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Diageo Closures

Volume 496: debated on Wednesday 15 July 2009

Motion made, and Question proposed, That this House do now adjourn.—(Mary Creagh.)

The Johnnie Walker whisky bottling plant in Kilmarnock dominates the town. As its Hill street address suggests, it sits above the centre of the town as a solid symbol of Kilmarnock's industrial history. Like the ravens in the tower of London, no matter how bad things get in Kilmarnock, as long as the Johnnie Walker plant is there, there is always hope for the future. For a community that has suffered decades of de-industrialisation and that for more than 30 years now has had a systemic higher rate of unemployment than the rest of Scotland, psychologically the imposing presence of Johnnie Walker and its 700 jobs offers some optimism that the town can rise again.

Hardly is there a family in Kilmarnock and the surrounding area that is not connected in some way to the Johnnie Walker plant or to the distribution centre in Barlieth, Hurlford. There are thousands of former Johnnie Walker workers in Kilmarnock, hundreds of present Johnnie Walker workers, and many thousands who aspire to be Johnnie Walker workers.

I congratulate my right hon. Friend on his campaign, which has brought together on a cross-party and cross-community basis many people in Kilmarnock and the surrounding area. Does he agree, however, that the closures would affect the whole of Ayrshire, which has already lost far too many jobs in the past few decades? The economic impact on Ayrshire would be dire.

I thank my hon. Friend, who has been a stalwart supporter of the campaign that we are conducting to try to get Diageo to change its mind. The fact that she has been so vocal in her support shows the extent to which the people of Ayrshire—and, indeed, Scotland, to a large degree—have fallen in behind the campaign. She anticipates many of the arguments that I am about to make, so perhaps I should carry on.

The plant, the distribution centre and the support services provided by local businesses contribute in excess of £20 million a year to the local economy, and that economy stretches beyond Kilmarnock. By operating the bottling plant in Kilmarnock and the distribution centre in Hurlford, Diageo contributes all that benefit to the wider community of Kilmarnock. To that extent, the people of Kilmarnock and Ayrshire are grateful for the years that it has run the plant, but the situation has been far from a one-way street, and I think that the business would accept that.

In 1819, Johnnie Walker, a local grocer, first blended his whisky for sale in his own shop. Today, the brand Johnnie Walker is the world’s leading blended whisky, outselling every other whisky in volume, and outselling every other spirit in value. Workers in Kilmarnock contributed to that success story with their loyal, efficient profit-making and hard work.

I congratulate the right hon. Gentleman on securing the debate, and on his vigorous support of his community. Does he agree that the provenance and heritage of whisky is crucial to consumers at home and abroad? It is a real mistake for any multinational company to lose touch with, and lose its commitment to, the communities that produce their profits, whether they are in Kilmarnock, Glasgow or Speyside.

I thank the hon. Gentleman for his intervention, and indeed for his support, to which I shall come back in a moment. The interventions reassure me that the argument that I am developing is the right one; it is being anticipated right, left and centre. It may well be anticipated further as the evening goes on. I was explaining that the situation is far from a one-way street, and that the people of Kilmarnock have contributed significantly to the success of the plant and its well-known and internationalist spirit.

For many of my constituents, Johnnie Walker is woven into the weave of Kilmarnock. I have to say that until 1 July, they thought that that commitment was reciprocated. Diageo is an impressive multinational company: it provides 4,500 jobs in Scotland, leads the drinks industry across the world, and markets some of the world’s best-known and leading brands. To its credit, it earns formidable amounts from exports for the United Kingdom and its shareholders. Ostensibly, it is a modern company managed according to the best 21st-century corporate practices. That means that over the years, its workers in Kilmarnock have been conditioned to understand just how much they are valued by their corporate masters, just how important their individual and collective contributions are to the corporate success, and, importantly, how seriously Diageo takes its responsibilities to them as partners, not just workers. Its workers have been conditioned to understand how much the company is committed, as part of its ethos, to cherish and preserve its legacy and heritage and to protect the communities that are its hosts.

