§ 11.25 p.m.
§ Mr. Hamish Watt (Banff)I welcome this opportunity to inform the House and the Government of the present depressed state of the Scotch whisky industry.
My constituency contains approximately one-third of all the malt whisky distilleries in Scotland, and what is happening in Banffshire is indicative of what is affecting the whole industry. It is having an effect on employment throughout Scotland.
When I point out that one gallon of whisky made and laid down in bond this year is the basis of no fewer than 22 bottles of saleable whisky five to eight years hence, I hope that the unnecessary long-term damage that is being done to one of Scotland's most valuable exports by Government indifference, neglect or just plain greed in the short-term imposition of taxes will be realised.
It is in the interests of everyone that the exports of Scotch whisky continue to rise. Exports of Scotch have risen in the past 20 years by approximately 9 per cent. per annum, but unfortunately the figure fell dramatically in 1975 for a variety of reasons, not the least of which was shortage of cash throughout the entire whisky industry to spend as liberally on advertising as in the past.
I shall deal briefly with only one of the markets where a drastic fall-off in the uptake of Scotch occurred—namely, Italy. Towards the end of 1974, in order to 542 protect its wine industry, Italy imposed a discriminatory value added tax on spirits made from cereals. This resulted in a severe fall in shipments of malt whisky to Italy—a drop of 27 per cent. and a loss of £6 million to the British balance of payments.
As a partner in the EEC, Britain must press the EEC Court of Justice to have this discriminatory tax removed in the interests of parity of alcohol regimes throughout the Common Market.
I turn from me examination of the overseas market to examine the domestic market, where we find an even more severe discrimination against whisky. The duty charged per degree of alcoholic strength is 6.75p for beer and 22p for whisky, with wines and sherries some way between. I do not wish to overburden my speech with statistics, but surely there is a strong case for a narrowing of that wide gap by bringing the latter down. The tax on whisky being three times higher than the tax on beer is surely discrimination of the worst kind.
The Scotch whisky industry is no lame duck, and it is not asking the Government for any hand out, but unless it can retain more of its own cash I am afraid that the Treasury's golden goose, the whisky industry, will rapidly go into a moult and will stop laying golden eggs. Every bottle of whisky is a golden egg to the Government, for on a bottle of whisky costing £3.40, the Government get no less than £2.70. From the remaining 70p the industry has to finance the cost of production, warehousing, blending, bottling, transport, advertising and retailers' profit. Surely that is indicative of a thriving industry.
Already there has been a great retrenchment in the production of malt whisky this season. This has already resulted in loss of jobs in my constituency and elsewhere in Scotland. Distilling is the biggest single employer of labour in Banffshire, and already there have been lay-offs, but many of the worst effects of the recession are hidden by short-time working and longer enforced holidays. Ever since the war there has been virtually no close season in distilling, but this winter it is common practice for distilleries in my constituency to cut out weekend mashing altogether, and to close for long periods 543 over New Year and in the summer. Distillery men and their families have become accustomed to pay packets swelled by overtime and double time pay. Now with short time and flat time the purchasing power of a large section of the community has been badly slashed and every shopkeeper, garage and small business man is feeling the pinch.
I am fully aware that what I have said in the last minute or so could have been said by virtually any hon. Member about any industry in his constituency, but here ends any similarity between the whisky industry and virtually any other industry one cares to mention.
The production of cars, washing machines, television tubes and the like can all be compensated for at a later date by factories working overtime when the economy improves. But whisky production that is lost this winter can never be made up. There will be a grave shortage of 1975–76 whisky to put into bond in five years' time, and nothing can fill the gap that will be caused by this year's lost production.
My party has taken a lot of stick in many quarters for voting with the Government to save Chrysler United Kingdom because of the Linwood factory. But it was not only the Chrysler United Kingdom jobs we were saving. We feared the snowball effect on the steel industry of the West of Scotland and on other ancillary industries throughout the United Kingdom.
