Support for the Scotch Whisky Industry
(1 week ago)
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Dame Siobhain McDonagh (in the Chair)
I will call Graham Leadbitter to move the motion. Unusually, two further Members will make a contribution in this half-hour debate. There will not be an opportunity for the Member in charge to sum up at the end.
Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)
I beg to move,
That this House has considered Government support for the Scotch whisky industry.
It is a pleasure to serve under your chairship, Dame Siobhain. Today I seek to address the critical role of the Scotch whisky industry in the UK economy and to outline the essential support that it requires from the UK Government.
Scotch whisky is more than just a drink; it is a cultural and economic asset that is enjoyed around the world. We all share the desire to ensure that it is enjoyed responsibly and sustainably for generations to come. Each bottle shipped from Scotland to every corner of the world leaves behind a measurable impact on our economy. The numbers speak for themselves. The industry provides £7.1 billion in gross value added to the UK economy. It supports 41,000 jobs across Scotland and more than 25,000 more jobs across the UK. Scotch whisky accounts for 74% of Scottish food and drink exports and 22% of UK food and drink exports.
Jim Shannon (Strangford) (DUP)
I thank the hon. Member for securing this debate. He is right to highlight the importance of Scotch whisky in his constituency. In my constituency, the Hinch distillery is becoming a globally recognised, award-winning whiskey brand. These home distilleries provide for each and every person’s constituency, including the hon. Gentleman’s, mine and others. They grow the local economy and should receive support to further their success from the Government here at Westminster.
Graham Leadbitter
I thank the hon. Member for that intervention. I enjoy a dram now and again as well.
Robin Swann (South Antrim) (UUP)
I thank the hon. Member for securing this debate. I do not want this to become a promotion for every drink across these islands, but the challenges that Irish and Scottish whisky face are also faced by Baileys. Maybe not many people know this, but 70% of the world’s Baileys is produced in a factory in Mallusk in my constituency. It is exported to 100 countries worldwide, providing good jobs in the economy. I know the hon. Member enjoys a glass as well.
Graham Leadbitter
I do not know whether I need to comment on how many different types of drink I consume. Returning to the matters at hand, exports are valued at more than £5 billion, with 43 bottles of Scotch whisky exported every second.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Would the hon. Gentleman allow a non-promotional intervention?
Mr Carmichael
The hon. Gentleman is speaking about exports. We know the damage done to the Scotch whisky industry when we last suffered tariffs as a consequence of US trade policy—nothing to do with President Trump, it has to be said, but due to an old trade dispute. Surely this is the point at which the Government should be thinking ahead and putting a strategy in place to help the industry should, heaven forfend, we find ourselves back to that place as a consequence of the new regime in the White House?
Graham Leadbitter
I thank the right hon. Gentleman for making that point, which I will come on to a little bit later in my speech.
In 2022, Scotch whisky distilleries attracted 2 million visitors, making them the most popular tourist attraction in Scotland. Between 2018 and 2022, the industry invested £2.1 billion in capital projects, with many more such projects in the pipeline as we speak.
Seamus Logan (Aberdeenshire North and Moray East) (SNP)
Does my hon. Friend agree that it is perplexing to see the Prime Minister commit that he will
“back Scotch producers to the hilt”
—I believe those were his words—while enforcing the highest excise duty in the G7 on Scotch? Surely now is the time for the Prime Minister to back up his words with action.
Graham Leadbitter
I agree entirely with those sentiments. Again, I will touch on that issue shortly.
The success of the Scotch whisky industry relies on firm foundations and support. Support can take many forms, and I will endeavour to outline the key areas in which the UK Government can take positive and beneficial action. First, on trade, securing beneficial free trade agreements is absolutely paramount. For example, a free trade agreement with India that reduces the 150% tariff on Scotch whisky could generate up to £1 billion in additional exports over the next five years and create 1,200 jobs. We must also continue to strengthen our trade relationships with the US, recognising the significant investment that the Scotch whisky industry already brings to the US economy.
Graham Leadbitter
I will give way first to the hon. Member for Glenrothes and Mid Fife (Richard Baker).
