Scotch Whisky Industry
Good morning. The first item of business is a debate on motion S1M-2833, in the name of Annabel Goldie, on the Scotch whisky industry, and two amendments to the motion.
On a point of order, Presiding Officer. I understand that Miss Goldie, who is to open the debate, has been slightly delayed on her way to the chamber. She will arrive very shortly.
In that case, I will speak very slowly. Will those members who wish to speak in the debate please press their request-to-speak buttons now? I call on Annabel Goldie to speak to and move the motion.
I apologise for my precipitate arrival. It is a great pleasure to take part in a debate such as this morning's. I may say that I am a dame who likes a dram and so it is good to start the morning with something as agreeable as a debate on whisky, or uisge beatha.
Whisky is good for the economy, good for tourism, good to consume and good for Scotland. I was intrigued by the historical account contained in the Scotch Whisky Association's "The History of Scotch Whisky". It notes:
"The earliest documented record of distilling in Scotland occurs as long ago as 1494, when an entry in the Exchequer Rolls listed ‘Eight bolls of malt to Friar John Cor wherewith to make aqua vitae'".
Presumably, the biblical instruction to
"take a little wine for thy stomach's sake"
had been enthusiastically improved upon by the monks of 15th century Scotland, to mean "Take a little dram to stay alive." Distilling seems to have been almost the exclusive province of that early church presence—happy days indeed. Communion must have been a lively affair.
I will turn to more modren times. The Scotch Whisky Association notes:
"Scotch Whisky, in particular blended whisky, has gone from strength to strength. It has survived USA prohibition, wars and revolutions, economic depressions and recessions".
I seem to remember that it got me through the 1997 general election results. The association goes on to say that whisky maintains
"its position today as the premier international spirit of choice, extending its reach to more than 200 countries throughout the world."
It was heartening that recognition was given to the importance of the whisky industry in the early days of the Parliament, with the production of a joint document by the Scottish Executive and the Scotch Whisky Association, aptly if perhaps optimistically entitled "A Toast to the Future: working together for Scotch whisky". I could not help noticing that it was subscribed by the Minister for Enterprise, Transport and Lifelong Learning, Wendy Alexander, and by the Minister for Environment and Rural Development, Ross Finnie. Ms Alexander's signature makes it look as though she could do with a dram, while Mr Finnie's signature makes it look as though he should perhaps lay off them.
"A Toast to the Future" is a good document. I quote:
"Scotch Whisky is the best selling international spirit in the world, and that doesn't happen by accident".
That is absolutely right. The document continues:
"The Scottish Executive is well aware that the whisky industry does not operate in a vacuum. The decisions made by government can and do impact on the business community."
That, too, is absolutely right.
The document notes that the whisky industry is a major employer,
"providing direct employment to more than 11,000 people"
and
"generating indirect employment for a further 30,000 people."
It goes on:
"The Whisky industry … Supports 1 in every 54 Scottish jobs … Accounts for 5% of all manufacturing jobs … Spends £1 billion a year, buying goods and services from local suppliers".
I have very much enjoyed Annabel Goldie's light-hearted introduction to the debate. As she knows, I represent a very important constituency in this context.
As she is speaking as a member of the Conservative party, I ask her why the Conservative Government saw fit to increase excise duty on whisky on 10 occasions during its 18 years in power, thereby reducing the wealth of the industry and, indeed, the uptake by the Government?
Mrs Ewing will find that, in comparison with other fiscal regimes, the Conservative Government did no more than continue a practice that was already established. Interestingly, it was a Conservative party in government that, in 1996, took the remarkable step of reducing duty, a step that was greatly welcomed by the whisky industry. Perhaps more important, the Conservative Government made its view on tax strip stamps extremely clear, which was also welcomed by the whisky industry.
The document notes:
"Every year exports account for 90% of Scotch Whisky sales … and in terms of added value, this makes it Scotland's number one export industry."
As a product and as a contributor to the economy, they do not come much more precious than that.
Are there any bits of grit in this amber nectar? Yes, there are. There is regulation and restricted access to many global markets:
"Of the 200 countries that currently import Scotch, some 130 operate some form of barrier to trade … there were 25 export markets with excise structures that discriminate specifically against whisky."
Indeed, China has
"a 65% tariff on imports of Scotch whisky."
In Europe—I mention this particularly for Mrs Ewing—duty rates illustrate an institutional prejudice against spirits. That is, of course, not only unwelcome for our industry; it encourages smuggling.
I say to those of us who love the golden tincture: do not be dismayed, because help is at hand. I refer again to "A Toast to the Future". The Executive states:
"The Scottish Executive has pledged to support Scottish manufacturers where EU and UK policies have an effect on the competitiveness of Scottish industry and will take steps to ensure that the regulatory burden is kept to a sensible minimum."
The document further states:
"The Scottish Executive and the Scotch Whisky industry are committed to standing together to fight for more open markets around the world … The Scottish Executive will continue to support the Scotch Whisky industry's case for genuine tax harmonisation in Europe."
Perhaps most intriguingly of all, the document states:
"The Scottish Executive supports the industry's case for a review of the tax regime in the UK with the aim of achieving a fair outcome for the Scotch Whisky industry."
Will the member give way?
Will Dr Ewing forgive me? I have some points that I wish to expand upon.
All those comments in "A Toast to the Future" are immensely reassuring. The minister will, no doubt, update the chamber and, more important, the industry on those pledges and commitments. They are significant, they are certainly relevant and they are important.
That makes two matters all the more remarkable. First, I pose the question: why has the Executive lodged an amendment to delete my motion, which did nothing more than applaud the document, observe the statements made in it and call on the Executive to demonstrate how it is getting on with the implementation of the commitments and pledges? I must conclude—gloomily—that there is nothing to report.