Now, in exactly similar fashion, I fear the snowball effect on many jobs in Scotland because of the 17 per cent. drop in the production of whisky which has occurred this year. There are some 25,000 workers employed in the whisky trade, but this does not take into account the many transport drivers, mechanics and others that all totally depend on whisky transport for a job. Nor does it include the many glass workers in factories throughout the United Kingdom who are also on short time or who are even now being made redundant because of the general downturn in the business.
Perhaps the most dangerous aspect of the whole situation is that the coopers who make the barrels to hold the whisky while it is maturing are being paid off. Coopering is a highly skilled and highly 544 paid job, but it is also an extremely hard job. Coopers work at a tremendous pace and the noise and bustle in a cooper's store has to be seen to be believed. I would welcome any hon. Member coming to Speyside to see precisely what I mean. I was a working farmer for many years and I am no stranger to hard work, but I would be hard pushed to say that, with the single exception of lambing time, I have ever worked at such a pace as a cooper does.
If these men get paid off and find a lighter job, even if it is less well paid, they will be extremely reluctant to return to such arduous work, and we could well find that there will be a grave shortage of casks when production of whisky gets into its stride again, as it undoubtedly will. The world is developing a taste for Scotch whisky and the present slowdown in sales will be only temporary. It is vital that stocks are there when the upturn comes.
The Scotch whisky industry is a wonderful industry with a great future to look forward to, for the best is yet to come. Whenever I am trying to persuade a whisky company chairman to build a new distillery in my constituency I remind him that the best whisky has yet to be made.
I am confident that the Government have got lots of revenue to come from whisky in years to come, whether it be this Westminster Government or, in the days to come, a Scottish Government. But it is essential that this Government pay heed to the needs of the industry now and leave it with more of its own cash to spend on financing the laying down of stocks now.
Many Front Bench spokesmen in the past few weeks have spoken of the need for industry to stockpile against the day that trade improves. That is precisely what the whisky industry wants to do at the moment. Incidentally, if the Government have any spare cash—or, indeed, if any company or individual has spare cash—the laying down of whisky this year could well pay handsome dividends.
I talked earlier of the snowball effect. One side effect of the present downturn and the reduced uptake of malting barley by the maltsters has been that many farmers fear what the future holds for their production of barley of malting 545 quality. If these maltsters go out of the market for malting barley, farmers will turn to growing varieties of barley for feeding livestock—barley of lower quality but capable of higher yield than malting barley. Like the coopers, once lost to the trade—a very specialised trade—these farmers will be reluctant to change back.
The blenders, the bottlers, the shippers and many other trades throughout the United Kingdom are all dependent on a thriving whisky industry. What I am asking the Government to do to help the industry and to help all my constituents who depend on the industry is, first, to see fair play for the industry and to make representations to all those Governments—such as those of Italy, Brazil, Japan, Australia and the United States—who clap discriminatory taxes on Scotch whisky imports to protect their own alcohol industries or simply to raise extra revenue on a top-selling and top-quality drink.
I know that the Government will claim that they do not want to be the first to start a trade war, but, as a prominent figure in the whisky business told me only last night, that trade war has already been started, and not by us. It is now up to the British Government to protect their best foreign currency earner. If hon. Members will note the countries that I mentioned they will see that they all export far more to us than we do to them, so we are asking the British Government to use the trump card they hold in their hand.
The industry is not calling for a temporary bail-out of £162.5 million—the sum that the House saw fit to give another industry some weeks ago; nor is it asking for £2,000 million over 10 years, as was given in the case of yet another industry. It is asking only for that which is its own. The whisky industry urgently needs a derogation of excise duty for 50 days from the day that the whisky leaves the bonded warehouse. The beer industry has this period of credit of duty. Surely the whisky industry is entitled to parity.
At the present rate of excise duty the industry is at any time financing duty to the tune of more than £60 million. Towards the end of the year, when there is obviously more whisky passing through the trade, the figure nears £110 million. If this money could be released to the 546 industry it could once again afford to finance the laying down of stocks that are so vital to the long-term prosperity of the entire industry and the countryside from which it stems.
