Scotch Whisky Excise Duty

Baroness Morgan of Cotes Excerpts

Wednesday 8th January 2014 Westminster Hall

[The Economic Secretary to the Treasury (Nicky Morgan)]

It is a pleasure to serve under your chairmanship, Mrs Main.

I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate and I note the wide interest in it, as shown by the number of Members here in Westminster Hall.

In the time available to me, I will be hard pressed to answer all the questions, however nicely Members indicate to me from a sedentary position that they would like to intervene. However, I shall do my best and if I do not address all the points that have been made today, I will write to the hon. Gentleman to do so, and he can perhaps share that information with other members of the all-party group and others who are interested.

I start by highlighting the Government’s continued commitment to the Scotch whisky industry. First, Scotch whisky is a protected spirit drink, which helps to maintain its high reputation both at home and abroad. Secondly, and related to that, Her Majesty’s Revenue and Customs will shortly be launching its spirit drinks verification scheme. Within the first two years of that scheme, every single business involved in the production of Scotch whisky will be verified to ensure that they are creating a genuine product. This will help to protect the industry’s deservedly high reputation. In fact, the Scotch Whisky Association has praised HMRC’s commitment to deliver a scheme that fits its needs.

Thirdly, I am proud to report that Scotch whisky of course featured as one of the first products in the food and drink element of the GREAT campaign. This helps to give Scotch whisky high visibility internationally in key export markets, the importance of which we have already heard about. The Scotch whisky industry is to be congratulated on its export success. The Scotch Whisky Association reports that the value of exports increased by 11% to almost £2 billion in the first six months of 2013. That is something that I think everybody in Westminster Hall today will support. I think that people will agree that those measures leave no doubt about the Government’s commitment to the Scotch whisky industry, and I want that message to be heard and understood by Members from all parts of the House.

I turn now to duty, because that is the issue that the hon. Gentleman and other hon. Members, in their interventions, focused on.

[Angus Robertson (Moray) (SNP)]

The Minister may or may not be aware that I have the onerous responsibility and the pleasure of representing the heartland area of single malt production, with more than half of all Scotland’s distilleries based in Speyside. I just wanted to ask her about a basic democratic point. We have heard interventions from Labour Members, the Liberal Democrats and now from the Scottish National party, and Members from those parties make up 58 of the 59 MPs from Scotland who are at Westminster, with all of us saying that we want tax fairness and duty fairness. Is the Minister prepared to confirm that the Government will actually listen to the views of the overwhelming majority of democratically elected representatives in Westminster Hall today and deliver on tax fairness, or not?

[Nicky Morgan]

I hope that the message is going out that this Minister is always willing to listen and that she is willing to engage. I am also very willing to have the meeting that was suggested by the hon. Member for Central Ayrshire. However, I would be a foolish new Minister if I were to commit to announcing Budget moves now. Nevertheless, I shall certainly listen; I have listened; and I shall continue to listen to the debate that we are having and to the wider representations that have been made to me. I thank the hon. Member for Moray (Angus Robertson) for his intervention. As he said, he has a very onerous task in representing his constituency; I am sure that his constituency Fridays are filled with much fun and spirits.

I return to the duty escalator, including that on Scotch whisky. I am aware of the industry’s views on the pre-announced alcohol duty rises for 2014. It may be helpful if I explain the background to these increases before addressing the specific issues that were raised by the hon. Member for Central Ayrshire. Of course, the previous Government were responsible for introducing the spirits duty escalator and are therefore responsible for this year’s increase in spirit duty. The inflation plus 2% rises were first announced at Budget 2008 and they were extended for a further two years, until 2014-15, at the March 2010 Budget. These rises were for all alcohol duties and, as I say, were legislated for by the previous Government.

This Government made changes to beer duty at Budget 2013 to support pubs, which, as we all know from our constituencies, play an important role in local communities. The hon. Gentleman asked about the impact of last year’s Budget on pubs and I shall address that issue in a moment. However, he also talked about 68% of the alcohol that is sold in pubs being beer, so the changes to beer duty were, overall, a measure to help pubs. I can also tell him that although spirits and wine account for 41% of sales by value in the off-licence trade, they account for only 23% of sales in pubs by alcohol volume.