Secondly, the haste with which the matter of tax strip stamps was removed by the Executive suggests to me that strip stamps are to be the blow that will be delivered by the Chancellor of the Exchequer's fist to this showpiece Scottish industry, over the heads of the impotent and supine Scottish Executive. Tax strip stamps do not work.
Am I to take it from Annabel Goldie's comment that she is looking to extend the powers of a devolved Scottish Parliament in that respect?
No. The matter is perfectly clear, at least to parties such as mine—it is perhaps remarkable in itself that we seem to have embraced devolution with greater understanding than has the Labour party. We believe that our mission is to work with our colleagues in Westminster, as part of a United Kingdom partnership, and to bring influence to bear whenever we can, based on the knowledge and expertise that we garner in this devolved Parliament. I only wish that the Executive had the courage, and perhaps the intelligence, to do likewise.
Strip stamps pose a huge potential problem. They will increase costs to the whisky industry; they will slow down production; they will create chronic cash-flow problems; and they will reduce competitiveness.
The issue is bigger than whisky, however, and the minister alluded inadvertently to it. The business community is losing confidence in the Scottish Executive. That should perhaps give me comfort, but it does not, because it suggests to me that the stature of the Parliament in the business community is being impugned, and I do not like that one little bit. My question is this: does the Scottish Executive have the muscle to fight for Scottish interests?
The document opens with the statement:
"Scotch Whisky is the best selling international spirit in the world and that doesn't happen by accident".
If the Scottish Executive cannot put its money where its mouth is, there is an accident waiting to happen. The only sad feature is that the casualties will be greater than the Scottish whisky industry.
I will not comment specifically on Mr Ewing's amendment, other than to say that the points raised in it were articulated by Mrs Ewing and I have already responded to them. I am debating not reserved matters, but an entirely devolved issue—this document, produced by the Scottish Executive. My lament is that it remains a document with very little meaningful representation of the life of the industry in Scotland.
I move,
That the Parliament notes the publication of A Toast to the Future – working together for Scotch Whisky and the Scottish Executive's pledge to "support Scottish manufacturers where EU and UK policies have an effect on the competitiveness of Scottish Industry" and "take steps to ensure that the regulatory burden is kept to a sensible minimum"; further notes that Her Majesty's Government is considering applying tax stamps throughout the UK, a measure described by the Scotch Whisky Association as being "by far the greatest threat that the industry currently faces", and calls upon the Executive to demonstrate its stated commitment to the industry, to implement its stated pledge and, accordingly, to make representations to Her Majesty's Government against the introduction of tax stamps.
I congratulate Annabel Goldie on her interest in this matter and on some of her opening speech.
I begin by responding to the member's comments. She is curious to know why we do not support the terms of her motion. Yesterday I made some informal inquiries with the aim of establishing whether this is the first occasion on which a member of the Conservative and Unionist Party has lodged a motion that focuses so largely on reserved matters—it appears that it is. Given the SNP's views, Mr Ewing may welcome that, but neither Opposition party will be surprised to learn that we do not.
Is the minister seriously suggesting that he is not in favour of doing his job, which is to make representations to Her Majesty's Government on behalf of this Parliament and people? That is exactly what the motion and the SNP amendment call for. Is the minister against that?
Mr Hamilton knows the answer to the rhetorical question that he has posed before I give it—we take very seriously our duty to make representations in the appropriate fashion. However, we do not consider it appropriate for Scottish ministers to seek to make policy on matters that are reserved to Westminster. I am surprised that the Conservatives should suggest that we go down that road.
Does the minister regret the publication of the document that we are debating? If the Scottish Executive makes commitments about what it will do, is not it fair that we examine those commitments and hold the Executive to account? If the Executive commits itself to making representations on behalf of the industry, should not it tell us what representations it has made?
Far from regretting the publication of the document, I regard it as taking on board precisely the issues that are our responsibility. If I have the opportunity to explore those issues further, without immediate interruption, I will explain what we have done to fulfil that responsibility.
The responsibility that I have for the alcoholic drinks industry is important to me. It gives me great pleasure to be involved in an industry that has such deep roots in Scottish soil and that is such a significant component of the Scottish and the United Kingdom economies. I intend to use the debate to reaffirm our support for and commitment to our foremost indigenous industry.
Scotch whisky production continues to represent a vital part of Scotland's manufacturing base and its importance to the wider economy cannot be overstated. Not least significant are the annual export figure of more than £2 billion pounds and the provision of employment—directly and indirectly—to one in every 54 people employed in Scotland. As has been mentioned, the location of those jobs makes them particularly vital to the Scottish economy—whether they are in rural locations, where few alternative job opportunities exist, or in areas of the central belt that have other employment problems.
The Scotch whisky industry is also an important customer for Scottish farmers, who produce the vast majority of the cereals used. I know that the links between Scottish farmers and the Scotch whisky industry are of importance to both parties. The close relationship that the industry has with suppliers such as farmers, transport operators and bottle and label producers and their interdependence make it a prime example of an industrial cluster. Therefore, it is precisely the type of modern industry that both the United Kingdom Government and the Scottish Executive seek to foster.
Although Scotch whisky makes a significant contribution to Scottish employment and is fighting hard to innovate and to develop its home and world markets, I am conscious that several issues of concern remain. Those issues have been raised today, and we have made and will continue to make representations in respect of them. The Executive is well aware that the Scotch whisky industry does not operate in a vacuum and that decisions made by Government can have an impact on the industry.
Will the minister give way?
Will the minister give way?
I will give way in a moment.