We are all aware of the historic reasons for the Government's insisting on the payment of duty before the whisky is taken from bond, but the days of the illegal distiller and the smuggler of bootleg liquor have long since gone. Mr. Deputy Speaker, in these days I could not find you a drop of moonshine or illicit whisky even if you paid me. The distilling companies are all respectable operators now and have a great deal of money involved in the industry, with highly sophisticated, automated plants, capable of high outputs of top-class whisky. There is no such thing as bad whisky—the only thing is that some whiskies are better than others.
The whisky companies provide many men with congenial, highly-skilled and well-paid jobs. Strikes are almost totally unknown. If ever an industry was worthy of attention by the Government in its time of need it is surely the whisky industry. So far as I can discover, the last debate on the whisky industry in this House took place on 2nd February 1965. The industry has not asked anyone in this House to lose much sleep and I am sure that all hon. Members will agree that during all those 11 years the judicious use of a wee dram at bedtime has induced a sound sleep for many hon. Members and many millions of satisfied customers all over the world, most of whom have never seen the lovely glens and hills from which fine malt whisky originates.
In conclusion, I ask the Minister to ask his colleagues in the Treasury carefully to consider this most reasonable request. Indeed, the leaders of the Whisky Association are such reasonable men that they are prepared to see parity come about by a series of steps, say two weeks' derogation this year, two weeks' next year and so on for four successive years until parity is reached with the beer industry. They can hardly be fairer than that.
This is a sound industry, worthy of attention and support, with a colourful past and a brilliant future—if only it gets a transfusion of its own money now.
§ 11.42 p.m.
§ The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang)I am grateful to the hon. Member for Banff (Mr. Watt) for giving us the opportunity to discuss this important industry. The fact that we have Members from all the political parties present tonight—and Adjournment debates are often not very well attended—reflects the importance the House attaches to this industry.
The growth of the Scottish whisky industry must be one of the finest examples of the graceful and gradual development of a traditional cottage industry into a highly sophisticated export-orientated industrial activity which nevertheless retains the unique qualities of the original product. The very fact that Scotch is a premium quality product means that it faces particular challenges in home and overseas markets, especially in the present world economic climate. The industry faces problems of taxation and discrimination, even adulteration and imitation. Fortunately no one has ever found a substitute product which could be mistaken for true Scotch and I doubt whether anyone is ever likely to do so.
I will deal with the points raised by the hon. Member but before doing so it is important for me to emphasise the significance of this industry to our nation and the immense importance which the Government attach to it. It is a highly successful sector in our economy, responsible for about 2 per cent. by value of the total United Kingdom exports. It is important in providing employment for over 20,000 people, mainly in areas of high unemployment in Scotland. The industry has an excellent record in production terms and in labour relations.
It is the duty of any Government to see that an industry as important as this is provided with a climate in which it can prosper. Scotch whisky is an important source of revenue to the Exchequer. In our private lives we may regret this, but it is a fact that about half the estimated total revenue of £640 million from spirits in the current fiscal year will accrue from Scotch—well over £300 million. I was interested to hear the hon. Member suggest that one day that revenue will go to an independent Scottish Government. Since we have the hon. Member for Western Isles (Mr. Stewart) with us, may 548 I express the hope that we will make a point of explaining to the whisky industry the implications of those customs posts which he told us he planned to erect at the border with England if he gets his way. In value terms, the English market is a lot more important to the industry than the Scottish market and imposing a big tariff before the product reaches the English market would not help the industry.
The question of duty rates, to which the hon. Member for Banff referred, is one for the Chancellor of the Exchequer who knows the views of the industry very well. It is somewhat arbitrary to say, as did the hon. Member, that duty should be the same for different commodities in relation to their alcohol content. I do not want to burden the House with too many figures, but the duty increase in the last Budget was 29.8 per cent. for whisky and 46.3 per cent. on beer. There is no implicit reason why the rate of duty on whisky should be the same as that on wine, beer or anything else.
The hon. Member for Banff spoke at length about deferment of duty, This is a matter on which the industry has been campaigning for some time and the hon. Member indicated how it might be phased in. The industry is basically asking for a tax credit. Arrangements for paying duty in the United Kingdom are linked to our generally available bonded warehouse system. Duty is payable on clearance from the warehouse and thus the bondholders have to finance the duty paid to the Exchequer until they receive payment from their customers, normally the distributors.