Richard Baker
Does the hon. Member agree that the work undertaken by Ministers to open up new markets for Scotch whisky is vital, and that the new special status for Scotch whisky in Brazil is great news for the industry? Does he also agree that the InchDairnie distillery in my constituency should be supported in launching its new rye whisky brand, through consideration of the current legislation regarding labelling, which is vital, but is creating a barrier to its accessing the rapidly growing market for rye whisky?
Graham Leadbitter
I totally agree with the hon. Member. It is really interesting that the industry is diversifying into new brands, new products and new styles of whisky being produced in traditional distilleries.
Douglas McAllister
The hon. Member will be aware that 90% of Scotch whisky is exported. Does he welcome this Government’s decision to give Scotch whisky protected status? Following on from that, Brazil granting special status to Scotch whisky is set to give the industry a boost of at least £25 million. Does the hon. Member agree that the UK Government are removing trade barriers and unlocking global markets, and does he welcome selling Scotland to the world, rather than just selling Scotland to itself?
Graham Leadbitter
Absolutely. As I have mentioned, 43 bottles of whisky are exported every second—that will be 75,000 bottles of whisky by the time we have finished this debate. That is a phenomenal export contribution not just to Scotland’s economy, but to the wider UK economy at the moment. I welcome the efforts made by the UK Government in the area of trade; the question is whether more can be done, and whether those efforts can be made more quickly.
Wendy Chamberlain (North East Fife) (LD)
It is right to give credit to the UK Government for some of the work happening on exports. However, does the hon. Member agree that the changes that the previous Government made to spirits duty, which this Government have refused to change, mean that the Treasury is losing out on money by not treating alcohol as alcohol across the different categories?
Graham Leadbitter
Absolutely. That is another point that I will expand on in a bit more detail shortly.
We must continue to strengthen our trade relationships. While this debate is rightly focused on UK actions, it will not have bypassed hon. Members that there has been significant media comment on tariff actions taken by the US Administration in recent weeks, and on what potential future actions may be taken. Combined with global headwinds affecting the wider luxury brands market, it has unsurprisingly generated comment and speculation, both from within the sector and elsewhere. Maintaining a watchful eye and accentuating the positives of the existing trade relationships remain vital.
On excise duty, the current tax regime is unsustainable. Scotch whisky and other spirits have faced a 14% increase in excise duty in just 18 months. Over the past 18 months the Treasury has lost £255 million, or £500,000 per day, in spirits revenue—a far cry from the £600 million that the Office for Budget Responsibility forecast that the increase in spirits duty would raise. That Treasury loss from lower sales was projected by the industry to increase as the Chancellor’s recent decisions start to bite.
If we want to examine the impact higher taxes have had on the retailers and the producers themselves, we need look no closer than right here. Last year a freedom of information request revealed that in the first 10 months of 2024, a year after the Conservatives hiked whisky tax, sales of whisky in Parliament’s gift shops plummeted, with average monthly sales of 5 cl bottles down 36% and 70 cl bottles down 16% by the end of October. That means that, when Labour MPs approved the Chancellor’s plans to further increase taxes on whisky products, they did not even need to leave the building to pass a shop adversely affected by the tax.
Lillian Jones (Kilmarnock and Loudoun) (Lab)
The SNP has failed to use the powers the Scottish Government have to grow Scotland’s economy and has instead provided over low growth and low productivity, prioritising vanity projects over economic development. Scotland lags behind the rest of the UK in 10 out of 13 productivity indicators due to several factors, including insufficient investment in key industries and underperforming innovation strategies. The Scottish Government’s slow response to support industries like Scotch whisky has exacerbated the issue. The lack of proactive long-term planning to foster business development and improve competitiveness has left Scotland’s economy struggling to keep pace with the rest of the UK. Is the hon. Member aware that his own Government’s inaction over 17 years has held this vital industry back?
Graham Leadbitter
That was a fairly lengthy intervention. The first point I would make is that the key concerns raised by the Scotch whisky industry are trade agreements and spirits taxation—and we are here to scrutinise the Government in Westminster, not Scotland.
The tax increase means that a minimum of £12 of the cost of a bottle of Scotch is now claimed by the Exchequer in tax for the first time, disproportionately penalising those who choose to consume Scotch whisky over other beverages. I urge the Government to reconsider excise duty on Scotch whisky to ensure that its global success story is not undermined.