I could paper the walls of this Chamber with corporate documentation that articulates that message of partnership. It is designed to encourage the work force to show greater efficiency and greater loyalty, and it succeeds. Yet on 1 July, those same workers were told that the need for “more shareholder value” required that their bottling plant be closed within two years, and that the distribution workers be transferred within months to a new employer—essentially, as they were told in a letter, whether they liked it or not.

I congratulate my right hon. Friend on securing the debate. He is well aware that Kilmarnock workers have made a major contribution to the profits of Diageo, but so have workers throughout the rest of Scotland, particularly in Port Dundas and in Renfrewshire, where we are losing jobs, too. Independent consultants have been brought in to assist Diageo, which is a welcome move. Can he inform the House whether those independent consultants will work with the workers’ representatives, the trade unions? I do not mean just talking to the trade unions, which have expertise in such matters; I mean working alongside them.

I thank my hon. Friend for that intervention, as he has great knowledge of the industry. The Shieldhall bottling plant is in his constituency, and he will come to know Diageo very well as he continues to represent the area over the years.

The mandate to carry out the work was accepted by Scottish Enterprise, but I can reassure the House that, at a meeting convened last night by John Swinney, it was made very clear that the consultants were to be engaged just on that basis. Indeed, Jack Perry, the chief executive of Scottish Enterprise, offered the representatives of the Unite and GMB unions the opportunity to contribute to and engage in the process of assessment.

Of course, this issue is broader than my constituency. I am being slightly selfish in concentrating on the interests of my constituents in this debate, although I am sure that the House will understand that, but I repeat that the matter stretches well beyond my constituency. It is unfortunate that the Port Dundas workers do not have a Member of Parliament at present to speak up for them in this House, but there will shortly be an election and that might give them a chance to get their problems aired.

As a Glasgow MP, I can safely say that the cooperage in Port Dundas is well known, if only because of the smell in the streets in the top end of the town. It is part of Glasgow, and the people there can ill afford to lose the 100-odd jobs in Port Dundas.

I am grateful to my hon. Friend for speaking up for Glasgow, which he does regularly in this House. I am sure that the workers are pleased that they are not being forgotten in this debate. I hope that the campaign will continue and that they will have other opportunities to make their case. However, time is always short for these debates so I shall try to make progress with the argument that I want to make for my constituents, and in respect of the wider issues at stake.

Since 1 July, much has been written and spoken about this matter, in the Scottish media and more widely. Latterly, corporate whisky has been responding to the campaign to get Diageo to think again about its proposals, and last week Diageo embarked on a counter-campaign.

Over the weekend, it was reported in the online edition of The Sunday Times that the view of the managing director of the distiller and bottler Ian McLeod and Co. was that, as a consequence of the decision, the whisky industry had

“become the latest plaything of government and opposition.”

He is reported to have said:

“If the politicians are going to start shouting from the rooftops whenever a company tries to make some of their employees redundant, it hardly sends out a positive message to prospective inward investors in Scotland”.

Some of us thought that that attitude had gone out in the 1980s, but unfortunately it seems to be alive and well in corporate whisky. My message to that director is that his rather quaint and old-fashioned views mainly reinforce my concerns about where we will end up if we do not stop and think hard about the full implications of the proposals.

Far from playing at it, we are deadly serious. The workforce at both Kilmarnock and Hurlford, the Unite and GMB unions, East Ayrshire council, Scottish Enterprise, the Scottish Government, Willie Coffey, who is the Member of the Scottish Parliament for my constituency, the members of the recently elected Scottish Youth Parliament, as well as wider civic society in Kilmarnock and Loudoun and in Ayrshire, have all joined together to speak with one voice in asking Diageo to think again. That we have sustained this campaign from a standing start for two weeks now, maintaining a consistent public presence and gathering support from across the world, is convincing evidence that the cause is just. However, it is also a sign of the degree of pain that the community is feeling and the level of fear that it has for its future.

The Johnnie Walker workers in Kilmarnock are extremely grateful to wider Scottish society for the support that they have received. The First Minister and my right hon. Friend the Secretary of State for Scotland have both pledged their support. On behalf of my constituents, I should like to thank the hon. Members for Moray (Angus Robertson), for Orkney and Shetland (Mr. Carmichael) and for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for joining me last week to launch an all-party UK parliamentary presence in this campaign. I should also like to add our thanks to my hon. Friend the Member for Glasgow, Central (Mr. Sarwar) and the Scottish Affairs Committee for taking up our request that it investigate the implications of the decision for Scotland.

