Support for the Scotch Whisky Industry

Lillian Jones Excerpts

Wednesday 12th February 2025 Westminster Hall

[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.