International Trade

Lord O'Neill of Clackmannan Excerpts

Thursday 23rd January 2014 Lords Chamber

[Lord O'Neill of Clackmannan (Lab)]

My Lords, I am very happy to follow the noble Lord, Lord Purvis, into what may be the Caledonian corner of this debate. Unfortunately, both he and I seem to have the same brief from the Scottish Whisky Association, so some of the statistics that I will be quoting may well be the same, although I have a slightly different slant on the matter.

I share some of the concerns expressed by my noble friend Lord Harrison in opening the debate, but I want to talk specifically about the Scotch whisky industry. When I was a Member of Parliament, I had a sizeable involvement in the textiles industry. Sadly, that industry is now gone, with the exception of a small amount of cashmere spinning, which is important for the rest of what you might call the Scottish woollen knitting industry.

Whisky is identified with Scotland. Indeed, the generic term “Scotch” covers all whisky which is not spelt with an “e”. We have already heard of the great importance the volume of Scotch whisky has for the Scottish economy. While it is correct to say that whisky distilling is set in rural circumstances and a lot of the raw materials come from the agricultural sector, it is also fair to say that the 30,000-plus employees in the Scotch whisky industry cover a variety of trades and economic activity across not only Scotland but the whole of the United Kingdom. It is therefore of great importance.

It is one of the few British products that any foreign traveller will see as they pass through airports with duty-free facilities, because there is always Scotch available. Not only is it available, but it is of consistent quality and people can have confidence in what they are buying. This is partly because of the efforts of the industry to maintain high standards but also because it enjoys a degree of support through the common market—and not only the common market of the United Kingdom but the free market represented by the European Union, which has been invaluable in supporting the Scotch whisky industry over the years.

As I have said, I had a constituency interest in the industry. Indeed, when I was a young candidate more than 30-odd years ago, one of the first bits of local colour that I was given was that I was told that the value of whisky stored in Clackmannanshire represented more than the worth of the gold in the Bank of England. I shall not comment on whether or not that was apocryphal but, certainly, when you drive through central Scotland and you look over to the Ochil hills, you will see miles of what used to be called bonded warehouses, where there is stored cask upon cask of Scotch malt whisky. That whisky can be there for anything up to 15 to 20 years. It represents a massive commitment by investors in the industry. Most of it in these warehouses is produced by the Diageo group, but the fact is that the Scotch whisky industry is a long-term industry.

Indeed, not only are taxes paid to the British Government, there is also the “angel tax”, which is the amount of whisky which escapes through the wooden casks and into the air. As you walk through these bonded warehouses, as I have done on occasion, you can have quite a heady experience if you stay there long enough—which I have not had the privilege of doing. However, as Ken Loach showed in his movie “The Angels’ Share”, there is evidence that the Scotch whisky industry requires the persistence and confidence of investors.

What concerns me is that, in the run-up to the independence or separation referendum in September, people will forget the complications with which the Scotch whisky industry will be presented if there were to be a yes vote. For a start, we would not become members of the European Union immediately. In the short term, we would be denied the services of the European Commission in the opening of new markets. The Commission has done a great deal to ensure what it calls the integrity of the product. This includes a consistent minimum level of alcoholic strength and that the “Scotch” name is protected. As my noble friend Lord Davies said a few minutes ago, the word “Scotch” is protected, and that is a consequence of the United Kingdom’s membership of the EU.

There are several complex international considerations, so it is not for nothing that over the past 10 years the trade association of the Scotch whisky industry has been headed first by Gavin Hewitt and now by David Frost, both of whom are distinguished diplomats in their own right, having been ambassadors representing us abroad. This is a serious business and there will be serious consequences for the industry and for the Scottish economy if we are denied, even for a short period, the protection of the EU.

Any member state joining the EU has to accept the level of tariffs that prevail throughout the rest of the EU. At the moment, Hungary and Greece are in a somewhat acrimonious arm-wrestling process over their own tariffs, but I think it is fair to say that the Commission is confident of success. The fact is that, were Scotland to vote yes in September, this industry would be put at a great disadvantage for some time, and that is assuming that in the end an independent Scotland would be allowed to join the EU. However, much of the protection we enjoy at the present moment might well disappear. If that were to happen, I think that the confidence of investors in the industry would be jeopardised in a major way.

Equally, while Scotch enjoys a fantastic position internationally as a luxury product, a number of other drinks would seek to take advantage of the position of Scotland being denied EU membership. A fact that I always find quite surprising is that more Scotch is consumed in France than French brandy. I am pretty certain that the French drinks industry and the northern European white spirit industries would not stand idly by and let Scotland be given some kind of quasi-preferential status outwith the European Union.

When we hear about the strength of an independent, separate Scottish state, and that one of its elements would be the Scotch whisky industry, it is incumbent on the Government to spell out clearly the costs of not being a member of the EU. Perhaps some people will think about this tomorrow when another debate is held in this place. What is equally important is that it is essential to recognise that it would be not be business as usual for the Scotch whisky industry were there to be a yes vote in September.