If we add to that the growing petition that is attracting support from throughout the world and the offers of support that are flooding in from all over, the House may get a sense of how important the issue is. All that will be reflected in a march and rally in Kilmarnock on 26 July, to which all those Members not on holiday—which we all know is for all but two weeks during the recess—are invited.

I am a member of the Scottish Affairs Committee, and today, as I am sure my right hon. Friend is aware, we met senior members of Diageo’s management. Not only I, but all members of the Committee, were angered at the management’s expression of resentment at any political involvement in the decision. Currently, by legislation of course, it is a proposal not a decision, but I hope my right hon. Friend agrees that it would be remiss of any politician not to challenge such a decision. The management said today that we were using the issue as a political football, but “political football” suggests to me that politicians have fallen out with each other, and that is not the case. There is cross-party condemnation of the proposal and cross-party support for a challenge to it.

I thank my hon. Friend for his contribution, although he has spoiled the whole second half of my speech. His point is important, however, and those in what I have come to refer to as corporate whisky need to hear that the path between them and us has been well beaten when they have wanted our support for their industry throughout the world. We are never short of giving that support, but on this occasion we say, “We have read your literature carefully, and you say that in the 21st century you have this relationship with your workers, legacy and communities, so can we please test this?”

A considerable number of Members wish to intervene, and I shall be happy to take those interventions, subject to leaving my right hon. Friend the Minister an opportunity to address the House at least for a few minutes, but I want first to make some progress.

It cannot be the case that all those whom I have cited and who have fallen in behind the campaign are wrong about the argument, and that the only people who are right are Diageo executives and corporate whisky. It cannot be the case that the former are the only people in Scotland who cannot see the point. My research has revealed that an embarrassment of phrases from whisky’s own promotional material could be deployed to show what we all know, which is that, when a glass of whisky is raised anywhere in the world, the whisky drinker is raising Scotland in a glass.

Of all the competing brands of Scotland in a glass, Johnnie Walker is the most successful by a street because of its provenance—because of its roots stretching back to 1820. To paraphrase the words of another successful advertising campaign, it delivers what it says on the label.

I, too, was at the Scottish Affairs Committee briefing with senior Diageo management, and I was surprised that they were so surprised by our reaction. We merely reflect the reaction of our constituents, however, so can I, through the right hon. Gentleman, tell those in corporate whisky, as he calls it, that they have always received a good reception in this House because we see the connection between our communities and their business? If they are determined to break that connection, why should our communities seek to support them in the future?

I could not have put it better myself. I was hoping to, of course, but I could not have. I want to pose some questions to my right hon. Friend the Minister, and I shall take one more intervention at an appropriate point.

About 12 years ago, the local council, East Ayrshire council, Scottish Enterprise and the workers at Kilmarnock, supported by Donald Dewar and Brian Wilson, who were then in the Scotland Office, succeeded in persuading Diageo that that combination of efficiency, loyalty and profitability, embedded in a credible heritage and provenance, which is in the bottle, was a winning combination. Then, Diageo decided not only to continue to bottle whisky in Kilmarnock but to invest in the plant. Then, politicians intervened, and as a consequence Diageo and its Johnnie Walker plant in Kilmarnock have enjoyed a decade of improving markets and greater profitability. It is possible for politicians to make a positive contribution, and that is an example.

Little, if anything, has changed since then, and the current proposal has nothing to do with the recession and everything to do with Diageo positioning itself in the global market for the next decade or so, as it is entitled to do. The difference this time is that the company’s marketing gurus and desire for more shareholder value have convinced its executives that they can take the risk of breaking the link between the world’s best-known Scotch whisky and its history. Furthermore, they must have been prepared to contemplate the disastrous social effects that the decision would have on the community that I represent, which has so loyally served the company for about 200 years, and they must have considered that a price worth paying. I do not believe that it is.