[Mr Donohoe]

I do not know where the Minister got that last figure from. I ran licensed premises, and although it is perhaps different down here in the south-east, I can tell her that in Scotland whisky accounts for at least 40% of sales in the pub, and in the pub that I ran the figure was 60%. [Laughter.]

[Nicky Morgan]

The hon. Gentleman’s pub sounds as though it was a very interesting place, and I am very happy to listen to representations on the figures.

The hon. Gentleman asked about the impact of Budget 2013 on pubs. The British Beer and Pub Association survey showed that, following a reduction in beer duty, 76% of the pubs would increase investment and 61% would employ more staff. That is why this reduction was targeted particularly at pubs. That is not to say that I have not listened to the hon. Gentleman’s arguments.

Given the Government’s commitment to ensuring sustainable public finances, it was not possible to end the escalator on all alcoholic products, so they made a targeted reduction in beer duty. The hon. Gentleman asked whether the Government had failed to consider other alcohol duties. I was not in the Treasury at that point, but I do not think that that was so. However, the decision to reduce the duty on beer was taken in 2013.

I have heard the views of hon. Members and I assure them that I will consider these as part of the Budget process.

[Graeme Morrice]

I congratulate my hon. Friend the Member for Central Ayrshire (Mr Donohoe) on securing this debate. The Minister may not be aware that there is a considerable number of whisky producers in my constituency, including the North British Distillery in West Calder, Glenmorangie and Glen Turner in Livingston, and Ian MacLeod Distillers in Broxburn. This last wrote to me recently to express concern about the fact that, in the past five years, while we have seen a 44% increase in taxation on whisky, there has been a 12% reduction in UK sales.

--- Later in debate ---

[Mrs Anne Main (in the Chair)]

Order. Minister.

[Nicky Morgan]

Mrs Main, I take the hint that you want me back on my feet and moving towards the conclusion of my speech.

I assure the hon. Gentleman that I will give this matter serious consideration in the run-up to the Budget. I shall certainly discuss it with my colleagues in the Treasury, including my right hon. Friend the Chancellor of the Exchequer.

[Jim Sheridan]

Will the Minister give way?

[Nicky Morgan]

I want to make progress and I am keen to get some further points in before the end of the debate, but I will try to take the hon. Gentleman’s intervention if I can.

The hon. Member for Central Ayrshire mentioned that spirit duty had risen by 44% between 2003 and 2013. I should point out that beer duty in that period rose by 56%, while still wine duty rose by 68%. We can trade as many numbers as we want, but I take the overall thrust of the arguments made today.

The hon. Member for Argyll and Bute (Mr Reid) asked about the spirits duty rate having risen by 37%. Duty on Scotch whisky has risen at a slower rate than beer duty over the medium term. The spirits duty rate was frozen between 1998 and 2008, and during that time duty rates on other alcoholic beverages increased. However, between the introduction of the escalator and 2013, the spirits duty rate rose by 37%, while other alcohol duty rates rose by 42%. I just wanted to put that on the record for the benefit of the House.

[Mr Reid]

I want to put it on the record that Islay, not Moray, is the heartland of the Scotch whisky industry.

We can all trade figures, but the point is that under the current duty escalator policy, the duty on spirits will rise in the next few years at a much greater rate than that on beers and will make the already unfair situation even more unfair.

[Nicky Morgan]

I understand that point.

[Jim Sheridan]

One of the best adverts for Scotch whisky was the long tradition whereby the Chancellor used to take a glass of whisky on Budget day. Is there any reason why that no longer happens?

[Nicky Morgan]

The hon. Gentleman is tempting me down the path of speculating on the Chancellor’s alcohol intake, which I really do not want to go down. Of course, I notice that my glass is not in front of me this afternoon.

I thank hon. Members for this debate and thank the hon. Member for Central Ayrshire for securing it. I will be happy to study the written report of it. I hope that this debate shows the Government’s continuing commitment to the Scotch whisky industry and that we will help it where we can.