[Mrs Madeleine Moon in the Chair]
I beg to move,
That this House has considered the contribution of the Scotch whisky industry to the UK economy.
It is a pleasure to serve under your chairmanship this afternoon, Mrs Moon. I am delighted to have secured this debate and to see so many of my colleagues present, particularly as they were all made aware that this is most definitely not a tasting event. I sincerely thank them for their attendance.
I understand that several hon. Members want to take part in this debate. If I have learned one thing since coming to this place last May, it is that no one loses points for repetition. However, in order to let colleagues develop their own arguments, I shall endeavour to speak in fairly broad terms about the remarkable economic success that is the Scotch whisky industry. I shall highlight the industry’s success before touching on what measures I believe that the Government must take to build on the achievements that we are currently enjoying and to ensure investor confidence for many years to come. I shall also look at the importance of the industry for rural communities throughout Scotland.
Thereafter, I shall shamelessly indulge myself in promoting the beauty of my Argyll and Bute constituency, which, regardless of what some of my green-eyed colleagues may claim later this afternoon, is without doubt the world’s whisky centre of excellence. As the home to the world-renowned whisky coast, Argyll and Bute can boast no fewer than 14 distilleries, which are working round the clock to produce the finest whisky in the world, consumed in ever greater numbers both at home and abroad. That said, I am inclined to agree with Raymond Chandler, the great American novelist, when he said:
“There is no bad whiskey. There are only some whiskeys that aren’t as good as others.”
I have a theory that all Scots children are born knowing certain incontrovertible truths—the kind of thing that you just know and do not have to learn, such as the fact that everything good in the modern world was invented by a Scot, that that ball never actually crossed the line in the 1966 World cup final and that Scotch whisky is, as George Bernard Shaw so wonderfully described it, “liquid sunshine”.
That liquid sunshine provides a silver lining for the UK Exchequer, as sales of Scotch whisky both at home and abroad contributed more than £5 billion to the UK economy last year. Last year alone, almost 100 million cases of Scotch whisky were exported to every part of the world. That is 40 bottles every second of every day leaving Scotland, bound for Spain, Brazil, America, Canada, China and just about everywhere else in between. Those exports earned this Exchequer £4 billion—or, to put it another way, £135 every second of every day for the UK balance of payments. Indeed, Scotch whisky is liquid sunshine for the Chancellor.
To be fair to the Chancellor—please take note, as this is probably a once-in-a-career event—he had the foresight last year to cut spirit duty by 2%. Indeed, it was only the fourth time in 100 years that that had been done. Although that cut was very welcome, many of us feel there is much more we can do, as taxation still accounts for 76% of the price of a bottle of whisky.
It is worth remembering that last year’s cut in spirit duty was, by the Treasury’s own Red Book calculation, believed to result in a shortfall of £185 million to the Treasury. The reality, however, was very different: the 2% cut in 2015 actually increased the tax take to the Treasury by more than £100 million. I am not saying that every 2% cut in spirit duty will recoup £100 million for the Treasury, but I think we can argue with a great deal of justification that a cut in spirit duty helped to increase sales in the domestic market for the first time in several years. It also sent out a very important signal to potential investors in the Scotch whisky industry.
Investor confidence is vital. The initial duty freeze, followed by a duty cut, gave confidence to investors, who saw that, for the first time in decades, there was a Government who did not view the Scotch whisky industry simply as a cash cow. As we know, spirit can only become whisky after it has been laid down for three years; only then can it be classified as Scotch whisky. For at least three years, investors can therefore have little or no return on their money. The fact that nine new distilleries have opened across Scotland in the past two years, with no fewer than 40 in various stages of planning and construction and hoping to come on stream over the next two decades, is in no small part due to the change in policy of not hiking spirit duty at every possible opportunity.
In fact, such is the confidence in the industry that there are advance plans to open a new distillery in the Scottish borders. To put that into context, the last distillery in the Scottish borders closed its doors in 1837—the year Queen Victoria ascended to the throne, and shortly after the birth of the great Mark Twain, whose love of whisky was such that he was moved to say:
“Too much of anything is bad, but too much good whiskey is barely enough.”
I have heard several people question how we can call for a further cut in spirit duty while at the same time campaigning in Scotland for a minimum unit price on alcohol. Let me say immediately that those are not contradictory positions. The adoption of a minimum unit price was never intended to affect sensible, moderate drinkers, and it would have no impact whatever on the production, consumption or export of Scotch whisky. Minimum unit pricing is designed to impact on the most harmful drinkers and is targeted at own-brand spirits and ciders that are high in alcohol but usually very cheap at the point of sale.
In the past few years, we have seen a signal to investors that Scotch whisky is a solid and sound investment. It is an investment that creates jobs and prosperity. The industry already supports directly and indirectly more than 40,000 jobs, many of which are highly skilled, across the United Kingdom. Included in that figure are 7,500 jobs in rural communities, where it is often very difficult to find alternative employment. A classic example of that is the new Isle of Harris distillery, which opened last year with the aim of producing 300,000 bottles of single malt a year. That one distillery has created 25 new jobs in the town of Tarbert, which has a population of barely 1,000 souls. That is an oft-repeated story across the highlands and islands of Scotland, where whisky distillation and high-skilled local employment have gone hand in hand for centuries.
As I said at the outset, in my opinion—and as chair of the all-party group on Scotch whisky, I suggest that that opinion is not to be taken lightly—the finest whiskies in the world come from Argyll and Bute, although I fear that my right hon. Friend the Member for Moray (Angus Robertson) and my hon. Friends the Members for Ross, Skye and Lochaber (Ian Blackford) and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) may be of a different opinion. On our whisky coast in Argyll, we have 14 distilleries producing some of the most famous brands in the world. We have Bowmore, Ardbeg, Bruichladdich, Bunnahabhain, Caol Ila, Lagavulin, Laphroaig, Kilchoman, Isle of Jura, Glengyle, Springbank, Glen Scotia, Tobermory and Oban—and if you can still reel those names off after a good night, perhaps the night was not as good as you thought it was. As well as producing great whisky and creating employment, those distilleries attract tourists to the area in their tens of thousands. Indeed, visits to distilleries have rocketed in recent years; I saw a figure suggesting that one in every five visitors to Scotland visits a distillery.
I thank my hon. Friend very much for securing this debate. Will he join me in welcoming the fact that Royal Lochnagar distillery in my constituency —the home of the first distillery tour, for Prince Albert and Queen Victoria—has almost doubled its visitor numbers since 2008, with 16,384 visitors visiting in 2015?
I absolutely join my hon. Friend in welcoming that, and that statistic is replicated across the country. Islay, for example, which has a population of just 3,000, has eight working distilleries with two more currently under construction. In 2014, Islay had 125,000 visitors to its distilleries—that is 41 visitors for every permanent resident on the island. The importance of tourism, and whisky tourism, cannot be overstated, and if hon. Members have not holidayed in Argyll and Bute, I suggest that they put it on their bucket list immediately.
I used to think the sky was the limit for our Scotch whisky industry, but it appears that I was wrong. It seems that there are absolutely no limits on what our industry can achieve, as I recently discovered, when I was told that a quantity of Ardbeg was sent into outer space to the international space station—for research purposes, I believe. Who would have believed that Argyll and Bute would be exporting liquid sunshine into outer space? Indeed, if that is not an argument for awarding the UK space station to Machrihanish, I do not know what is.
My intervention is not specifically on that point. Sadly, I say as a Welshman that there is no whisky industry in my constituency, but there is one not very far away, and it produces wonderful Welsh whisky—one day perhaps there will be competition. My point, however, is that not only is Scotch whisky tremendously important to Members’ constituencies and Scotland as a whole, but to the United Kingdom. Given that the Scotch whisky industry is worth some £3.3 billion directly and £1.7 billion indirectly to the UK economy, does the hon. Gentleman agree that it is important not only locally in Scotland, but to Wales and the United Kingdom?