Members will be aware that, in November last year, the House of Commons Scottish Affairs Select Committee reported on the drinks industry. We have responded to the aspects of the report that relate to devolved matters, rather than those that relate to reserved matters.
Will the minister give way?
I will do so in a moment.
The Executive's response to the select committee's report is an example of its engagement in the interests of the industry and in the future of Scotch whisky. Annabel Goldie referred at length to the document that we have produced. "A Toast to the Future: working together for Scotch whisky" was produced not out of the ether, but in collaboration with the Scotch Whisky Association, which represents the industry.
The debate is about the proposal that tax stamps be applied throughout the UK, a measure described by the Scotch Whisky Association as being
"by far the greatest threat that the industry currently faces".
Is the association right?
Mr Ewing's timing is perfect. I intend to move on to the very subject that he raises.
Clearly, the possible introduction of tax stamps has caused the industry great concern. It is important to place the proposal in context. Spirits fraud costs HM Customs and Excise £450 million in lost duty each year, which is equivalent to 15 per cent of the UK whisky market. Spirits fraud is predominantly inward diversion fraud, by which I mean that goods entering the UK from a European Union tax warehouse do not reach the intended UK tax warehouse but are illegally diverted on to the home market.
Will the minister give way?
Not at the moment.
Despite HM Customs and Excise's recent successes, particularly in tackling beer and wine smuggling, inward diversion fraud of spirits remains a serious problem. The UK Government is obliged to consider a wide range of options for tackling the problem; clearly, the introduction of a UK tax stamp is one such option.
In outlining the background to the open consultation that has been undertaken by Her Majesty's Government, will the minister remind us of the provisions of the Roques report—the independent investigation of the problem of spirits fraud—which recommended the introduction of a stamp tax? That recommendation is the subject of an open-ended consultation by the Treasury.
I am very aware of the content of the Roques report. The case that it makes for the advantages of a stamp tax is clear. However, such a tax would also have significant disadvantages.
The minister will be aware that strip stamps were introduced in the USA, Greece and Ecuador, and have been abolished because they did not work. The minister will also be aware that three European countries intended to introduce strip stamps, but did not proceed with the measure because of doubts about their efficacy. One country in which they still operate is Hungary, where they have not succeeded in eradicating illicit transactions.
I am aware of some of the international examples that Annabel Goldie cites. It is important to emphasise that the UK Government remains open-minded about the possibility of introducing tax stamps; in other words, as Brian Fitzpatrick pointed out, we are dealing with a consultation process. The UK Government and the Scottish Executive are encouraged that the industry has responded not only by highlighting the problems associated with the tax stamp proposal, but by suggesting other possible methods of dealing with the problem of spirits fraud.
What has changed between 1997, when the Government pleaded with Norway not to introduce tax stamps because it saw them as ineffective and as raising a barrier to trade, and this year? What major change has led the UK Government to consider the introduction of tax strips?
We all understand that the introduction of tax stamps is being considered in the context of the removal by the European Union of duty free and other tax barriers, and of losses to HM Customs and Excise through whisky and spirits fraud. The latter problem needs to be tackled. I very much welcome the commitment by the Scotch Whisky Association and the UK Government to find a way of dealing with spirits fraud. I know that HM Customs and Excise will give careful consideration to the detailed suggestions that the Scotch Whisky Association has made in response to the consultation opportunity.
As members will know, the scheduled closing date for the consultation has passed. However, in the light of the debate today we have had discussions with HM Customs and Excise and will respond following the debate. I have been keen to take interventions as far as I can, because in making our response, it is important that we are aware of the views around the chamber. We will give a response that acknowledges the interests of the Scotch whisky industry and its vital importance to the Scottish economy. We will acknowledge also the importance to the Scotch whisky industry of finding ways to tackle alcohol import fraud.
On that basis, I look forward to hearing the remainder of the debate. When I close, I will do so in a way that is designed to respond to the debate from the Executive's point of view.
I move amendment S1M-2883.2, to leave out from first "notes" to end and insert:
"welcomes the Scottish Executive's recognition of the importance of the Scotch whisky industry to the economy, the contribution that the industry makes to employment across Scotland and the Executive's commitment to work with the industry as set out in A Toast to the Future – working together for Scotch Whisky."
We warmly welcome Annabel Goldie's motion on a topic that I believe I can safely say we all enjoy in variable quantities. It is my pleasure to open for the SNP in the debate. My wife will have the last word later in the proceedings—the rules of natural justice apply in this debate.
The debate is not about the worth and inestimable value of whisky to our economy, culture and society—we can all take that as read. The debate is about an absurd proposal that emanates from Westminster, from a gentleman from a firm of accountants, who thinks that a problem can be solved by a solution that many other countries have discarded as ineffective, inefficient and counterproductive. We really should focus on that issue in the debate.
The Deputy Minister for Enterprise, Transport and Lifelong Learning rightly mentioned that tax fraud is a problem. He referred to the particular problem of inward diversion, namely tax fraud in respect of whisky coming from the EU into the UK. Of course, the primary difficulty is that excise duty in the UK is much higher than it is in other EU states. That creates an automatic incentive to fraudsters who wish to avoid paying the higher rates of excise duty in the UK.
The real question is whether the proposal that has been prescribed by the Roques report will work. We have had the benefit of an excellent briefing from the Scotch Whisky Association. Its conclusion is that the proposal will not work for a number of reasons. First, the Scotch Whisky Association says that it is wrong to suggest that strip stamps deter fraud. Hungary has strip stamps and illicit goods still account for an estimated 15 to 20 per cent of the market. Secondly, it is said that strip stamps cannot be forged. History and practice show that Mexico had such problems with forged and stolen strip stamps that it introduced a new type of fiscal mark to be affixed to the main bottle label. Although the new mark was difficult to copy, it has failed to stop the tax evasion problem.
