Darling defends tax increase blow for whisky industry

CHANCELLOR Alistair Darling today defended his Budget against complaints that Scotland's whisky industry would be hard hit by the steep rise in duty.

Whisky producers claimed the 55p-a-bottle increase – to be followed by further rises over the next four years – were "punitive". And SNP Finance Minister John Swinney described the move as a "body blow" to a key Scottish industry.

But Mr Darling said increased taxes on alcohol – there was also 4p on a pint of beer, 3p on a litre of cider and 14p on a bottle of wine – had helped him put more money into getting children out of poverty and boosting winter fuel payments for pensioners. He said the UK government had recognised the problems the Scottish whisky industry faced a decade ago. "We froze the duty on spirits for ten years. Very few sectors can say they are in that position."

And he rejected claims the higher duty would be damaging to the industry now. He said: "Most of its production goes to export – it is an extremely successful exporter – and what you pay in duty depends on what the country you are exporting into chooses to charge. That's not going to be affected by what we are doing."

Opposition politicians pointed out Mr Darling had failed to mention Scotland during yesterday's budget speech. But the Chancellor said it was a budget for the whole country. He said: "Scotland will benefit from putting off fuel charges and from the money going to families. Scottish pensioners will benefit from the winter fuel payment. And Scotland will benefit from the overall strategy to keep interest rates and mortgage rates down."

But Mr Swinney said the Chancellor was using whisky as a "cash cow" for an ailing economy.

And he said the duty hike would hit exports because it sent a signal to other countries that whisky was fair game for high taxation. He said: "The signal he has given to other countries is they can exercise punitive taxation on whisky which makes it an obstacle to gaining entry to other markets."

Mr Swinney said whisky was already at a disadvantage compared with other forms of alcohol and called for taxes to be levied according to the alcohol content of drinks. The Scottish Government will get an extra £26 million to spend as a result of spending increases announced in the Budget.

The money comes through the Barnett Formula, the mechanism which gives Scotland a share of public spending rises by Whitehall departments. But it will be for Scottish ministers over the next few weeks to decide how to share the total between departments.

• Mr Darling also insisted today the Scottish Government could not expect to retain £400m a year in council tax benefits from Westminster if it moves to a local income tax.

He said: "Alex Salmond has known from day one, if you don't have a payment to make you cannot get a benefit to compensate for it. But as ever he has tried to bluster his way through this."

The SNP unveiled its 3p local income tax plans earlier this week, but insist they should keep access to the council tax benefit cash.