I could not agree more with the hon. Gentleman—my honourable Welsh friend—about the importance of the Scotch whisky industry. For all these islands, it is absolutely vital and I am delighted that the Government have shown a commitment to creating a more level playing field than there has been in the past.
The Scotch whisky industry is not just one of Scotland’s oldest, most iconic and most culturally significant industries, but one of our largest and most successful. As I said, it contributes massively to the UK balance of payments, supports 40,000-plus jobs and pays out £1.5 billion in salaries. Exports are up, domestic sales are up and investor confidence is at an all-time high. There is a golden future for Scotch whisky, and I urge the Government to keep faith with that industry and allow it to build on recent successes by applying a further cut to spirit duty in next week’s Budget. Together, we can boost the industry and the wider economy for the benefit of us all.
Before I call Andrew Percy, I will just say that there is a lot of interest in this debate; I have eight people down to speak and I can see a lot of people who will want to make interventions. I suggest that speakers take five minutes maximum each, if all are to get in, which will include the time that hon. Members give for interventions.
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate the hon. Member for Argyll and Bute (Brendan O'Hara) on securing this important debate in support of the whisky industry, which is important not only to Scotland, but to the whole of the United Kingdom.
I declare an interest as an avid Scotch drinker. In fact, I drink all sorts of whisky, whether it is Arkansas rye whiskey or my particular tipple of Highland Park. Or there is even the whisky produced by the English Whisky Co., which is very good, or Penderyn, which is very lemony, very citrusy, very nice. I have named enough now in the hope that somebody sends me a free crate; we will see. I will not talk about my evening on Kintyre with a full bottle of Laphroaig—we will leave that one, but the photos are still out there.
This is an important debate for all the reasons that the hon. Gentleman gave. Scotch whisky is a huge part of the UK economy. I want to talk in particular about its impact on the whole of the United Kingdom and my constituency, the duty rate, and the potential for growth in the market through trade agreements such as the Canada-EU comprehensive economic and trade agreement.
I have just accepted a small role as the Prime Minister’s trade envoy to Canada, and one of my mandates from him is to market and push CETA and its benefits. I am not the first politician to hold two diametrically opposing views at the same time, but while promoting CETA, I am, of course, also campaigning for us to leave the European Union. Leaving that small inconsistency aside, CETA will obviously be of great importance to the Scotch whisky industry. I would argue, of course, that outside the European Union we would still have the same access, blah blah blah, but Canada is the 15th biggest market for Scotch whisky, with about £66 million-worth of exports—about 20% of all Scottish exports to Canada. Unfortunately, however, due to the liquor board system in Canada and some of the burdens placed on imports, Scotch whisky is unfairly discriminated against at the moment. We have to make sure, through the final stages of CETA, that those barriers are removed so that we have full access for Scotch whisky to the Canadian market.
That is a reminder of just how important trade treaties can be to jobs. There is a lot of opposition to the Transatlantic Trade and Investment Partnership, and some of that is unfortunately filtering through to CETA, but we have to make it very clear not only to people in this place but to the wider public that it is a good deal that will support jobs across the United Kingdom.
Scotch is doubtless a Scottish product, and Scottish people should be very proud of it, but it is also a great British product. IG Industries in my constituency provides a lot of the packaging, and Muntons, also in east Yorkshire, provides some of the cereal. I like to think that when people have their tipple of Scotch whisky, the taste comes not just from the fine Scottish water but from the even better east Yorkshire grain.
The Scotch whisky industry creates prosperity and jobs right along the supply chain, be it in cereal, ceramics, glass or haulage. Does the hon. Gentleman agree that we should do all that we can to support the industry and to protect the many jobs that depend upon it, and that we should listen to its calls for a small drop in duty?
I do have sympathy with that. It was nice to hear the hon. Member for Argyll and Bute pay tribute to the Chancellor, which is not something I often do either. He was correct to do so on this issue, because the calls that were made last year were successful. We have all seen the incredibly positive impact that has had on the supply chain and jobs, and if there could be movement again, that would be appreciated. I need not reiterate the number of jobs that the hon. Gentleman quoted, but they are a huge part of this country’s economy and employment profile. As we heard, our trade deficit would be 11% higher without Scotch whisky. It is a great product, and a British product in so many ways, including the fine Yorkshire grain and the packaging from my constituency. It supports jobs at the Immingham port complex through exports, so it is important to the whole UK market.
I am conscious of your instruction on time, Mrs Moon, so I will end with a simple request to the Minister, which he will hear many times today. If there is an opportunity ahead of next week’s Budget for some movement on the 67% duty rate, I will entirely support it, not least because of the arguments we have heard so far today.
It is a pleasure to serve under your chairmanship, Mrs Moon. I thank my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) for initiating this important debate today.
Whisky is Scotland’s gift to the world, a gift that brings enormous benefit to the Exchequer. It has a substantial impact on our trade statistics and generates substantial employment in Scotland. The success of the whisky industry is rooted in rural Scotland, where the addition of well-paid employment puts substantial income into many local economies.
There has been a renaissance in Scotch whisky with so many iconic brands being marketed and sold throughout the world. Its brand identity is unparalleled and has been hard won, although it needs to be protected and invested in. There is a competitive threat from other products, but none have the right to call their product Scotch whisky. The rich diversity of successful Scotch whisky global brands has helped to create the circumstances for an explosion of investment in new distilleries, often small community-based operations that add to the rich tapestry of unique product offerings and the breadth of those offerings to the discerning palate. Each whisky is unique and is shaped by the environment and character of each distillery with the barley, the local source of water and the peculiarities of the still among other things affecting the character of each whisky.
We have several distilleries in my constituency, including some in the planning and development phase. In Skye, we have the iconic Talisker whisky, which was the favourite of writer Robert Louis Stevenson. In his poem, “The Scotsman’s Return from Abroad”, he said:
“The king o’ drinks, as I conceive it, Talisker, Islay, or Glenlivet.”
Because of lack of time I want to press on, but before my hon. Friend the Member for Argyll and Bute gets excited about Islay being mentioned in the same sentence as Talisker, I should point out to him that the king of whisky, Talisker, is the first and foremost whisky to be mentioned in the poem.
Moreover, in the film “Charlie Wilson’s War”, CIA agent Gust Avrakotos presents Congressman Wilson with a bottle of Talisker. The agent explains to Charlie that Scotch is mentioned in a Robert Louis Stevenson poem, but the bottle is bugged and allows him to listen to the congressman’s conversations. One would hope that in this House Talisker may be enjoyed by all and certainly never used for more subversive activity, although with this Government you never know.
One website on whisky stated the following of Talisker:
“This alluring, sweet, full-bodied single malt is so easy to enjoy, and like Skye itself, so hard to leave.”
What must be kept in mind is that Talisker distillery and so many of our distilleries are located not just in the most beautiful parts of our country but in areas of varying degrees of fragility of economic activity. Talisker is located on the western side of Sky where the potential for full-time, year-round employment is limited. The distillery employs 45 staff members, a significant number for an island with a population of just over 10,000. It is of note that only nine of those jobs are in production, with the vast bulk of employment being around the visitor centre. Last year, it welcomed a grand total of 67,000 visitors. The distillery is the second highest visitor attraction in footfall on the island of Skye.
Clearly many people come to Skye to visit Talisker, among other places, helping to grow and develop our tourist offering and tourist spend, not just at Talisker but throughout the island. The motion today refers to the economic value of whisky to our country. That economic benefit is based on the direct value of the whisky industry to many rural communities in my constituency and elsewhere. Talisker is a well-established, successful brand, but the story does not end there.
Torabhaig distillery is under construction on the Sleat peninsula on Skye. This distillery is expected to employ a staff of eight when it enters production. There are also plans for a new distillery on the island of Raasay. There is a birth of a new spirit in the Hebrides, a spirit that will excite the whisky world with these new ventures adding to the appeal of Skye and Raasay as the premium whisky region of the entire industry.