On extended producer responsibility, we need a scheme that genuinely promotes a circular economy. The industry is supportive of EPR in principle, but it must not simply function as a packaging tax on producers. The costs imposed on producers through EPR are considerable and place significant additional cost pressures on the industry. Producers must be given clear figures to map their liability and meet their obligations. Better incentives need to be placed on local authorities to use the payments provided by producers to improve recycling and reprocessing services and in turn lower costs per tonne for producers.
Supporting the industry’s sustainability goals is absolutely crucial and will, by extension, help meet the wider net zero goals that I believe most of us want to see achieved. The Scotch whisky industry has long taken its responsibility to address its own impact on the environment and to tackle our emissions seriously. The industry is committed to decarbonising its own operations by 2040 and becoming net zero by 2045.
The Scottish Government’s Scottish industrial energy transformation fund and the UK Government’s net zero innovation portfolio are welcome and have been strategically important in de-risking new technology, supporting delivery and testing at scale. It is important to note the example of Chivas Brothers, which has set an ambitious target of becoming carbon-neutral in distillation by 2026—I repeat: by 2026, or next year—and is on target to achieve that. That is ahead of the Scotch Whisky Association’s industry target to decarbonise by 2040 and Scotland’s vision of being net zero by 2045.
Chivas’s heat recovery technology programme is open source, encouraging the adoption of technologies that unlock the successful reduction of energy intensity and carbon generation at scale. It is extremely heartening to see an energy-intensive business such as distilling being willing not just to invest millions in developing innovative new technology, but to invite competitors, supply chain companies and others to share in that learning and use it in other locations. That is something many other businesses could learn from in terms of how we collectively tackle our energy usage.
It is vital to protect the unique sales environment offered by duty-free and global travel retail, a critical market for the whisky industry. Duty-free sales have long contributed to the development of the Scotch whisky industry and are estimated to generate £6.2 billion in annual exports and support 42,000 jobs across the UK. Overseas duty-free sales provide a shop window for Scotland. The vast majority of major airports have shelves lined with an incredible variety of Scotch. Serious consideration of arrivals duty-free here in the UK could provide a new opportunity for whisky brands to showcase their products, while creating a critical new source of revenue through increased employment in the UK-based supply chain.
The Scotch whisky industry is a vital part of both the Scottish and UK economies, and is a source of national pride. In my own Moray West, Nairn and Strathspey constituency, the sector operates 48 distilleries—soon to be 49—numerous labs, whisky storage sites and offices with engineers, technicians and architects, and is supported by a vibrant and extensive supply chain and a busy logistics sector. More than 5,000 of my constituents’ jobs are tied to the Scotch whisky industry—one in every nine jobs. It is the most concentrated group of distilleries in the world.
By addressing the issues I have outlined today—trade, excise duty, extended producer responsibility, sustainability and duty-free sales—the UK Government can provide the support needed to ensure that the Scotch whisky industry continues to flourish for generations to come. We need all parties to champion our great exports, including Scotch whisky, and ensure that the sector has the support it need at home to deliver growth and investment, to flourish and to deliver on its sustainability objectives.
Alison Taylor (Paisley and Renfrewshire North) (Lab)
Thank you for calling me to speak under your chairmanship, Dame Siobhain.
I thank the hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter) for calling this debate on Government support for the whisky industry, a measure that I warmly support. I have the good fortune to represent some important whisky names located in my constituency of Paisley and Renfrewshire North. Diageo has a major distribution centre, and at Hillington we have a fine example of a modern distillery established by the Glasgow Distillery in 2012, which is going from strength to strength. We have a well-respected and established independent bottler in Douglas Laing & Co, which has more than 70 years in the industry, Russell’s bonded warehouse and, I suspect, more than a few customers of the Scotch whisky industry. So my constituency, like many others in Scotland, has a significant association with whisky, which is a good source of quality employment, a driver of innovation and a source of pleasure.
Whisky is a craft, an industry and an important export; it is symbolic of Scotland’s landscape and beauty. I welcome the recognition that this debate brings, and I pledge to support this vital Scottish industry.
