Whisky tax hike leaves pounds 100m hangover

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THE CHANCELLOR, Kenneth Clarke, scored an own goal when he raised duty on whisky last December - the move has caused such a slump in demand it will actually cost the Treasury an estimated pounds 100m this year.

Whisky sales were an astonishing 26 per cent lower in the first three months of this year than in the same period of 1994, more than enough to wipe out any benefits from the tax increase.

The figures, released by the Scotch Whisky Association, are certain to embarrass the Chancellor, a whisky drinker himself who was denounced as a traitor by distillers when he slapped the extra 26p on a bottle. They show that between 1 January, when the duty came into force, and 31 March, 4,069,400 litres of pure alcohol - the industry's official measure - left bonded warehouses, compared to 5,503,900 litres in the first quarter of 1994.

That decline will cost the Treasury pounds 25m, despite the higher duty levelled on each bottle. And the figure rises to pounds 30m if lost VAT is taken into account. The association called yesterday for the extra duty to be withdrawn and the tax reduced by a further 10 per cent to reverse the slump in sales, noting that the Treasury had "shown itself to be hopelessly inept at judging the market for Scotch whisky and its capacity to continue to serve as a milch cow for government revenues".

Mr Clarke proudly sipped whisky as he delivered his first Budget speech last November - a Chancellor's once-a-year perk in the Commons - and there is no doubt that the extra duty on the drink was a tax he would rather have avoided.

In the Budget itself he left the whisky duty unchanged, as it had been for several years. It was the following month, after MPs rejected the planned doubling of VAT on domestic fuel, that Mr Clarke imposed the extra 26p to help make up the shortfall.

A Treasury spokesman said that the association's arguments would be taken into account.