I have many distilleries in my constituency. The Glen Ord distillery in Muir of Ord is a contrast with Talisker. It employs just shy of 60 workers and as well as production of the Singleton of Glen Ord brand and a successful visitor centre, there is also a maltings at Glen Ord as well as an engineering base for the parent company, Diageo.
I am glad to say that not far from Glen Ord, just outside Dingwall, is another new distillery, GlenWyvis, based on a long-held tradition of distilling in this area, under the name of the previous Ferintosh distillery. Our national bard, Rabbie Burns, famously lamented the previous loss of this distillery when he said in 1759:
“Thee, Ferintosh! O sadly lost!”
Well, it is lost no more.
Because of lack of time, I will wrap up. We celebrate the success of the whisky industry, but let me quote Douglas Fraser of the BBC, who stated in 2013:
“Scotch whisky is a national brand worth toasting. It is a drink that can only be distilled and matured in one country—Scotland—but which sells in to 200 markets around the world. How did Scotch go from cottage industry to global phenomenon and how does it benefit its country of origin?”
That question requires more time for debate than we have today, but let me reflect briefly on employment.
As has been mentioned, 40,000 jobs are connected with the industry, 7,000 of which are in rural Scotland. My challenge to the industry is that, as well as the very welcome investment in distilleries, more can be done to make sure a greater part of the supply chain is secured in the area of production. Let us increase the dividend available for those in whisky-producing areas and let us toast the success of the industry, but let us have the ambition to grow this fantastic industry on a sustainable basis. To encourage this to happen, the Chancellor must play his part next week by reducing duty and introducing greater equity for the Scotch whisky industry.
Everyone here today understands that Scotch whisky is a huge player in the UK economy and overseas markets, and without the success of this industry Britain’s trade deficit of around £35 billion would be around 11% larger. This wonderfully popular product is the biggest net contributor to UK trade in goods. Exports are worth almost £4 billion and imports in the supply chain, such as packaging for products and casks for maturing the spirit, add value to our economy. The industry’s trade balance is £3.8 billion, supporting almost 40,000 jobs, 10,800 of which are worth £1.4 billion to UK workers.
As my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) pointed out, more than 7,000 workers in the Scotch whisky industry are employed in rural communities such as Arran in my constituency, leading to considerable added value in both direct and indirect incomes. Further, it accounts for 21% of the food and drink exports of the whole of the UK.
I am here today to applaud the success of this industry and its huge contribution to the UK economy. I am delighted that my constituency can boast some of the finest whisky distilleries in the UK with the Arran distillery being one of the few remaining independent distilleries in Scotland and the only malt whisky distillery on Arran, home to an award-winning dram. It opened in 1995 at Lochranza, which is the perfect location for producing the perfect malt. It is home to the purest water in all Scotland, water that has been cleansed by granite and softened by peat as it slowly meanders from the mountain tops into nearby Loch na Davie. Arran also enjoys a warm microclimate. The atmosphere of sea breezes and clear mountain air with the warm flow of the gulf stream is ideal for the speedy maturation of single malts.
I have painted a rather poetic picture. As for my hon. Friends the Members for Argyll and Bute and for Ross, Skye and Lochaber (Ian Blackford), I will put their gas at a peep because the Arran distillery, despite what they have said about their own neck of the woods, is a patron of the Robert Burns World Federation and, as such, has created a Robert Burns single malt and Robert Burns blended whisky in honour of Scotland’s national poet. It is the only whisky distillery able to use the image and signature of Robert Burns on its packaging—a true accolade indeed. [Interruption.] Not for nothing does the island of Arran have a reputation for producing the highest-quality whisky, although I am sure that the whisky from the constituency of my hon. Friend the Member for Ross, Skye and Lochaber is quite nice, too.
I join my hon. Friends in urging the Government to make a cut in excise duty on spirits at the Budget next week to boost the Scotch whisky industry. The Government must make it clear that the whisky industry will not be viewed as a cash cow, as the oil industry has been for too many years. Failing to cut the excise duty in the Budget will risk holding back this vital industry and the revenues, jobs and tax receipts from which the whole of the UK benefits. We need to help to create the conditions for the growth of this industry in our home market and stimulate long-term investment. If we cut excise duty, the revenues will go up, not down. The current staggering and eye-watering 76% tax on a bottle of Scotch whisky is far too high. Consumers hand over almost £10 on each bottle of whisky that they buy. That is 51% more duty than beer drinkers and 27% more duty than wine drinkers. That is clearly unfair and unsustainable. The 76% duty is the fourth highest rate in Europe. A cut would at a stroke support not only the whisky industry, but farmers, local pubs, rural and island economies, responsible consumers, manufacturers, exporters and supply chains across the UK.
There is no denying that distilleries are a source of jobs in areas that, as has been pointed out, might otherwise find it hard to sustain them and they are strongly aligned with wider tourism activities in rural economies. In my own constituency, a visit to Isle of Arran Distillers Ltd is all part of the experience of visiting the island of Arran.
The Scotch whisky industry is, rightly, a source of pride to all Scots, and no wonder, but it is also a huge success story that needs to be told more often. The question is not whether the UK Government can afford to cut excise duty on whisky. The question is whether the UK Government can afford not to make that cut? This is an iconic industry for both Scotland and the entire UK. It has a crucial role to play in the economic health of the UK, and that must be recognised. I urge the Minister today to support a cut in excise duty on whisky and recognise this jewel in the crown of Scotland’s —and the UK’s—industrial strength.
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) on securing the debate and providing us with an opportunity to discuss the significant contribution that the whisky industry makes to the national economy. I am well aware of the contribution that the industry makes to his constituency of Argyll and Bute, an area that I regularly visit for family trips, and my office manager, an Ileach, speaks often about the importance of the distilleries to the Islay economy. With eight distilleries on an island of 3,000 people, and another two being planned, soon there will be one distillery for every 300 residents. My office manager tells me that, from hazy memory, the Islay festival of malt and music is a very good time to be on the island.
Like Argyll and Bute, my constituency of Paisley and Renfrewshire North benefits greatly from having an active and successful whisky sector in the area. We have heard much, rightly, about areas of production, but there are equally important parts of the industry. Indeed, I recently visited the Chivas Regal bottling plant in my constituency and spoke with staff about the work that they do. The facility employs more than 500 staff, and it is where the company bottles most of its whisky portfolio, including brands such as Chivas Regal, the Glenlivet and Aberlour and the super-premium products such as Royal Salute. Chivas Regal is famous the world over—
Does my hon. Friend agree that in the aspect that he has mentioned—bottling—the whisky industry has led fantastic growth in productivity and innovation? The growth has been such that in Fife, the bottling plant in Leven now bottles not only malt whisky, but most of the company’s London gin.
Indeed. I thank my hon. Friend for that intervention. The productivity leads to further investment, which I will come on to later.
The staff at the Paisley site are proud to distribute whisky to all corners of the world, including China, India and the United States. During my visit, I was grateful to be shown around the new north bottling hall, which was opened last year as part of a wider £40 million investment by Chivas Brothers and helps to highlight the positive future that the whisky industry has in Renfrewshire and across the UK.
However, it is not only Chivas that operates in my constituency. Diageo is also well represented, with facilities near Braehead and at Blythswood. Both are long-standing providers of many jobs in the constituency, and I look forward to visiting them in the near future—that was a plug. Chivas and Diageo are extremely important to the Renfrewshire economy and help to support more than 1,000 local jobs. The Scotch Whisky Association estimates that the Scotch whisky sector directly employs 10,800 people. I am very proud to say that about 10% of those jobs are based in my constituency. Back home in Renfrewshire, we probably do not realise or appreciate how important our constituency is to the wider success of whisky. The three plants based in my constituency are extremely important, both locally and nationally, and I would like to record my thanks to all those workers who contribute to the success of the “water of life”.