Gregor Poynton (Livingston) (Lab)
It is a pleasure to serve under your chairmanship, Dame Siobhain. I congratulate the hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter) on securing this debate, and thank him for his forbearance in letting me say a few words. Showing that this is a cross-party issue, it great to see Scottish Liberal Democrats, SNP MPs and Scottish Labour MPs here. It is a shame that we have missed out on the Scottish Conservatives.
Scotch whisky is more than a drink; it is one of Scotland’s finest products, a symbol of our heritage and a driving force in our economy. In the Livingston constituency, we are proud to have world-class whisky producers such as the Glenmorangie and Ardbeg bottling plant and the North British Distillery. They generate good jobs, investment and prosperity in our communities, and that is why it is important that the Government have taken decisive action to support the industry.
We have worked tirelessly to remove trade barriers, ensuring that Scotch whisky receives the international recognition that it deserves. As others have said, Brazil’s decision to grant Scotch whisky special status will give a £25 billion boost to the industry by opening up one of the world’s fastest-growing markets. Brazil ranks among the top five global growth markets for alcohol over the next five years, and with exports to the country already topping £90 million in 2023, there is a huge opportunity for Scotch producers.
What is more, the Government’s decision to give Scotch whisky protected status will, as has been said, ensure that our product remains authentic and competitive, free from imitation products that could undermine its quality and reputation. This really is brand Scotland in action, expanding our global reach, strengthening our economy and boosting jobs and investment in Scotland. The support does not stop there. The UK Government’s decision to invest up to £5 million to cut costs for distillers in the spirit drinks verification scheme and to remove the mandatory duty stamps for spirits from May this year will be an important boost to the industry. Those steps will make it easier and cheaper to do business, ensuring the continued success of our whisky industry.
Scottish whisky is a global success story, but with the Government’s support, and with the Scotland Office relentlessly promoting Scotland and Scottish products, we will ensure that it remains at the heart of Scotland in the future.
The Minister for Food Security and Rural Affairs (Daniel Zeichner)
It is a pleasure to serve with you in the Chair, Dame Siobhain. I thank the hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter) for securing the debate and providing such an excellent and thorough introduction. I commend my hon. Friends the Members for Paisley and Renfrewshire North (Alison Taylor) and for Livingston (Gregor Poynton) on their contributions. I am sure that they will all be delighted to hear how much I enjoyed my visit in the summer to the Glendronach distillery in Aberdeenshire.
The Government recognise and celebrate the global success of the Scotch whisky industry, which is of historical and cultural significance and plays a huge role in the UK’s economy and balance of trade. In 2023, exports of Scotch reached almost £6 billion in value. That success comes from the industry’s well-earned reputation for quality and high standards, and we are committed to working with the industry to champion and protect that reputation.
Douglas McAllister
The Scotch whisky industry supports 41,000 jobs across Scotland, many thousands of which are in my West Dunbartonshire constituency, including at Chivas Brothers in Dumbarton and Auchentoshan in Clydebank. The October Budget backed Scottish whisky, introducing measures called for by the industry, and I welcome the Government’s move to address long-running discrepancies in the treatment of the Scotch whisky industry by ending duty stamps, and to reduce and deliver parity in the fees for the spirit drinks verification scheme. Can the Minister share when details of that very positive announcement on reduced fees will be confirmed?
Daniel Zeichner
I will come to the Budget measures in a moment, but first I endorse my hon. Friend’s point about the number of jobs the industry supports—41,000 in Scotland and a further 25,000 across the rest of the UK, many in rural areas.
Collectively, whisky distilleries are now Scotland’s most visited tourist attraction, bringing in thousands of domestic and international tourists every year, largely to rural areas, and creating many opportunities for employment. Whisky is also a hugely important trade good. In 2023, the equivalent of 53 bottles of Scotch every second were sold overseas. That is important to delivering growth at home, which is why we are committed to supporting the Scotch whisky industry to export its fine products to overseas markets. We do that by leveraging free trade agreements and removing barriers to market access across the world. We are currently working on no fewer than 29 markets.
Wendy Chamberlain
It is important that we recognise, particularly when we look at the US, that exporting Scotch is not the only challenge. The Scotch whisky industry needs ex-bourbon casks to produce the whisky we all know and love. Does the Minister agree that the Government need to ensure that conversations with the US Administration take place? Otherwise, our supply will be impacted.