It is an important industry; it is not some kind of Sleepy Hollow. As has been said, some 30,000 people are involved in it. Quality control and policing are undertaken by people of the highest calibre. Although it may sound a bit demeaning in some respects, the wages of the workers in this industry are now on a par with those of the best paid chemical process workers, who themselves are among the best paid in the UK economy. For a while, employment conditions in certain parts of the Scotch whisky industry were in a bit of a Sleepy Hollow but, led largely by Diageo over the past 25 years, there has been a dramatic improvement. The quality and nature of employment in the industry goes far beyond pouring drink into bottles. It is of a character that the United Kingdom requires and which Scotland would lose at its peril.

I therefore urge the Minister, not necessarily this afternoon but at an appropriate point, to spell out that whisky is as important to the United Kingdom as it is to Scotland, and that without the European Union alongside us, it would be a disaster for Britain and Scotland.

Falkland Islands

Lord O'Neill of Clackmannan Excerpts

Wednesday 13th June 2012 Lords Chamber

[Lord Howell of Guildford]

If I may say so to my noble friend, that is a very interesting thought, which I will certainly pass on to my colleagues. It will be important to establish beyond doubt that whatever emerges from the referendum is absolutely and properly established, and that the whole process is properly conducted. Of course it is undeniably on a very small scale, and therefore the monitoring and checking should be absolutely 100% proof that this is a sensible and precise expression of the wishes of the islanders.

[Lord O'Neill of Clackmannan]

I welcome the Statement by the Minister, and declare an interest in so far as I am the chairman of the South Atlantic Council, a body established after the war to try to improve the triangular relations between the islanders, Argentina and the United Kingdom. The degree of success that we have enjoyed has been variable, but it must be made clear that sabre-rattling by the United Kingdom at this time is irrelevant, because democracy followed the war in Argentina and that, in turn, resulted in the demilitarisation of its economy and the country. The defence cuts of which we are talking this afternoon in the United Kingdom are as nothing compared to what has taken place in Argentina. It is therefore totally unrealistic to talk in terms of a military threat from Argentina. The Malvinas mania going on in Buenos Aires and across the country is concerned primarily with disguising the economic chaos engulfing that country.

We should take Gibraltar as a pointer. When a clear expression of democratic opinion was made, Spain began to think again about how it dealt with the problem of Gibraltar. In the kind of triumphalist rhetoric in which we sometimes indulge regarding the Falklands, it would be unfortunate if we failed to think about what should happen after the referendum. Now, for the first time in several years, there is an ambassador to the Court of St James’s from Argentina. Let us take advantage of that, and start a dialogue rather than just the haranguing which has been carrying on for the last few years. Let us use the opportunity of what I am fairly confident will be a clear expression of the opinion of the people of the islands that they wish to retain the status quo. There are many things—fishing, hydrocarbons, tourism, shipping, flights to the islands—which should be the subject of clear and straightforward negotiation. This could provide us with an opportunity to start afresh after many lost years—largely lost, I have to say, due to Argentine intransigence.

[Lord Howell of Guildford]

The noble Lord is extremely well informed on this and has followed it very closely. Of course, leaving aside sovereignty and the wishes of the islanders to remain a self-governing territory of the United Kingdom—very clearly expressed, and I am sure they will be again—a whole range of things have been offered to Argentina. There is much talk, of course, about the hydrocarbons explorations around the island. Thirty years ago, when I was involved in some administration of this country on energy matters, one of the files on my desk was concerned with exploration of the hydrocarbons around the Falklands—and that was right at the start of this, in 1980. All along, and increasingly and very specifically in the 1990s, offers were made to the Argentinean people to co-operate very closely and to share the benefits of anything that emerged. That was just one example; the noble Lord gave many others. There is a whole range of areas where there could be extreme benefit to the people of Argentina, but they must not include—and in fact must exclude—the consideration of the sovereignty and the self-determination of the people of the Falkland Islands.

Argentina: Falkland Islands

Lord O'Neill of Clackmannan Excerpts

Monday 11th October 2010 Lords Chamber

[Lord Howell of Guildford]

I can confirm that the US position has not changed, regardless of the allusions to which the noble Lord has referred. The US recognises the UK’s administration of the Falkland Islands. We are in regular touch with the US on this issue, as on many other issues. We expect that dialogue to continue.

[Lord O'Neill of Clackmannan]

Does the Minister agree that the UN decolonisation committee is normally concerned with the liberation of subjugated peoples rather than the transfer of ownership of islands that are largely uninhabited and are liable to be uninhabitable for a long time to come? Surely the role of the British Government at this time, nearly 30 years after the cessation of hostilities, should be to try to achieve a decree of reconciliation between the megaphone diplomacy of the Kirchner Government and the obduracy of many of the islands’ elected councillors, who do not seem to realise that they live in a world in which their nearest neighbour could be a friend rather than a source of hostility?

[Lord Howell of Guildford]

Except on the question of the Falkland Islands and its right to self determination, which I am sure that the noble Lord would not be against, we wish with Argentina—an important country and a member of the G20—to establish better relationships. But it is very hard if all the time the counterpropositions and withdrawal of co-operation we have described occur. The noble Lord is touching on a relevant point as regards the decolonisation committee, which is rather outdated and full of language about colonies, British imperialism and so on. We have moved far away from that because the Falklands Islands is a self-governing overseas territory under the British Crown and that is what it remains.