We cannot stress enough the importance of the whisky industry to Scotland. It is part of our DNA, and we are famous all over the world for being the home of whisky. According to the SWA, the whisky industry’s contribution to the UK’s GDP amounts to £5 billion and it helps to support 43,000 jobs across the UK. In 2013, more than 1.1 million visits were made to whisky distilleries, with many of the visitors coming from all over the world to sample some Scotch whisky and see how it is distilled. Scotch whisky can be and has been described as the star performer of the UK economy. When we look at the activity of the industry in overseas markets, it becomes clear why it is so important to our national economy. Last year, Scotland exported 99 million barrels of whisky, which, according to the Library, were worth almost £4 billion, with imports amounting to £200 million. Without the success of whisky, the UK’s trade deficit would be 11% higher than it is today.
Given the success and significance of whisky in the national economy, our call for a further reduction in spirit duty by 2%, which is supported by the SWA, is entirely legitimate. A 76% tax burden is entirely excessive and ultimately unsustainable. What is more, with less than 9% of the EU population, UK consumers pay 25% of all EU spirit duties. Indeed, revenue raised by spirit duty has gone up by more than £100 million in the last year, following the Chancellor’s 2% cut in last year’s Budget, so he does not have to look too far for the evidence.
The future is bright for the Scotch whisky sector. I see that at first hand in my own constituency with the investment that has been made in the plants in Renfrewshire. We should be proud that our whisky is famous the world over and attracts tourists all year round. Scottish whisky is one of the star performers of our national economy. It is vital to our local communities and vital to supporting local jobs, and we should do as much as we can to encourage its growth in any way we can. Slàinte!
It is a pleasure to serve under your chairmanship, Mrs Moon. I commend my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) for securing this important debate. Scotch whisky, as we know, is one of Scotland’s most recognisable, ubiquitous exports. We have heard a lot today about its valuable contribution, including to the Exchequer, to which I will turn at the end of my speech. It is also enshrined in our history, art, culture and science. In fact, the late Alexander Fleming, who discovered penicillin, gave the very scientific advice:
“A good gulp of hot whisky at bedtime—it’s not very scientific, but it helps.”
I want to turn my attention to the innovation, research and development that are vital to ensure that Scotland’s journey in the industry is a continuing success story. I will do that by sharing with hon. Members the stories of two local companies close to my constituency of Dundee, one of which is not known for producing whisky. They are indicative of the wider needs and aspirations of our industry, and they assist in leading the way to future progress.
One of the companies is just over the water from Dundee, in the county of Fife. The Eden Mill brewery and distillery is a small craft company that faces the same almost insurmountable challenges as many others starting out in whisky distillation. Eden Mill is the first of its kind in Scotland. In a few years, it has gone from one employee to 40 employees. It has a turnover of between £3.5 million and £4.5 million this year, and more than 15,000 people from more than 30 countries have visited it. Those are all the hallmarks of having great success ahead.
What makes the company unique, however, is its approach to making whisky. It is estimated that the average cost of starting up an independent craft whisky distillery is £10 million. In order to begin laying down casks for whisky production, it began with the production of beer and now has its beers stocked nationally by Tesco, Sainsbury’s, Whole Foods Market and Aldi. In addition, it produces more than a dozen gins with a range of flavours. As we know, gin takes a much shorter time to produce than whisky and can generate much-needed cash flow while whisky, which takes more than three years to mature at a minimum, comes slowly to fruition. A little-known fact is that 70% of the gin produced in the UK is from Scotland, and the UK is the world’s largest gin exporter.
Eden Mill’s innovate business model has helped to at least stem the loss-making years of whisky production to some degree and has allowed affordable investment in whisky being laid down for future sale upon maturation. Small distilleries such as Eden Mill also add enormous value to local economies as tourist destinations, and they bring local sourcing of ingredients and high employment per litre of whisky produced compared with big distilleries.
I asked Paul Miller, one of the co-founders of Eden Mill, what more could be done to help grow our industry and whether there was value to his company in a duty reduction, for example. He said that in simple terms, duty and VAT were expected to be between £390,000 and £500,000 in the current year. A 2% reduction, for example, which I fully support, would allow Paul to create another job for a trainee distiller.
However, Paul added that the real opportunity could come from creating an environment for small, growing businesses to mirror the benefits that stimulated craft brewing back in 2001-02, when the sliding-scale tax on small breweries was introduced. That encouraged authentic small breweries to grow and was the catalyst for an entire industry. Paul pointed out that the US bourbon trail was a great example of such a move. The UK Government should focus their efforts on the impact of the limiting volume written into the EU derogated power. Changing that would be a major prize, a point not lost on those of us who point out the valuable contribution that Scotland and the rest of the UK make by being part of the European Union and not sitting on the sidelines, as we would in the event of an EU exit. The UK should focus on that now, while it is seeking a better position within Europe. If that happened, Eden Mill could reinvest more than £175,000 per annum in better infrastructure and a retail experience for visitors, and could ultimately create a better global brand. Imagine what that could do for the other 111 distilleries.
At the other end of production, but no less important, is my other neighbour, the James Hutton Institute, a world-leading scientific research organisation that is working to provide solutions to global challenges in food, energy and water security. As I speak, the James Hutton Institute and Dundee University have launched a campaign to set up the international barley hub, which will be the world’s leading centre for research into barley and its potential in a future where demands are ever increasing owing to production, reduced chemical use and climate change. Without vital support there are dangers ahead for our Scotch whisky industry.
The cost of developing and building the hub is £36 million, and it will create 3,400 highly skilled jobs and add £700 million in economic value. It will be financially sustainable by year seven. Let us not forget that 20% of our food and drink exports depend on that research. Increased exports of our precious whisky and greater consistency of barley for the whisky industry will be just two key benefits. Doing nothing, however, would mean the UK no longer leading in barley research. As researchers naturally follow investment, that would lead to a downward spiral in capability and viability. To return to the point that my hon. Friend the Member for Argyll and Bute made about £135 being generated per second, the Treasury could have the future of our research into barley, the essential ingredient in our dram, bought and paid for in less than three days.
There is no doubt that innovation, investment and a careful eye on the future of our industry have to be paramount. I make this simple plea to the UK Government: if the Chancellor is serious about expanding exports threefold by 2020, investment and a large pinch of serious industry advice from companies such as I have mentioned will go some way towards that. Doing nothing is simply not acceptable or desirable, especially given the world’s desire for our liquid gold. To reiterate the point that my hon. Friend made, the American writer Mark Twain was undoubtedly correct when he said:
“Too much of anything is bad, but too much good whiskey is barely enough.”
It is always a pleasure to serve under your chairship, Mrs Moon. I thank my very close hon. Friend the Member for Argyll and Bute (Brendan O'Hara), who has a neighbouring constituency, for securing this debate.
I have a long association with whisky, and not just as a drinker. In 1992, I was elected to the then Clydebank District Council for ward 3, Mountblow. The district of Mountblow is home to one of Scotland’s most lowland malts and the only triple distilled whisky; it has been producing the uisge beatha for nearly 200 years. The Auchentoshan distillery is found in the foothills of the Kilpatricks, in the old Auchentoshan estate. I was honoured to represent the area in 1992, and I am delighted and honoured to do so in this House as we debate the impact of whisky on the economy. For the record, that is “whisky”, without an e—that is just a note for Hansard.
In recent times my constituency has mourned the passing of Littlemill, which was dismantled in 1997, although thankfully its production was taken up by the vibrant Loch Lomond distillery, which produces Captain Haddock’s favourite tipple in Hergé’s “Tintin”—a truly European product. Whisky is a global product that will not be assisted by Members who favour Brexit. Loch Lomond marks the boundary between the lowlands and highlands of Scotland and has been at the heart of whisky production for centuries. Sadly, at least nine distilleries around the loch have been lost over the years, leaving Loch Lomond distillery to maintain the proud local tradition at that end of my constituency.
