancellor has admitted his mistake in the Commons and has tabled legal orders to negate the impact.
BBC Scotland understands new legal documents will go before the UK parliament to amend the pre-Budget report and ensure the whisky industry is not hit for more tax. It is understood the original 8% increase in excise duty on spirits will be halved to 4%.
In his pre-Budget statement, the chancellor announced an 8% rise in excise duty on spirits, which would see the tax on a bottle of whisky rise by 47p to £6.45. Mr Darling told the Commons: "I said on Monday that what I wanted to do was to make sure the level of taxation on alcohol and on cigarettes remained the same.
It would be a huge blow to the chancellor's credibility if he is forced into a climbdown when the ink on the Pre-Budget Report is barely dry Angus RobertsonSNP MP A temporary reduction in VAT, down 2.5 percentage points for the next 13 months, would see this rise reduced to about 29p on an average 70cl bottle. "So that broadly the reduction in VAT would be cancelled out by a change in duty.
This was on top of a 59p increase in March. It confirms just how much of an afterthought the whisky industry was to the chancellor that he took such a reckless decision in the first place Angus Robertson SNP MP
The duty increase was branded a "smash and grab raid" by the SNP MP for Moray, Angus Robertson. "I think in relation to spirits what we announced on Monday didn't actually achieve that so I'm tabling a further order today to ensure that on spirits the duty there is at a slightly lower rate, which I think will hugely benefit the spirits industry wherever it is."
He said the increase was the biggest in nearly four decades. Reaction from Mr Darling's opponents was swift.
Mr Darling insisted his intention was to keep alcohol taxation "broadly" the same, but while VAT was charged on price, duty was charged on alcohol content so there was not an exact match. The SNP's Angus Robertson, whose Moray constituency produces more than half of Scotland's malt whisky, said: "I welcome the fact that the Treasury has buckled in the face of the outcry from the whisky industry and the SNP over the last 48 hours.
He said: "When they see the detail they will see that broadly the effect of cutting VAT and changing the duty - one cancels out the other, because my intention is I don't want to raise any more or any less. "It confirms just how much of an afterthought the whisky industry was to the chancellor that he took such a reckless decision in the first place.
"I just wanted to hold the taxation on alcohol steady and we'll be laying the necessary orders to do that." "The decision to cut the increase by half is certainly welcome.
Campbell Evans from the Scotch Whisky Association said he was "delighted" that the issue was being revisited. "The wheels are coming off the Pre-Budget report, and serve as a perfect illustration of why the Scottish Parliament should be responsible for all tax and spending decisions in Scotland."
He said: "I'm sure this is an error that crept in and the government are taking quick steps to address that and the industry will welcome that very much." For the Liberal Democrats, Alistair Carmichael said: "I am glad that Mr Darling has now ordered changes to Monday's PBR to prevent this vital industry being hit by yet more tax increases.
Mr Evans added that there needed to be a "fundamental look" at duty in the longer term. "This embarrassing u-turn is something which should have never been necessary.
Mr Robertson said: "We need to see the detail of what Alistair Darling is proposing, but hopefully he is U-turning on this damaging tax hike on one of Scotland's key industries. "It beggars belief that the chancellor was so unaware of the impact his proposals would have on such a crucial Scottish industry."
"It would be a huge blow to the chancellor's credibility if he is forced into a climbdown when the ink on the pre-Budget Report is barely dry, and it suggests that he didn't understand the impact of his own PBR measures on Scotland."