Daniel Zeichner
I am grateful to the hon. Lady. We are well aware of the importance of those casks to the industry and their value.
As well as working with Governments overseas to increase market access, we work closely with the industry at home to catalyse its ability to reach export potential. We offer a wide range of support for businesses that want to start exporting or to expand into new markets, as well as a compelling programme of trade shows and events to support Scotch whisky exporters to access new markets, build buyer connections and increase marketing in target countries. We also have a network of international trade advisers offering one-to-one support across England, and teams with embedded sector expertise in Scotland, Wales and Northern Ireland. Overseas, we have a network of trade advisers and international market teams supporting agriculture and food and drink businesses in more than 100 markets, supplemented by a network of 15 highly skilled agricultural attachés focusing on removing trade barriers in key markets. We are aware of the challenges faced by Scotch whisky in international markets and we work closely alongside their representatives.
Officials across Government are working on trade deals and breaking down export barriers to ensure that Scotch whisky is traded on a fair playing field and has opportunities to grow in new and expanding markets. An important part of that work is securing geographical indication status in major export markets, to add to Scotch whisky’s domestic protection. The status is a special form of protection that defends the iconic product from imitation and counterfeiting. Last August, the Government were pleased to announce our role in securing this form of protection in Brazil, a country which is in the top five global growth markets for alcohol, and is worth almost £900 million in Scottish exports.
In the Budget a firm commitment was made to support spirits producers by, among other measures, investing up to £5 million in the spirit drinks verification scheme, which will reduce the fees paid by businesses for verification of their use of the Scotch whisky geographical indication, and go towards upgrading the overall verification scheme the Government provide. The specifics on how the funding will be used to improve the service will soon be announced by His Majesty’s Revenue and Customs.
Mr Angus MacDonald (Inverness, Skye and West Ross-shire) (LD)
The share price of Diageo is down by two thirds, that of Pernod Ricard has halved—the whisky industry is in a difficult place. In the Budget, the duty added to a normal bottle was 32p, taking the total duty on a bottle of spirits up to £9.18. Does the Minister not think that we are plucking the golden goose once too often?
Daniel Zeichner
I hear those concerns. We are addressing a whole range of financial issues across the economy, and we think this is a fair and balanced approach.
To continue outlining some of the measures that we have taken to support the industry, we have announced measures to reduce business costs and encourage growth. We will be doing away with the alcohol duty stamp scheme from 1 May. About 3,500 spirits producers, bottlers and labellers will no longer need to comply with the duty stamp requirements, saving an estimated £6.5 million annually.
We will also simplify the administration of alcohol duty, reducing burdens and supporting growth. From March 2025, HMRC’s arrangements for duty returns and payments will be reformed, supported by a new online service. Additionally, reform of the production approvals required by spirits producers means that many will no longer be required to operate separate excise warehousing facilities for the storage, bottling and labelling of their own products.
The industry has always been innovative in sustainability practices. That is reflected in the strategy developed by the Scottish Whisky Association, supported by the UK Government as we strive to develop a more circular economy. The strategy involves a number of packaging reforms, such as the deposit return scheme and extended producer responsibility. We genuinely believe that this partnership working toward a common outcome will help us all to achieve wider sustainability goals.
We are aware that some distilleries in Scotland have struggled in recent years with delays and limitations to connection with the national grid, creating a barrier to growing their businesses. Reducing electricity network connection timescales and expanding network capacity to connect and to power businesses are both top priorities for the Government. We are working closely with Ofgem and the National Energy System Operator to accelerate network connections. The newly announced mission control for clean power 2030, alongside planning reforms to speed up infrastructure development, will play a vital role in unlocking grid connection delays for Scotch whisky distilleries, especially those in rural areas.
I thank the hon. Member for Moray West, Nairn and Strathspey again for securing this debate. In the contributions today, we have heard Members’ passion for this vital and important industry in Scotland and the wider United Kingdom. We have also demonstrated the strong support the UK Government are giving the Scottish whisky industry by listening to and acting on the industry’s concerns, and by working collaboratively toward common goals.
Question put and agreed to.