Auchentoshan is a true urban whisky, with an economic and social reach across my entire constituency and beyond. As hon. Members have said, that reach includes bottling, marketing, tourism, sales, printing, malt production and glass production. Each year the distillery of Auchentoshan alone uses 2,500 tonnes of malt, 12.7 tonnes of yeast and 12 million gallons of Scotland’s finest water drawn from the Kilpatricks, with more than 1 million litres of pure alcohol. That is bottled as five expressions of Auchentoshan, including my personal favourite, American Wood. In addition, it has produced its exceptional eight limited editions.
Auchentoshan and Loch Lomond distilleries play their part in supporting national production with 40,000 jobs, of which 10,800 are directly in the industry, and supplying salaries worth £1.4 billion to UK workers. I call on the Minister and the Government to play their part in supporting them. The average-priced bottle of Scotch whisky is subject to 76% tax, and there is no doubt that that is bad for business, bad for the industry and bad for consumers. I am sure the Minister will at least agree that a 2% cut in duty on whisky in this year’s Budget would be a welcome relief to the economy and a win-win for everyone.
The case for that is self-evident. From 2015 to January 2016, following the 2% cut in last year’s Budget, duty receipts from spirits went up by £102 million compared with the same period the previous year. Spirits were the driver behind a £190 million increase in alcohol revenue, which was of huge benefit to the economy. The evidence is clear. The UK Government’s rate of 76% on Scotch whisky is the fourth highest rate in Europe, and UK consumers currently pay 25% of all European Union spirit duties—more than consumers in Spain, Italy and Poland combined. It seems that at least in this case, the only drawback to being part of the European Union is the UK Government’s self-made taxation rates on spirits. Although Scotch whisky enjoys widespread popularity, a further cut in duty would be a welcome move for a product that remains one of the most highly taxed in the world.
Investment in new distilleries and production at established sites is unprecedented. Those new distilleries need a home market that encourages growth and long-term investment. Support for the industry through a further cut in excise duty would help and support that.
One last challenge remains. Some whisky producers have a local GDP equal to that of small nations. That could and should be challenged through our Community Empowerment (Scotland) Bill. It is my hope that one day whisky production will act as a catalyst for local community ownership, with broader local production being in the hands of the communities of Scotland.
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate my hon. Friend the Member for Argyll and Bute (Brendan O'Hara) on securing this important debate.
I confess that uisge beatha, the water of life, would not have been my drink of choice in the past, but I have joined the all-party group on Scotch whisky. When I asked at one of the first meetings whether whisky was still mainly drunk by men, I was informed that some of the world’s most renowned tasters are in fact women, so I decided to do my bit for the industry and embark on some personal research. Since then, I have been practising. Hon. Members will be pleased to know that my taste for whisky is developing quite well, although it will no doubt cause a stramash among my colleagues to hear that I enjoy it quite a lot with Coke.
We have heard about the producers and the supply chain. A major employer in Drumchapel in my constituency is the Edrington whisky bottling plant, which bottles Macallan, Highland Park and the Famous Grouse, among others. The origins of the company stretch back to its 19th-century foundation by William Robertson in Glasgow. In the 1960s, Sir William Robertson’s sisters transferred their ownership of Edrington to the newly formed Robertson Trust and insisted that a percentage of the profits should go to good causes—a practice that continues to this day. Many worthy causes throughout the UK have benefited from grants from the trust.
I had the pleasure of visiting the Edrington bottling plant last summer, where the chief executive, Ian Curle, voiced some of the industry’s concerns regarding levels of duty. Although the debate is about whisky, other small producers would benefit from a reduction in duty. Along with my recent work on whisky, I had the pleasure of tasting a new local product, the Makar Glasgow gin, which is only two years old and would really be able to increase its outreach with a change in duty.
New whisky producers have come to the market, but how many more would there be if there were a more realistic taxation level? When we call for a reduction in the ridiculously high duty of 76%, it is about more than just finance. It is about our ambition for this key Scottish industry. Although I was told recently that to dilute my whisky with a mixer was an affront, I would argue that the real affront is the level of duty placed on whisky, which is stunting the growth of the industry in Scotland.
It is a pleasure to serve under your chairship, Mrs Moon. Hon. Members might wonder what on earth my link with whisky is, as the Member for Edinburgh West. Well, here you go. BenRiach Distillery Company, which is in fact based in Speyside, was built by John Duff in 1898. The hon. Member for Argyll and Bute (Brendan O’Hara) will note that that was 10 years after the formation of Celtic football club. The distillery features a traditional floor and pagoda-style chimneys. It was a global whisky distiller of the year in 2015 and, more importantly, its head office is located in Edinburgh West.
Few people consider the wider picture around the supply chain. Bottlers, glass makers, ceramics, cereals, transport, energy suppliers, tourism and retailers all add value. There are spin-off businesses, such as Celtic Renewables, which makes biofuel capable of fuelling cars with the by-products of whisky production.
We have talked about the value of the industry to the economy of Scotland and the UK, and about the increase in the tax take with the tax cut in March 2015. I agree with what I suspect the Minister will say, which is that it is difficult to prove the so-called causality. However, from a business perspective, I believe that the tax cut gave businesses the confidence to invest. We cannot assume that a year-on-year tax cut will always result in this outcome, but we can reflect on the fundamental fairness of how the industry is treated compared with others, such as beer. The tax cut is also to be welcomed as we have seen a reverse in the trend of declining home figures.
There are new distilleries in Annandale, Arbikie, Ardnamurchan, Ballindalloch, Dalmunach, Eden Mill, Glasgow, Isle of Harris, and Kingsbarns—now, I would like the Minister to repeat those backwards, if he can. In fact, the finance director of the Glasgow Distillery is an old colleague of mine from the independence referendum. The new distilleries will initially focus on gin but, critically, we must emphasise the point about capital investments. It is about the creation of jobs and infrastructure. As I mentioned, the supply chain is of value to the wider economy, particularly to rural economies.
I am a member of the Select Committee on Business, Innovation and Skills, in which I recently questioned Ian Wright of the Food and Drink Federation. If the contribution of Scotch whisky to UK exports was underappreciated, he highlighted that the UK Government fail to appreciate the value of consumer goods in general and said that there needs to be a change of mindset on the issue. I agree with that.
Significant value is to be derived from increasing exports, especially looking at the massive potential of the emerging middle classes in the likes of India. The Scotch Whisky Association argues that taxing until the pips squeak sets a precedent for overseas markets. Indeed, Scotch faces a tariff of 150% in India. In reality, the economic picture is considerably more complex, with individual economies making decisions based on support for their own producers, not just on their perception of the high quality of Scotch, but the point is worthy of reflection.
I am concerned about a potential British withdrawal from Europe because barriers to trade are considered unhelpful by industry. We should go for a trade agreement in India and stay in Europe; we can have both.
On a more serious note, my last point is about Scotland the brand, which whisky most encapsulates. There have been a number of attempts today to bottle the essence of Scotland the brand. The brand is shaped by authenticity and personality, and that cannot be truer than of Scotch whisky. Brand has equity, and we mentioned that when we talked about the small gin distilleries. Brand is the recognition and embodiment of key values, pleasures, value and perception, but it faces competition and we must ensure that the industry can compete.
I leave hon. Members with two brief thoughts about whisky. The first is from my personal favourite, Tommy Cooper:
“I’m on a whisky diet. I’ve lost three days already.”
And, finally, “Alcohol is your trouble,” said the judge to the drunk. “Alcohol alone is responsible for your present predicament.” The drunk looked pleased as he said, “Thank you, judge. Everyone else says it’s my fault!”
