Support for the Scotch Whisky Industry

Graham Leadbitter Excerpts

Wednesday 12th February 2025 Westminster Hall

[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?

--- Later in debate ---

[Graham Leadbitter]

Yes.

[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.

[Richard Baker (Glenrothes and Mid Fife) (Lab)]

rose—

[Douglas McAllister (West Dunbartonshire) (Lab)]

rose—

[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?

--- Later in debate ---

[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.