I turn to the impact on the industry. I spoke to the manager of one of the distilleries that produce single malt in my constituency. The manager said that the distillery simply could not afford the cost, which is estimated at around £300,000, of introducing automation to the process of applying strip stamps. I will not reveal which distillery it was, but the manager said candidly that he did not necessarily see that the distillery would be able to survive if it were burdened with that cost. Were the distillery so burdened, it would have to apply the strip by hand, because it could not justify the expenditure of introducing a process of automation.
That is surely absurd. For that reason alone, the proposal must be disregarded. The argument about cash-flow costs is even more serious. The same manager to whom I spoke said that given that the whole point of the strip is to indicate that tax has been paid on a bottle of whisky, the proposal would involve—as the SWA and others have argued—pre-payment of tax by up to two years. The tax constitutes—as the Executive admits in its glossy document—66 per cent of the retail cost of each bottle, which is £5.48 a bottle. To pay that level of tax two years in advance would impose a huge additional burden.
I find it difficult to fathom why any serious and responsible Government would make such a ridiculous proposal. I am bound to reflect that if the proposal for duty to be pre-paid by two years goes ahead, we will not have a Scotch whisky industry. The industry's role will be not to produce whisky, but to bankroll the Government. The industry will become select bankers for the UK Exchequer—Gordon Brown's bank—but the Exchequer, of course, will pay the bank no interest.
I believe that it is essential, as Annabel Goldie has argued, that the Executive speaks out clearly, does not sit on the fence and makes its representations in public, not in private. Unless it does so, it cannot claim to speak on behalf of the Scotch whisky industry.
I move amendment S1M-2833.1, to insert at end:
"welcomes the raising by the Scottish Conservatives of an issue that is reserved; believes that the taxation imposed on whisky by successive UK governments has disadvantaged Scotch in the home market, where whisky is taxed at higher levels than wine or beer, and has also allowed other countries to seek to justify their own discriminatory tax regimes by reference to those in the UK; further believes that a tax stamp system would constitute a barrier to trade, would be inefficient and ineffective as a means of combating fraud and illicit trade, will cause many practical and technical problems in respect of, for example, labelling and storage and will impose substantial costs on the industry, and calls upon the Scottish Executive to demand that all powers relating to the regulation and taxation of the whisky industry be transferred to the Scottish Parliament."
I call George Lyon. I am sorry, that was wrong; the Liberals' choice is John Farquhar Munro.
I have just changed my identity, Presiding Officer.
We have had an interesting debate so far and I am glad to have the opportunity to become involved. The Scotch whisky industry is an icon in Scotland. It generates worldwide exports worth in excess of £2 billion a year. The industry's importance to Scotland's economy is undisputed; we have heard much about that this morning. The industry, which is one of the main employers in many economically fragile areas, employs 11,200 people directly and supports a further 30,000 jobs with suppliers and support services. In short, Scotch whisky supports one in every 54 jobs in Scotland. Those figures speak for themselves.
With Scotch whisky, Scotland has a rare and competitive advantage. It is accepted that Scotch whisky can be made only in Scotland, so it is truly a unique indigenous industry. As we have heard, however, the industry faces a competitive disadvantage that is enshrined in the UK excise structure.
Will the member express an opinion on whether Scotch whisky can be made from imported barley?
I am not sure whether the Scotch whisky industry imports barley to make its product, but I am sure that there is sufficient malted barley within Scotland to meet the demand.
Scotch whisky, wine and beer are in direct competition with one another, but the UK Government taxes whisky at a rate that is one and a half times higher than that for wine and beer. That offers a competitive advantage to imported competitors.
The Scottish Liberal Democrats have always called for lower duty on whisky. On 22 November 2000, the party called for the duty on imported wines to be levelled up to create a more level playing field. The current duty leads to Scotch whisky facing trade barriers in 130 of its 200 export markets. That hardly sets a glowing example overseas and it certainly does nothing to help the industry in its home market.
I am curious about the reference to Liberal Democrat policy. Did I understand the member to say that the Liberals' solution was to increase the duty on wine so that it was as exceptionally high as the duty on whisky? Would that not merely give smugglers an incentive to smuggle wine as well as whisky, rather than instead of whisky?
Whether increasing the duty on imported wine would encourage more smuggling is a matter for debate, but it would certainly make a level playing field for the Scotch whisky industry, which is competing against the illegal imports.
As I said, the industry faces the potential of more strife in the form of strip stamps. The general view of the Scotch whisky producers is that strip stamps are the greatest threat that the industry faces—dramatic words, but perhaps they are justified.
The Treasury considers that strip stamps will be a solution to the alleged losses in Treasury revenue that arise through large-scale smuggling. I stress the word "alleged" because, as the Scotch Whisky Association stated, the £450 million of excise and VAT that is lost to spirit fraud each year is only an estimate. Bearing that in mind, I must ask whether strip stamps are really the answer, because the evidence appears to suggest that they are not. Countries such as the USA, Greece and Ecuador abolished strip stamps because they were ineffective. Germany, Belgium and Norway considered introducing strip stamps, but opted not to implement that system because the evidence is weighted against their use. Hungary has strip stamps, yet illicit goods still account for an estimated 15 to 20 per cent of the market.
Special machinery is required to apply strip stamps, at a potential cost of £30,000. New machinery and re-engineering costs across the industry would be likely to reach at least £10 million. The cash-flow difficulties that would be presented by strip stamps could prove insurmountable for smaller firms. At the moment, duty is paid only when spirits leave the final distribution warehouse. However, as strip stamps would be affixed at the bottling line, the duty would have to be paid upfront without an assured sale. The £5.48 a bottle that the duty would cost is a massive sum to those who bottle 200 to 300 bottles a minute. The whisky industry and other distillers will not benefit from the scheme. The UK Government will benefit, therefore the UK Government should pay.