It is a pleasure to serve under your chairmanship, Mrs Moon, and it is a pleasure, as always, to debate opposite the Exchequer Secretary to the Treasury. I congratulate the hon. Member for Argyll and Bute (Brendan O’Hara) on securing the debate. In his opening speech, he eloquently explained why the Scotch whisky industry is so important to the Scottish and UK economies and why his constituency is the centre of the whisky universe.
I thank hon. Members for taking part in the debate, which I have really enjoyed. I feel as if I have had a bit of a history lesson. A few points that I was not aware of before include: that Talisker was Robert Louis Stevenson’s favourite drink; that Arran has the purest water in Scotland; and that Alexander Fleming’s advice was to drink whisky, which I now take as medical advice. Other fantastic things have been mentioned but I will not go into detail because we are pushed for time.
There was a consensus across all contributions that, beyond doubt, the Scottish whisky industry contributes significantly to the UK economy. A number of hon. Members raised points about excise duty. Of course, we all look forward to hearing what the Chancellor has to say about that next week and whether the Minister is willing to leak any information on that.
The Scotch Whisky Association, which supplied a very useful briefing in preparation for the debate, estimates that the industry added more than £3.3 billion directly to the UK economy and more than £5 billion indirectly in 2014. That makes the Scotch whisky industry arguably larger than the UK’s iron, steel, shipbuilding and computer industries, and about half the size of the UK’s pharmaceutical and aerospace industries in terms of gross value added. It is important to note that the industry just keeps growing. The 2014 figures mark an increase of 1.6% on the previous year’s estimates of GVA.
The contribution of the industry is equally impressive when one considers the number of people it employs. In Scotland, 10,800 people are directly employed in the industry, with salaries totalling almost £530 million. Across the whole of the UK, both directly and indirectly, the association estimates that 40,000 jobs are supported. Any industry that provides employment to so many should indeed be recognised as an important UK industry.
Nor is that significant only in Scotland. The impact on the wider UK supply chain is also important, as we have heard in many of the speeches today. Of the nearly £2 billion spent by the industry, 90% remains within the UK. The latest input-output data published by the Scottish Government, and industry estimates, show that about three quarters of the goods and services purchased outside Scotland are sourced from the rest of the UK, and that they are worth about £330 million to the suppliers. That is particularly significant in relation to capital expenditure worth about £140 million, much of it on items such as machinery and vehicles that support the wider industry.
Constituencies such as mine, with its history of manufacturing and other traditional industry, stand to benefit from the Scotch whisky trade, despite our distance from Scotland. We have heard Yorkshire’s point of view in the debate, and I think there is agreement on that point. Greater Manchester has a longstanding and proud brewing and distilling sector of its own—not to mention a blossoming boutique sector, in which I am becoming an expert. Whisky distilling, along with much of the drinks sector, is effectively a manufacturing industry itself, and the debate should be set within the wider one about the need for an industrial strategy.
One of Scotch whisky’s distinctions is that it is famous the world over, and is one of the largest contributors to UK exports. Scotch whisky exports were worth £3.9 billion in 2014—1.4% of total UK exports. That represents 80% of Scotland’s and 25% of the UK’s total food and drink exports. Scotch whisky’s trade surplus is the second highest for any goods exported from the UK, and it has been estimated that the UK’s overall trade deficit would be 16% higher without Scotch whisky exports. I think that that fact has also been alluded to today. However, it must be noted that, while the £3.9 billion is significant, that figure marked a decline of 7%—the largest since 1998.
It has been suggested by commentators that that fall in exports might be due to the political and economic situation in export markets. For example, David Frost, the Scotch Whisky Association’s chief executive, suggested that
“economic and political factors in some important markets held back exports in 2014 after a decade of strong growth”.
Similarly, the drinks analyst at the market intelligence firm Euromonitor has highlighted the fact that the
“fall in exports to Singapore was linked to Beijing’s clampdown on gift-giving”,
noting that direct exports to China fell by 23% to £39 million. He also said that Scotch was losing out to types of whisky like US bourbon, which are targeted at a younger market. Political volatility in Russia and Ukraine is also reported to be having an effect on exports of Scotch
“with the value of direct sales there down 95% from £25 million to £2 million in a single year”.
In that context, we would be interested to hear from the Minister what steps the Government are taking to ensure that our key export industries are able to cope with volatilities in the global market. What help are they giving the industry in its ambassadorial role abroad? For example, DEFRA’s Great British food unit was created to promote British food and drink—such as Yorkshire Tea, the hon. Member for Brigg and Goole (Andrew Percy) will be pleased to hear—across the world. Could the Minister confirm whether Scotch whisky is currently included in the Great British food unit and, if so, how the initiative has helped the industry?
It is important to highlight the wider context of UK manufacturing. Frankly, I am concerned that this Government’s industrial strategy is inadequate across the board, as the problems with the steel industry have illustrated all too starkly. That is why we have been calling for a proper industrial strategy, in the context of a wider economic policy focused on investment, not cuts. Scotch whisky is one industry that by its nature cannot be outsourced abroad but, in other ways, it will face many of the same challenges as we see across the UK in other manufacturing sectors.
The last time the Scotch whisky industry was discussed in Westminster Hall, the then Economic Secretary to the Treasury, now the Education Secretary, stated that Her Majesty’s Revenue and Customs would
“shortly be launching its spirit drinks verification scheme.”—[Official Report, 8 January 2014; Vol. 573, c. 138WH.]
The scheme was designed to preserve the industry’s reputation by requiring every business involved in the production of Scotch whisky to be verified as producing a genuine product. The introduction of the scheme was broadly welcomed at the time, but it might be useful for the Government to provide an update on its operation to date. Is the Minister satisfied that it has been implemented in full?
The UK should be proud of the Scotch whisky industry, which contributes enormously to employment and boosts UK exports at a time when the trade deficit remains large. I therefore hope that the Minister can respond to the issues that I and other hon. Members have raised, so that we can continue to back this important global industry.
I am delighted to get to sum up last. I know that my party likes to claim that we are the official Opposition—but I like this new order in Westminster Hall.
It is rare to have the opportunity to sum up with such a good-looking group of MPs. I do not know whether it is to do with the balance in the Chamber. The hon. Members for Salford and Eccles (Rebecca Long Bailey) and for Brigg and Goole (Andrew Percy) are very welcome to join the Celtic brotherhood—and the Minister too. [Interruption.] He has Celtic connections.
We have heard the benefit of an upbringing and affinity with the product we have been talking about, in the amazing lyrical literary references throughout the speeches.
I thank my hon. Friend for that wonderful intervention. He is here all night, ladies and gentlemen.
It feels slightly superfluous to sum up in this debate; I do not know if anyone has not figured out by now, whether in the Public Gallery or anywhere in the Chamber, that Scotch whisky adds £5 billion to the UK economy. They should do a test, just to see. It has been repeated so much.
I look forward to hearing what is clearly going to be an excellent summation of the debate from my hon. Friend.
On the point about investment, will my hon. Friend join me in welcoming the massive investment by Diageo in Scotland, particularly in my constituency, where there has been an investment of £10 million in a state-of-the-art cooperage, and £80 million in a new filling store, at Cambus; £30 million in a new warehouse at Blackgrange Bond; and £1.5 million to expand and upgrade the Diageo global archive? I encourage all Members to come and visit if they have not already done so.
I thank my hon. Friend for that wonderful intervention—and Diageo thanks her too. I agree that it plays a huge role in our industry—but a positive and constructive one—and is part of the success story.
As well as the £5 billion value that I mentioned, the trade deficit would be 11% higher without Scotch whisky; and there are 40,000 jobs. Every job supports a further 2.7 jobs in the broader economy. One point of particular importance, which has come up in a number of debates—not least in contributions by my hon. Friend the Member for Argyll and Bute (Brendan O'Hara)—is the importance of the industry to the rural economy, where there are fragile economies that people are leaving and where depopulation is a challenge. The industry is a success story in the rural economy.