Duty deferment is allowed in other EEC countries, but their bonding systems are generally less widely available than ours. Brewers do rather better in enjoying a modest deferment, but in their case the bonding system is not involved and the duty is levied at an intermediate stage in manufacturing. The hon. Member for Banff might like to consider the tobacco industry where a similar situation arises in that the industry finances, for a period, its part of the duty.
As a premium product, Scotch has been under considerable pressure throughout the world during the present downturn in economic activity. However, although the United Kingdom bottled product has suffered a slight setback of 2 per cent. 549 in volume terms last year compared with 1974, total exports, including those in bulk, have shown an increase of 3 per cent. in volume and 12 per cent. in value—which indicates the effect of the fall in the value of sterling—over the same period.
The hon. Member for Banff suggested the setback to Scotch had been caused by the industry's lack of money for advertising, but I think he will agree that a major factor has been the state of the world economy. Sales have been depressed because of the level of economic activity in those countries to which Scotch is exported. We welcome the fact that the industry recently increased the prices charged abroad because that increases our real export earnings.
We have no reason to believe that any trade setbacks are more than temporary. There are indications that the United States market may be starting to recover and some economic pundits have given this as one of the reasons for optimism about a general upturn in the economies of the West.
Now that we are in the EEC, we can do more in regard to the question of discrimination by Italy than we can with some other countries to which we repeatedly make representations about discrimination. We have taken this matter up with the Commission and at our insistence the Commission is pursuing it. As we see it, it is a breach of the Treaty of Rome. Just as we use every avenue to pursue this matter in relation to the United States market, and other markets where there is discrimination, we have put pressure on the Commission, and the Commission is pursuing the matter with the Italian Government. In due course, we expect that pressure to be reflected in the removal of discrimination which should not exist between member States of the Community.
The hon. Gentleman referred to the downturn in the level of employment. He acknowledged that it is not so much a loss of jobs as the effect on earnings of workers caused by the loss of overtime earnings and short-time working because of the depressed demand.
Mr. WaftDoes the Minister acknowledge that 400 jobs had been lost by July last year and that since that time that number has more than tripled?
§ Mr. StrangI do not necessarily accept that the number has tripled. The hon. Gentleman suggested that 25,000 people were employed in the industry. I do not argue about that. It depends how the ancillary industries are defined, but by any definition the number is well over 20,000.
The industry is very dependent on factors outwith our control, because it is export-oriented. In the areas where we sell whisky, in the United States—which is far and away the most important market—and in the Community and Japan, the improvement in the economy should be reflected in increased earnings by the industry and thus in increased production and increased employment opportunities.
The fact that I have paraded the problems and the hon. Gentleman has raised problems shows the involvement we have in the future of the Scotch whisky industry. We do not mask the fact that we are dealing with a highly successful competitive industry.
To sum up, I repeat what I said on a previous occasion to the hon. Member for Dunbartonshire, East (Mrs. Bain). Whenever possible we take action in the national interest to maintain the viability of this important sector. The industry knows best where it can sell its product and how best to develop the market. What we can do for the industry above all is to reduce discrimination. It is because of the uniqueness of the product that it is so successful and there is such tremendous discrimination against it throughout the world. We make repeated representations to countries which discriminate against Scotch whisky. By being in the Community, we shall be able to make sure at the end of the day, although it may take time, that we remove unfair discrimination within the Community. We raise the matter regularly with Japan.
We set great store by the forthcoming GATT discussions. The United States is not prepared to consider this matter again until it is raised in the context of the multilateral trade negotiations which will start in the near future. We shall be using those negotiations as another major opportunity to attempt to persuade countries to cease discriminating against Scotch whisky.
551 We recognise the problems raised by the hon. Gentleman, but the outlook for the industry is good. The people in the industry to whom he and we have spoken acknowledge that they are now in a position to pull out of a temporary period of depression in production, and I am sure that we can look forward to a successful industry making an even 552 greater contribution to our national well-being.
§ The Question having been proposed after Ten o'clock, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at Six minutes to Twelve o'clock.