The whisky industry is taxed heavily, but in the case of the Talisker distillery on Skye, in my constituency, there is an additional tax—the distillery must contend with the burden of excessive Skye bridge tolls, which is quite a tax.
No one denies the problem of bootlegged spirits, yet the problem was created largely by the UK Government and its Tory predecessor, which cut the service that is provided by HM Customs and Excise to such an extent that the organisation is no longer able to do its job effectively. Strip stamps treat the symptoms rather than the root cause of the problem. The imposition of stamps may well become a logistical nightmare.
I give members an example. Whisky is taxed at 66 per cent, or two thirds. I ask members to imagine someone walking into Deacon Brodie's Tavern, buying three nips and lining them up on the counter—he drinks one of the nips but the other two go to the Treasury. That is terrible.
We move to the open part of the debate. Members can expect to have five minutes, plus extra time for interventions.
Like other speakers, I recognise the importance of the Scotch whisky industry, not only to Scotland but to the UK. Let me be slightly parochial: the industry is also critically important to people in the Dumbarton constituency.
As we have heard, whisky is the second largest export industry in Scotland and the fifth largest in the UK. The industry employs directly more than 11,000 people in Scotland, and a staggering 30,000 people are employed in related sectors. The minister gave the examples of farmers who supply the quality cereals for use in distillation, bottle and label manufacturers, and people who are involved in providing transport services.
A report that was produced by the Fraser of Allander Institute in 1999 for Allied Domecq identified how the Scotch whisky industry compares with other industrial sectors. If I can find my papers, I will share those figures with members. [Interruption.] Here they are. The Scotch whisky industry is
"Twice as important as computer-related manufacturing
A third bigger than the oil and gas industries
12% greater than banking, insurance and finance
30% greater than mechanical engineering
A third larger than the chemical industry."
We can be in no doubt about the Scotch whisky industry's importance to the Scottish economy.
Allied Distillers is one of the largest employers in the Dumbarton constituency. It provides economic opportunities for local people in an area that faces significant levels of unemployment and disadvantage, and has a work force of 726 permanent employees in Dumbarton. The company's sales are growing steadily, its export markets are increasing and it is acquiring new brands to sit alongside household names such as Ballantine's, Teacher's and Laphroaig. It is clear to me that Allied Distillers is a cornerstone of the local economy.
I confess that I am slightly curious that the Conservatives, who have representatives in Westminster—albeit a small number, including, I believe, one member who represents a Scottish constituency—are holding a debate on a reserved matter. The subject of strip stamps is but one option on which HM Customs and Excise is consulting. We should not lose sight of the purpose of that exercise, which is to tackle the large-scale spirits fraud that results in an estimated annual revenue loss of about £450 million. The whisky industry is at one with the Westminster Government in pursuing that fraud—the industry's concerns arise from the cost of compliance and the effectiveness of the proposed use of strip stamps.
The use of strip stamps would pose real cash-flow problems. Up to about £5.48 a bottle would have to be paid upfront prior to sale, which amounts to a considerable sum when it is multiplied by the millions of cases that are produced in Scotland each year. I disagree slightly with Fergus Ewing's emphasis, because we have a responsibility to tackle fraud. The more serious issue is not the cost of strip stamps but the fact that they do not work—I refer to Annabel Goldie's comments on the international experience.
I understand and fully support the industry's legitimate concerns. Therefore, I was heartened by Paul Boateng's comments when he said:
"The Government is approaching this issue with an entirely open mind and we are keen to build up as clear a picture as possible, before taking any decisions."
I remind Fergus Ewing that the consultation is on the recommendations of the independent Roques report and not on a Government proposal.
Does Jackie Baillie agree that the Scotch whisky industry has made innovative proposals on how to tackle the spirits fraud that we are all keen to see the end of? Are those proposals being taken into account? Perhaps the minister could respond to that point when he replies to the debate.
I find myself in agreement with Mrs Ewing. I welcome the fact that the whisky industry is in direct discussions with HM Customs and Excise on those alternative means of achieving the same aim of reducing fraud. I hope that an acceptable way forward will be found.
It is worth reflecting on the commitment to the whisky industry that has been shown by the Labour Government at Westminster and the Labour-led Scottish Executive. At the UK level, and due to the sound economic stewardship of Gordon Brown, there has been no increase in duty on spirits in the past four budgets, and the industry has welcomed that real-terms cut of 6.2 per cent. Duty rates are 35 per cent lower in real terms than they were 21 years ago. At the European level, the UK Government is arguing that the minimum rate for spirits is too high in comparison with the minimum rate for other drinks. We want a narrowing of the duty discrimination in the EU minimum rate structure.
Will the member give way on that point?
I will continue with my speech, as I am conscious of the time.
Douglas Alexander recently made the welcome announcement that, as a result of detailed negotiations, the Indian Government will cut its import tariff by almost 300 per cent. That announcement may not have been of immediate significance to many members, but the whisky industry regards India as the market that has the greatest potential in the world.
As we have heard, the Executive, in collaboration with the Scotch Whisky Association, has published a framework document, "A Toast to the Future: working together for Scotch whisky". That represents clear recognition of the importance of the whisky industry to our economy and of the contribution that the industry makes to employment and to our local communities. I welcome the minister's commitment to pass on the terms of the debate to HM Customs and Excise. I urge the Scottish Executive to reject the strip stamps proposal.