Turnover in the industry has increased by 27% since 2008, and employment is up 6%. Salaries have risen too. Another challenge in the rural economy is low pay, but salaries in the Scotch whisky industry have risen by 12% and now average £47,000 a year. That is a great track record, and it demonstrates how important the industry is to our economy and country.
Whisky may be our national drink, but it is not a homogenous product, and as my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) outlined—when he used the words “alluring” and “full-bodied” I thought he was talking about himself, but it turned out he was talking about one of the whiskies in his region—our malts are highly regional and wonderfully varied. Each area produces its own highly distinctive variations. It is sacrilegious to put Coca-Cola in them, though, and I fear that my hon. Friend the Member for Glasgow North West (Carol Monaghan) has done herself immense damage by what she said. Clearly, she is but a novice, and there is time yet. Perhaps the hon. Member for Brigg and Goole can help there, because he does frequent the bars, I am told. I think the different characteristics are what make Scotch whisky such a wonderful success story. I am with my hon. Friend the Member for Argyll and Bute in that Islay malts are my favourite. Their peaty, smoky nature is just fantastic.
One region of Scotland does not have a distillery at present. As my hon. Friend said, the last time whisky was produced in the borders, legally at least, was in 1837, but times are changing. It shows the success that can be harnessed in all the regions of our country that no fewer than three distilleries are currently planned in the Scottish borders, most of which I represent. R&B Distillers is looking at a site in Peebles, and the Three Stills Company has a £10 million project for a fantastic distillery in the centre of the wonderful town of Hawick. Last week, I visited a new site just outside Jedburgh operated by Mossburn Distillers, which has fantastic and ambitious plans for new distilleries on the site. I witnessed the full scale of its ambition and how significant the operations could be. Taken together, the companies could invest £50 million in the borders economy and create more than 100 jobs. In the borders, the distilleries will of course reflect the history and landscape of the region, as well as making use of our fantastic borders barley and pure water. Indeed, Mossburn is considering names such as “the Borderer” and “the Teviot” for its whiskies. [Interruption.] It is a river.
Thankfully not. Those wonderful titles pay tribute to the region’s rich heritage and will help to promote us as the whiskies are sold across the world. Of course, I am sure the distilleries will produce lighter, lowland-style whiskies, and I am sure I am not the only one looking forward to tasting them—they cannot come soon enough, but we will have to wait.
The companies behind the new borders distilleries are certainly entrepreneurial, and they have plans, beyond traditional distilleries, to produce other spirits, including gin. The sites have the potential to be highly popular attractions in their own right, and the visitor centres look fantastic. If I had £1 for every person who has offered to be a taster, particularly at the Hawick distillery’s gin lab, where people can make their own gin, I would be a rich man. I am taking names if anyone here wants to sign up. The sites will be fantastic tourist operations.
I visited Springbank in Campbelltown with a number of friends, and I was struck by the number of people who were there because of the distillery. I met one group from Sweden who had matching blazers, and another group from America had whisky-tasting ties. I am not suggesting that we all had to get into uniform, but it reinforced the huge way in which a distillery puts a town on the map, raises its profile globally, brings more investment and creates more jobs than just those directly involved in the distillery.
I congratulate Speyside Distillers in my constituency. Founded in 1770, it has just secured a £2.3 million funding package to help it grow its market in the far east. Does my hon. Friend agree that the Chancellor should seriously consider duty reduction in next week’s Budget so that all distillers can expand, grow and contribute to the UK economy?
I agree with my hon. Friend. If the Minister has missed that point, why not reinforce it? I am sure he agrees with us. I notice a lot of nodding, and I am sure it is in agreement that the reduction should be at least 2%.
This is a hugely exciting situation, as is reflected in the energy and enthusiasm of the Members gathered here. Our export market is strong, and the hon. Member for Edinburgh West (Michelle Thomson) mentioned something that I wanted to highlight, too. The planned distillery in Hawick mentioned the duty in India. If we raise 76% in our own country, it puts us in a difficult position to argue for reduced duty elsewhere. Clearly, the Indian situation of 150% is unacceptable. I will be interested to hear the Minister’s comments on what we are doing about that.
We should also remember that the UK domestic market is the third biggest market by volume, with only France and the USA selling more. It still accounts for seven times more sales than China, so its importance to our producers is clear. We have already heard the case, so I will not reiterate how reducing duty is a win-win situation. By reducing duty, although there is not necessarily causality—good word—we might raise more money in total.
People often use the word “iconic” about whisky. I prefer to describe it another way. Whisky is literally the spirit of Scotland. It embraces all the very best aspects of our history and culture, and it is both romantic and emblematic. It uses our finest national ingredients and has strong green credentials. Of course, it is a product of very high quality and reputation. Just as the money it earns helps to bind together the UK economy, so its character and the joys of its depth and warmth bind Scots together as people. Whisky is one of Scotland’s great products and great successes. Now we need the Government to celebrate that success, to build on it and to work with the industry to grow this fantastic drink’s reach and prosperity. I urge the Minister to take that message away today. If he can secure the backing of his colleagues in Government, I am sure that is something to which we would all raise a glass.
It is a great pleasure to see you in the Chair, Mrs Moon. I congratulate the hon. Member for Argyll and Bute (Brendan O'Hara) on securing this important debate. I have sometimes wondered what it is like to be at the Scottish National party conference, and I need wonder no longer. I commend all colleagues, from the SNP and from the Conservative and Labour parties, for being here for this debate. I welcome all the contributions, including from the SNP spokesman, the hon. Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr), fresh from his unexpected starring role at today’s Prime Minister’s questions—he was “Callum”. [Interruption.] I recall all his colleagues pointing at him. I also welcome the contribution of the hon. Member for Salford and Eccles (Rebecca Long Bailey), who as always made a thoughtful speech and some good points. During my remarks I will return to the points that have been raised.
This has been a good debate, which made me thirsty more than once, particularly when the hon. Member for North Ayrshire and Arran (Patricia Gibson) was speaking—and that was just when she was describing the water. Even the most enthusiastic champions of the spirits industry would stop short of calling whisky a daily necessity. [Interruption.] I may stand corrected but, according to the Wine and Spirit Trade Association, just over half of UK adults, the equivalent of 26 million people, drink spirits. Aside from that, the whisky industry makes a hard and important economic contribution to the UK economy. Every second, whisky exports earn this country £125—we will not quibble over £125 or £135. Scotch is solely responsible for a quarter of all UK food and drink exports. With Scotch present in some 200 markets worldwide, there is a good case to be made for calling it our most widely consumed export. Leading markets for Scotch whisky exports include France, the US and Spain. In Spain, exports increased by nearly 8% in volume between January and June 2015.
On sales, France is the largest consumer of Scotch whisky by volume. Does the Minister agree with SNP Members that a Brexit would be both fundamentally difficult for the Scotch Whisky Association and would limit its ability because further trade agreements would be required for that volume of sales to continue?
The hon. Gentleman anticipates some of my later points. If he will forgive me, I will delay my response until then.
One of my favourite whisky-related export stats comes from Japan. It will be a matter of equal sadness and joy to the hon. Member for Argyll and Bute that, scandalously, the best whisky of 2015 award was won by a Japanese brand but that Japan increased the volume of its imports of Scotch whisky by 23% between January and June 2015. Clearly the consumers of Japan have very good taste. We should also acknowledge the wider British spirits industry. I am pleased to say that the main trade association reported that 140 million bottles of British gin are exported to foreign markets, which works out as a 37% increase in five years.
It is also important to bear in mind the very positive effects that the Scotch whisky industry has on employment; many hon. Members have already alluded to those effects. The Scotch Whisky Association estimates that the industry already supports over 40,000 jobs, including—importantly—7,000 in the rural economy. Of course, distilleries remain a key source of jobs in the Scottish rural economy, and are strongly aligned with wider tourism activities. Also, as we have already heard this afternoon, every job in the Scotch whisky industry supports 2.7 further jobs in the broader economy, and some of that benefit is spread throughout the UK.