Making the case for the company to think again is my job as a politician; it would be a dereliction of my duty not to do now what I did 12 years ago. Thankfully, we are dealing with what in Diageo’s own words is a proposal. Its chief executive officer told me to my face that he would listen to an alternative. He has repeated that, both to the First Minister and to the Secretary of State for Scotland—and, no doubt, to the Scottish Affairs Committee. We intend to take him at his word.

I am not in the business of peddling false hopes and I realise how difficult this will be, but I am determined that all of us involved in this side of the argument will work together to produce an alternative that is at least as attractive as the proposal that is on the table at present. Scottish Enterprise has accepted the mandate to conduct the assessment of the underlying financial and business plan to enable us to come up with that alternative. The First Minister of Scotland has cast himself in the role of principal interlocutor with Diageo. Yesterday in a meeting in Edinburgh, local politicians and I made it perfectly clear to John Swinney, the Finance Secretary, and his officials and the senior management of Scottish Enterprise, that time is of the essence.

Diageo’s 90-day consultation clock is ticking, and the unions are already embroiled in consultations. If those consultations are not to become simply an opportunity for the company to justify its proposal, the shape of the alternative must begin to emerge sooner rather than later. When the First Minister meets the chief executive officer of Diageo next week, this story must move on. The campaign is bringing the community that I represent together in a spectacular fashion, but behind closed doors the uncertainty is destroying its confidence in its future. That cannot be allowed to go on.

My constituents are very grateful to my right hon. Friend the Minister’s Government for the support expressed by my right hon. and learned Friend the Leader of the House at Prime Minister’s questions last week. However, on my constituents’ behalf I have some messages for the Government and I look forward to hearing the Minister’s response. First, the UK Government must stand ready to support, in any way that they can while respecting devolved responsibilities, any alternative proposal that emerges. I repeat that what has happened is not a consequence of recession and the decision is not driven by duty rates on spirits; consequently, the levers that the UK Government hold will be limited. However, as the counter-proposal emerges, and if we need to come for support, my constituents need to know that it will be there.

My right hon. Friend the Minister is a fellow Scot and a former adviser to the late Donald Dewar, and he has a long history of appreciation of Scots values and heritage. I do not have to explain to him just how important these historical links are to Scotland’s most famous export. Does he share my concern about the facility with which whisky executives now seem to be able to trot out the justifications for not only breaking the link but for moving even more than 20 per cent. of whisky bottling offshore?

I thank the right hon. Gentleman and congratulate him on his campaign, which has my full support and that of my colleagues in Scotland. Does he agree that if Diageo is the blue-chip, high-quality global company that it holds itself to be, the 90-day consultation will be a genuine one in which a counter-proposal will be listened to and properly and legitimately evaluated, rather than being a sham exercise simply endorsing decisions that have already been made?

The hon. Gentleman has made an important point. I have spoken to the chief executive officer of Diageo, and I believe him to be a man of his word. He has given me his word that the company will listen to any alternative proposals during the consultation. I have to say that I was slightly concerned by the message that I was receiving, and the distillation of it, last Thursday, when I thought that a different message was in fact being given. However, I am satisfied that the man paid to run the company is telling me the truth and that it will listen. The onus is on us to come up with the alternative to persuade it. I do not underestimate how difficult that will be, but we need to get the opportunity to do it, and the company needs to listen to what we have to say.

I conclude by requesting that my right hon. Friend the Minister ensures that his officials keep in regular contact with their colleagues in Scottish Enterprise and in the Scottish Government, and that he gives this House an undertaking that he will keep us informed of any significant developments.

I congratulate my right hon. Friend the Member for Kilmarnock and Loudoun (Des Browne) on securing this debate. I have spoken to him about this issue several times in recent weeks, and I know how much it means to him and to his constituents. He is of course deeply concerned about the jobs of the Diageo workers in his constituency and the effect that the loss of those jobs will have not only on the families involved but on the wider community in Kilmarnock and the rest of Ayrshire.