I pay tribute to the workers in the industry, who are sometimes forgotten. I have met many of them at the Allied Distillers plant in Dumbarton and am constantly impressed by their commitment, enthusiasm and motivation. They are at the core of the success that is the Scotch whisky industry. I am conscious of the Executive's policy on alcohol. Nonetheless, I urge members who perhaps enjoy a drop of the amber nectar to keep enjoying it.
Although I am usually keen to accept the truthfulness of Jackie Baillie's comments, she must excuse me on this occasion, for two reasons. First, to quote Douglas Alexander as any kind of independent source always causes a frisson of excitement among the Scottish National Party. Secondly, to suggest that Fergus Ewing is not against fraud—given his attitude to crime and punishment—is altogether new.
Annabel Goldie was perhaps slightly modest about her contribution to the debate. She is to be congratulated on rallying to the nationalist banner in raising the issue as a reserved matter and demanding that the Scottish Executive take a lot more seriously its responsibility for arguing Scotland's case in Westminster. The Conservative party, the SNP—as ever—and the Scotch Whisky Association all make that case. The fact that it takes an alliance of the Scotch Whisky Association and the Conservative and Unionist Party to remind the Executive that it should be fighting Scotland's corner in Westminster illustrates how far the Executive has to go.
I will concentrate on two areas. First, I will deal with why there is a need for more equal tax treatment. Secondly, I will discuss the attitude that we must take towards strip stamps. It is important that we understand the nature of the market, which has not been mentioned in the debate so far, and the ready substitution that occurs among the products of wine, beer and Scotch. Any economic analysis of the sector shows that it is very easy to move from one product to another. That is why the disproportionate tax on whisky is all the more troublesome.
It is worth remembering the importance of the export market, which is worth £2 billion every year to the Scottish economy. That represents 12 per cent of the export total. If other countries such as Japan, South Africa and Canada are using the UK tax regime as an excuse for their tax policies, things have come to a pretty pass. We are not just not standing up for the Scottish industries. We are in a worse situation—our policy is being used as a justification for the implementation of other discriminatory policies. We must combat that at an early stage.
Annabel Goldie's rebuttal of Margaret Ewing's intervention on the Tories' tax position on the matter was less than convincing. The statistic that was put to Miss Goldie was that, on 10 occasions in 18 years in government, the Conservatives took the opportunity to raise the burden on the whisky industry. To suggest that that was okay because in 1996 there was a bit of a flutter and a change of heart does not cut it. A political party that introduced tax rises on 10 out of 18 occasions cannot present itself as the champion of the whisky industry. Perhaps Miss Goldie would like to have another go at doing that.
I would be immensely interested to learn just what reduction in taxation the Scottish National Party would propose.
I am very happy to look at the historical analysis. In the period during which Annabel Goldie's party was failing to deliver on those tax cuts, the SNP—in the 1992 and 1997 general elections and the 1999 Scottish Parliament elections—proposed measures to improve efficiency and productivity and to reduce the tax burden on the Scotch whisky industry. The SNP has nothing to apologise for. We have been championing the industry. Indeed, Winnie Ewing has been championing the industry in Europe for a lot longer than most members have been in politics. She is about to tell us why.
At last a member, albeit of my own party, has given way to me. In Europe, I acted for the Scottish whisky industry—practically by myself—for 24 years. The two main parties did not support what we need, which is a European Union alcohol regime that is based on alcohol content, regardless of the member state or the type of alcohol concerned.
I have a use in the Parliament—to give way to Winnie Ewing.
We must remember that the increase in the tax rate has not increased revenues. During the period in which taxes have been increased, the revenue that comes into the chancellor's pocket has plummeted. That suggests that the policy not only has a punitive effect on the industry, but does not even work for the Government as a method of increasing spending in other areas. As a policy, increasing the tax does not stack up.
Fergus Ewing correctly identified that other countries have rejected strip stamps and that strip stamps do not deter fraud. He used the examples of Hungary and Poland. Again, we have a policy that has been proven not to work. Other countries have abandoned strip stamps because they are entirely ineffective.
Jackie Baillie told us that she was against strip stamps, but she did not mention the fact that, when her colleagues at Westminster were given the opportunity to sign Annabelle Ewing's early-day motion that said precisely that, not a single Labour member of Parliament took that opportunity. Although the Liberal Democrats put themselves forward as the champions of rural areas, not a single Liberal Democrat MP signed that early-day motion. The Labour party and the Liberal Democrats have a long way to go in terms of standing up for Scotland.
We are told that the UK Government has an open mind on the subject, as if that is a "Shock! Horror! Hold the front page!" scenario. I welcome the fact that the UK Government, for once, has an open mind, but it should be up to the Scottish Parliament to tell the UK Government to close its mind on strip stamps. The UK Government should do that by stating that it is fundamentally against strip stamps.
I received an e-mail from a distillery on Islay, which summed up the issue quite well. The manager of that distillery said that governing a country is not rocket science, but just common sense. The measures that are putting our whisky industry at a disadvantage are indicative of anything but common sense. If we support Fergus Ewing's amendment, we will have the opportunity to do something about that.
I am delighted to be able to declare an interest in the Scotch whisky industry. The industry is incredibly important to the Highlands and Islands, where most of the distilleries are.
The whisky industry has been under threat from many sources of late. We last debated the issue on 2 May, when the threat came from the EU water framework directive. That threat has not entirely gone away, but the industry is working closely with the Scottish Environment Protection Agency to prove that the manufacture of Scotch whisky is not polluted. That should not be difficult. Many distilleries in the Highlands and Islands discharge into the River Spey, which is world famous for its salmon. Many Aberdeen Angus cattle, which produce the best beef in the world, are fed on draff, which is a distillery by-product. Like Scotch beef, Scotch whisky is an outstanding indigenous product that we in Scotland should be very grateful for.
