Alistair Carmichael MP: Hammond threatens 'economically fragile communities' every time he plunders our successful Scottish Whisky industry

Posted On: 
31st October 2017

The Liberal Democrat MP, Alistair Carmichael, says the Treasury must stop treating the Scottish Whisky industry as a 'cash cow'.

Credit: 
PA

There are not many British industries who can look to the future with anything approaching certainty and the Scotch Whisky Industry is no different. 

As an industry for which export markets are enormously important they view the prospect of Brexit with some trepidation but manage to put a brave face on it. On the one hand the Scotch Whisky Association has welcomed the intention of the Government to have a transitional period but goes on to observe “to ensure the competitiveness of Scotch, we need as frictionless customs and excise procedures as possible, during transition and after the UK leaves the EU.”

The Chancellor must take action to reduce the 'scotch supertax'

As things stand the industry it is in good shape. It is the largest net contributor to the UK’s balance of trade, worth some £4 billion every single year. It makes up one fifth of the UK’s total food and drink exports.  Last year alone seven new distilleries came into production with several others planned. Just last month Diageo announced that it would be investing heavily to reopen Port Ellen and Brora Distilleries.

This is a pattern that has been building for years. In my own constituency it has been great to see Scapa emerge from mothballs to grow its production impressively and to emerge from the shadow of its better known neighbour, Highland Park. Orkney is plenty big enough to accommodate two global players within its shores!

It is not all about the big boys. On Islay, ten years ago, the Wills family on Islay set up Kilchoman Distillery. Today they have a fine range of expressions and a business that turned over £4.6million in 2016.   They are still a family business employing up to thirty people all based on Islay. 

You might argue that the biggest threat facing the industry is complacency. The Treasury has form when it comes to seeing a successful industry and treating it as a cash cow - ask anyone in the oil and gas industry.

Earlier this year the Chancellor raised spirits duty by 3.9% and is planning a further rise of 3.4% now. The March increase not only damaged confidence but actually saw a reduced return for the Treasury with spirits revenue falling 7% in the first quarter of 2017/18 compared to the same period in 2016/17.

Contrast that with what happened after the coalition government cut the rate of spirits duty in 2015 by 2% - only the second time that this had ever happened. Then the take in spirits revenue went UP by 4%.

Why does this matter?

It matters because the Scotch Whisky industry has the promise to keep earning an export dividend for the UK plc as they break into new markets. It is difficult, however, for the marketers and the trade negotiators to argue against tariff barriers when governments elsewhere in the world see how we treat the industry here.

Of course the benefits of a more pragmatic policy on spirits duty go beyond the Scotch Whisky industry. The growth in recent years of craft gins has been quite phenomenal.  In 2016 exports of gin grew by a staggering 12.5%. The synergies between the two products are obvious.  Gin often serves to keep the cash flowing while whisky in these new distilleries lies in barrels maturing for the minimum three years required in order for it to be called whisky.

Much of the production of both spirits is done in some of our most economically fragile communities, far from the large centres of population. They are the ones who will be the first to feel the pinch if the Chancellor again comes to plunder one of the most successful industries we have.

 

Also writing for PoliticsHome, the Chairman & CEO of Chivas Brothers, which controls 14 distilleries in Scotland, calls on the Chancellor to take action in the Budget to reduce duty on whisky to boost the Scotch Whisky industry, which has recently witnessed a drop in sales. Read the full article here.