The Scotch whisky industry is hugely important to the UK economy. Figures published last month by the Scotch Whisky Association put the value of annual whisky shipments at more than £3 billion, earning £97 a second for the UK last year. Overall, the equivalent of more than 1 billion bottles of Scotch whisky were shipped all over the world—to north and central America, Australia, Europe and Asia. Whisky also means jobs. About three quarters of the UK’s distilled alcoholic drinks enterprises are located in Scotland, with an estimated 41,000 people employed just in making, distilling and bottling whisky.

Diageo is a major player in all this. It owns 29 whisky distilleries in Scotland, and houses all its maturing Scotch whisky in Scottish warehouses. Twenty-eight per cent. of its net sales are from Scotch whisky; that is a very large figure when one considers that it has sales of about £8 billion. Diageo directly employs 4,500 people across 50 sites. The Government, through UK Trade and Investment, have strongly supported the Scotch whisky industry, as my right hon. Friend said, and we have worked with Diageo in developing export markets. We very much appreciate the importance of that company and of the industry in general.

Diageo’s proposal is twofold. The first part is to close the packaging plant in Kilmarnock—one of three in Scotland—along with the cooperage in Port Dundas that was mentioned. The second part is to make a new investment of some £100 million, creating 400 new jobs elsewhere in Scotland. I understand that, as my right hon. Friend said, this has been greeted in Kilmarnock, where the greatest number of jobs will go, with deep disappointment and dismay.

My right hon. Friend outlined the history; if someone knows the history, it means something to them. Kilmarnock is known as the home of Johnnie Walker whisky. Place has a huge role to play in whisky brands. As he said, when people buy whisky, they are not just buying a drink—they are buying into a story about place, heritage and tradition. That is one of the major reasons for whisky’s success. This particular whisky has been blended in Kilmarnock for almost two centuries, ever since Johnnie Walker himself blended it and sold it in Kilmarnock high street back in 1819. In fact, one of the earliest incarnations of the whisky was called Walker’s Kilmarnock. Since then, generations of Kilmarnock families, including Johnnie Walker’s descendents, Alexander Walker and Alexander Walker II, have added to the story of the whisky, whether through the iconic square bottle introduced in 1870 or the distinctive label applied, I understand, at the precise angle of 24°.

The association of the brand with real people and real places helps make Johnnie Walker such a distinctive and successful whisky. In fact its influence goes beyond the pleasure of drinking, as it has a wider cultural influence. I could name Leonard Cohen, Van Morrison, The Band, The Streets and ZZ Top as just some of the artists to have featured Johnnie Walker in their lyrics. Films such as “The Dirty Dozen” and great television programmes such as “The West Wing” contain references to Johnnie Walker. Indeed, there is even a Japanese novelist, Haruki Murakami, who went so far as to create a character called Johnnie Walker.

Johnnie Walker is a whisky renowned throughout the world, with a far-reaching cultural influence. Perhaps that is one reason why there are yearly sales of more than 120 million bottles. Such is the product’s worth that owning one bottle of a particular Johnnie Walker blue label of which I understand there are only 200 in existence would set one back an estimated $30,000.

The affinity between the town and the brand helps explain why the proposal to close the plant in Kilmarnock has aroused such passionate and vocal opinion in the local community. As my right hon. Friend said, there is a 90-day consultation on the plans, and Diageo has given guarantees that there will be no compulsory job losses in the next 12 months. My right hon. Friend the Secretary of State for Scotland has met the Diageo chief executive, to whom I spoke briefly about the matter today.

Campaigners in Scotland have urged Diageo to consider seriously any alternative options that the workers and Scottish Enterprise can come up with, including the possibility of relocating to different sites in Kilmarnock and Glasgow if suitable proposals emerge. The business of devising alternative solutions involves the First Minister, the Secretary of State for Scotland, the chairman of Scottish Enterprise and many others. They are working on putting together an alternative proposal for the company. As my right hon. Friend the Member for Kilmarnock and Loudoun said, a meeting yesterday was convened by the Scottish Government’s Finance Minister, John Swinney.

For our part, we believe that the work that the Scottish Government and their agencies are taking forward is crucial. I hope and believe that the company is genuine about consultation and open-minded about possibilities. The UK Government will continue to work with the company and my right hon. Friend, and to engage with the work force about the best way forward on this crucial issue.

Question put and agreed to.

House adjourned.