Industries come and go, but Scotch whisky still flourishes and provides the Treasury with one of its most valuable sources of revenue. The Scottish Parliament would do well to reflect its pride in our national spirit. Whisky is uisge beatha—the water of life. It should be produced at every Scottish Parliament reception, but I regret to say that it is not. It should be an alternative to Chilean or French wine, but we are not even offered it.
If the Scottish Executive is serious about its document, "A Toast to the Future", in which it pledges to support the industry, let us have some evidence of that support and let us have it now. The Labour Government's proposal to implement strip stamps would have precisely the opposite effect. To accommodate the stamps, the UK spirits industry would have to increase its working capital by £250 million. The interest on that figure would be a minimum of £15 million per annum. The cost of adapting machinery is estimated at another £15 million. That is before we consider the cost of the strip stamps themselves and the cost of the extra security that would be needed to protect such tiny pieces of paper. Each stamp would be worth £5.48 and a bagful of them would be worth £1 million. If the strips were stolen, they could easily be used to stamp fake Scotch whisky or contraband spirits.
The minister mentioned that the Treasury estimates that £450 million of revenue is lost each year through inward diversion fraud. Inward diversion means imported drinks but, as we do not import Scotch whisky, inward diversion must refer mostly to fake Scotch whisky or other imported spirits. The Scotch whisky industry would be unfairly penalised by the proposed measure.
Mind you, Presiding Officer, Scotch whisky has been unfairly penalised ever since 1909, when a teetotal Liberal Prime Minister, by the name of David Lloyd George, tried to stop people drinking at all. He increased the tax by 35 per cent, so that he could fulfil his personal crusade. In a glass of wine at a bar, the proportion of tax is 19.3 per cent; in half a pint of beer, the proportion of tax is 16.6 per cent; but in a poor wee dram, the tax is a massive 27.4 per cent, which is a huge burden for something so tiny.
Only the Conservative party has at least recognised the unfairness by reducing the duty on Scotch whisky twice in recent times. The Government's economic advisers concede that spirits are highly price sensitive. As spirits are already taxed one and a half times more heavily than other drinks, applying strip stamps only to spirits would compound the competitive disadvantage that is already faced by the industry.
Let us consider the facts: strip stamps have been proven not to work—as Jackie Baillie rightly said—and they are easy to forge. The USA and Greece have abolished them because they do not work. Strip stamps are tremendously expensive to apply. Most important of all, the strip stamps would be a massive burden on our Scotch whisky industry.
I urge the Executive to put pressure on its UK counterpart to abandon the Treasury's dangerous proposal. The Executive must show its loyalty to the Scotch whisky industry, which flies Scotland's flag all over the world.
I end on a note of caution for the minister, which came from a little story that I found in William Ferguson's book "Scotland: 1689 - Present". In 1725, Shawfield House in Glasgow was severely damaged by a mob. The house was looted and razed, and blood was shed, because Daniel Campbell of Shawfield, who was the MP for the Glasgow burghs, had supported the malt tax on whisky. Perhaps the minister should support the industry now.
Tackle the fraud by all means, but do it by lowering the duty on Scotch whisky, so that the fraud is less attractive. HM Customs and Excise and the spirits industry should work more closely together to target and expose the criminals who perpetrate excise fraud. Strip stamps are not the answer. I hope that the Scottish Executive will support a great Scottish industry in its time of need.
Like Jackie Baillie, I was somewhat surprised by the topic that the Conservatives chose for today's debate. Over the past two and a half years, we have become used to the SNP debating reserved matters in the chamber. The SNP is constantly picking away at the corners of the Scotland Act 1998 and has debated reserved issues as an excuse to argue for the transfer of more powers to Scotland.
Given the fact that the Conservatives did not support even devolution—let alone independence—the fact that they chose to debate a matter that is reserved to Westminster was a bit of a mystery to me. Last night, as I was pondering—
Let me finish what I was saying because I want to make a point about what Annabel Goldie said.
Last night, as I was pondering why the Conservatives had chosen this topic for debate, it occurred to me that the Scottish Conservatives have only one member at the Westminster Parliament. That poor chap is obviously far too busy to raise the issue in Westminster. I must confess that I was surprised by Annabel Goldie's speech. When will she apply to the SNP for a membership card? I would be interested to hear an answer from her.
This may seem depressingly basic and worryingly tedious, but my motion for debate is on a document that was produced by the Scottish Executive. If the document is not competent to the devolved Parliament, what is the Executive doing wasting resources and public money by producing the damn thing?
That is very disingenuous, even by Annabel Goldie's standards. If she cared to read her motion, she would see that the debate is on a lot more than the document.
Having said that, I think all members present are happy to discuss the Scotch whisky industry. There is no problem with that; we have done so on many occasions. As we all know, Scotch whisky is a world leader. It is the best-selling international spirit in the world and is a leading global brand. Scotch whisky is Scotland's No 1 export and accounts for 20 per cent of the UK's food and drink exports.
The industry provides 11,000 jobs directly and a further 30,000 jobs indirectly. As we have heard, that includes farmers, hauliers and employees of bottling plants and of labelling companies. Many colleagues have mentioned the jobs in their constituencies in different parts of Scotland. In my constituency, the Simpson Label Company Ltd in Dalkeith is the biggest labelling manufacturer in the UK. It makes 4 million whisky labels every year and provides jobs that are important for the local economy in Midlothian.
Precisely because the Government recognises the huge importance of the whisky industry to Scotland, it has developed a partnership with the industry to build on the shared agenda. The industry does not operate alone, as Government decisions have an impact on the industry. The industry itself has responsibilities, because its actions have an impact on people's lives, on the Scottish economy and on the Scottish environment.