In the constituency of the hon. Member for Argyll and Bute, Scotch whisky is definitely a traditional industry that remains a critical part of its heritage. A total of 14 distilleries are in operation in the constituency, including Bowmore, Ardbeg, Kilchoman, Glengyle, Springbank, Glen Scotia, Tobermory and Oban, and a few others that are less obviously uni-phonetical, so I hope that he will forgive me if I stop there. It goes without saying that we want to continue and wholeheartedly support this Great British success story.
Over recent weeks, I have had the opportunity to meet the hon. Gentleman and some of his colleagues who are sitting with him today in the all-party group on Scotch whisky, as well as representatives from the SWA, and the Wine and Spirit Trade Association, among others. I have taken on board the confidence that they have about the continued success of their industry, and I assure the hon. Gentleman that we are united in wanting to help the industry go from strength to strength.
Of course, it was precisely for that reason that my right hon. Friend the Chancellor announced in the Budget of March 2015 only the fourth duty cut in spirits history, the previous one having been in 1996. I strongly supported that decision. Since then, the trend in whisky production has been notable. Between 2014 and 2015, the volume of whisky cleared for sale in the UK increased by 2%. Increasing confidence from the Budget 2014 duty freeze, combined with demand for exports, has contributed to this significant turnaround from the decline in production that the industry had experienced between 2010 and 2014.
The encouraging news continues with the developing trend in small distilleries entering the market. From 2014, seven new whisky distilleries have opened, taking the total number of Scotch whisky distillers to 117. In addition, it is planned that a further 30 to 40 distilleries will enter the market in the coming years, which is a good thing for investment and jobs in Scotland.
I am pleased that the Scotch whisky industry remains dynamic. As has been mentioned, the £1.7 billion investment in its supply chain has helped to meet the demand from overseas markets, and supported jobs over the long term, which is particularly significant for our rural economies.
How can we as a Government continue to support the industry over the coming years? Hon. Members know that next week my right hon. Friend the Chancellor will deliver his Budget in the Chamber, and the hon. Member for Argyll and Bute and his colleagues know that it would clearly be wrong for me to anticipate that in any way whatsoever.
However, it is important to maintain our efforts in two particular areas. The first is the export market. Nine out of every 10 bottles of Scotch whisky sold are sold overseas, and I must remind hon. Members that, on that volume, no UK duty is paid. The hon. Member for Salford and Eccles rightly asked what export support could be given to continue the growth of this important industry. Through the efforts of UK Trade & Investment, we have seen some very strong success stories, all contributing to the 90% growth in exports that the Scotch whisky industry enjoyed between 2004 and 2014. Each second, 40 bottles of whisky are shipped overseas.
We have increased the budget and the remit of UKTI so that it can continue and even extend its promotion of British products worldwide and, importantly, negotiate with export markets for the right regulatory regime, to help people enjoy their dram wherever they may be in the world.
Distillers can now supply their product in countries including India, which can further open the door to other countries. Although Scotch whisky’s share of total spirits volume in India is only around 1%, the SWA expects that that would increase to 5% if there was full and fair market access. The UK supports a broad and ambitious free trade agreement with India. However, there are outstanding issues, including on spirits, that need to be addressed.
The Government are keen to restart negotiations on the free trade agreement and have made the case for that to the European Commission and in bilateral engagement with India. I am sure that most hon. Members here will agree that, as was mentioned earlier, in this endeavour we are better equipped as part of the world’s largest single market than we would be alone, even if my hon. Friend the Member for Brigg and Goole—and Saskatchewan—(Andrew Percy) may only agree with that comment for half the debate. He also reminded us of the importance and the number of other potential export growth markets around the world, including Canada.
Opening up more export markets is just one part of the Scotch whisky success story, and I hope that we see much more success in the coming years, as our expanded UKTI teams continue to make the case for Scotch whisky.
The second area that the Government can support is a little more nebulous, and the hon. Member for Edinburgh West (Michelle Thomson) referred to it. I think of it as protecting and enhancing the quality mark of genuine Scotch provenance. Scotch whisky is clearly an iconic product for Scotland and the UK, but with iconic products comes the risk of poor-quality imitations. To protect the integrity and the high reputation of the brand of Scotch whisky worldwide, we launched the spirits verification scheme, which the hon. Member for Salford and Eccles mentioned. This scheme sets standards on production and labelling for producers to sign up to, helping to identify non-compliant products and counterfeits, and making sure that people who buy Scotch whisky get exactly that.
The geographical indication for Scotch whisky is now recognised in the laws of nearly 100 countries, including the whole of the European Union, which is another reason for there to be continued optimism in the industry and continued worldwide recognition for Scotch. But why limit consumers to what they recognise as Scotch whisky from the front of a bottle? The hon. Member for Ross, Skye and Lochaber (Ian Blackford) mentioned the tourism opportunities, and that point was echoed by a number of other colleagues.
Producers are offering tours of their distilleries, opening up a whole new way to connect with thirsty tourists who are keen to understand the traditional side of their whisky—the pride and the passion that go into every bottle of Scotch. According to the SWA, collaborative efforts by the industry and VisitScotland have contributed to more than 1.5 million visits over the last year, with visitors spending more than £50 million at distilleries.
The other aspect of protecting and enhancing the brand of Scotch whisky is, of course, the health issue. Let me be clear about this—Scotch whisky, like all drinks, is perfectly capable of being enjoyed responsibly, and of course it is also capable of being misused. However, this Government firmly believe that the irresponsible actions of some should not be a barrier to the vast majority of people who enjoy a drink responsibly. That is why we will continue to combine efforts with the industry to raise awareness of the need for responsible drinking.
The Scotch Whisky Action Fund is an excellent example of what the industry can do. It is entering its third year of a five-year programme and is delivering £500,000 of funding to support community-based projects that are aimed at reducing alcohol-related harm in Scotland. I am confident that we will continue to strike the right balance between enabling responsible enjoyment of a traditional product, and dissuading irresponsible and harmful behaviour.
Let me turn very briefly to a couple of the other points that were made in the debate. It is not a new development that different countries choose to tax alcoholic beverages differently. Of course, countries choose their tax system, including the balance between direct and indirect taxes, to reflect their needs. When setting duty rates, the Government have to consider the wider fiscal picture. Total revenue from alcohol duty in 2015 was £10.7 billion, with revenue from spirits contributing around 30% of that. Just to give some perspective, £10.7 billion is the same as the entire budget for the Home Office.
I do not know of any EU country that has full duty equivalence among alcoholic drinks. In this country, of course, a typical serving of 25 ml of spirits has lower duty than other typical servings of drinks, for example a pint of beer or 175 ml of wine. As I have already said, the majority of Scotch does not have duty applied to it as it is for export. As I am sure hon. Members appreciate, any and all announcements on duty rates are made in the Budget.
The contribution of Scotch whisky to the UK economy is not least due to the tireless work of distillers who put in the hours and, in this case, the years to produce such a high-quality product. We want the industry to continue to succeed, both domestically and in ever widening markets overseas, promoting Scotland and the UK, and creating jobs and growth. Our programme for Government is based on creating long-term growth and security, and a successful and strong Scotch whisky industry is an integral part of that.
I thank the hon. Member for Argyll and Bute once again for bringing this important subject to Westminster Hall for debate today.
Thank you, Mrs Moon, for your excellent chairing.
In the moments that are left to me, I thank the Minister for his reply. Without putting any pressure on him, I hope and feel that we have in him a real champion for the Scotch whisky industry, which does so much for the economy.
As I said earlier, Scotch whisky is liquid sunshine, so let us not put a cloud unnecessarily in front of that sun, and let us also push the Chancellor for a cut in duty on whisky in next week’s Budget.
Question put and agreed to.
That this House has considered the contribution of the Scotch whisky industry to the UK economy.