We have heard about the industry's concerns over the possibility that producers will be required to put tax stamps across the tops of bottles. However, it is important to remember that the suggestion came not from Her Majesty's Government but from an independent review of excise duties. Duty fraud costs the Government £450 million. The purpose of the suggestion is to reduce the legitimate whisky trade's competitive disadvantage, which the whisky industry is also committed to reducing. I would be interested to hear whether the Conservatives would turn a blind eye to tax evasion and alcohol smuggling, which have so many implications for Scotland's health and finances.
I am delighted to hear the minister's commitment to consult the industry on the issue. I know that the industry has been working closely in consultation with the Government on the possible implications of the proposal. The industry has also worked closely with the Executive on the water framework directive, for which a joint working group has been set up with the Scottish Environment Protection Agency. I welcome the Executive's assurance that there will be no blanket application of abstraction controls on the whisky industry.
The whisky industry is vital to Scotland and I welcome the way in which it has behaved. Only by working in partnership with the Government can we ensure a prosperous future for the industry. The industry is far too important to be used to score petty party-political points. Frankly, that is all that the Tory motion seeks to do. Of course, the SNP is delighted to help the Tories to do that.
The vast majority of Scots understand that devolution gives Scotland the best of both worlds: the strength of the Scottish Executive to develop the Scottish economy and the strength of the UK to negotiate for Scottish interests in the wider world, as it has done recently in India on behalf of the Scotch whisky industry.
I ask members to support the Executive amendment.
The fact that I stand to speak against the Conservative motion in no way implies any lack of support for the whisky industry, which is of supreme importance to the Highlands and Islands. The industry provides much-valued jobs in remote rural areas. The closure of a small distillery in the Highlands is the equivalent of the closure of a Motorola plant in the central belt. The jobs are extremely important, so I would argue strongly against any proposed legislation or regulation that would put the jobs in jeopardy.
The small, single-malt distilleries in the Highlands and Islands play an important part in community life. For example, the small Clynelish distillery at Brora produces an excellent malt, which I hope all members will sample and support. Recently, the distillery sponsored the Burns supper in Brora, which raised funds for the local scouts and guides. That is typical of what those small distilleries do. They play an important part in the tourism industry. Small distilleries are tourist honeypots, bringing visitors to small communities and so contributing to the viability of other local businesses. Distilleries also provide a market for the barley that is grown in parts of Scotland, including the Black Isle, thus providing support for Highland farmers.
The area of the Black Isle where I live is called Ferintosh. Members who know their Burns will recognise that as the name of a famous whisky. Forbes of Culloden was excused the payment of duty by the Hanoverian Government because of his support against the Jacobites. At one time, there were 40 illegal distilleries on the Black Isle and about 50 lawyers in Dingwall to defend the distillers as they were caught. Unfortunately, at the moment there is no distillery on the Black Isle, but I live in hope that the Ferintosh distillery might be revived.
When the whisky industry recently issued a press release voicing its concerns over proposals to introduce strip stamps to prevent duty fraud, my reaction was to write to the Treasury to find out what was happening. I am surprised that Opposition members did not do the same. Jackie Baillie quoted from the letter that I received from Paul Boateng. It will do no harm to quote again from the letter. It said:
"Although Customs and Excise have already undertaken some feasibility research I have now asked them to undertake a more wide-ranging and formal consultation on the costs, benefits and practicalities of introducing such a system.
I should like to make clear that the Government is approaching the issue with an entirely open mind and that we are keen to build up as clear a picture as possible"—
Will the member take an intervention?
Perhaps the member will wait until I have finished reading from the letter. It continues:
"through the consultation before taking any decisions … I know too that the industry shares the Government's commitment to tackling alcohol fraud and that they have already put proposals to Customs on how they can help."
What is the point of the Government approaching the subject with an open mind when all the evidence shows that strip stamps do not work? Why does the Government have to reinvent the wheel time and again?
I am sure that Mr McGrigor would not want the Government to approach the subject with a closed mind.
We had 18 years of that and it did not work.
Yes.
The letter makes it clear that what we are debating is nothing more than a proposal and that other options are on the table. It is natural for the Treasury to examine ways of preventing the leakage of £450 million in unpaid duty. In spite of all the jokes about having to pay tax on whisky, we need that money for health, education and transport services. The people who complain that not enough money is being spent on education, jobs or health are those who do not want to pay tax.
As a back bencher, I have lobbied consistently in support of the whisky industry. When Sylvia Jackson and I were members of the European Committee and the European Commission was proposing sanctions on water abstraction, we lobbied hard at the European level on behalf of the industry. The industry's position is to support environmental initiatives. Part of the mystique of whisky is built on the purity of the environment—people have only to look at advertisements for Glenmorangie whisky to realise how important the environment is to the industry. The whisky industry is committed to sensible environmental legislation. The Executive is pledged to a scheme that is proportionate to the degree of environmental risk and that takes users' needs into account. Too much scaremongering is going on.
As has been pointed out, the Labour Government at UK level has always supported the industry. Only last week, Douglas Alexander negotiated a huge import duty reduction in India. [Interruption.] SNP members may groan, but they should welcome that step, as India has the potential to become the biggest market in the world for whisky.
In the past four budgets, duty rates on whisky have been frozen. If we ask what the Tory record is, the answer is that it is not very good. The UK Government has argued consistently in Europe for the tax rates for wine and whisky to be equalised.
The Tory motion is built on sand. The Tories have built their case on possibilities rather than probabilities. They have ignored the excellent work that has been done by the Executive and the Labour Government to promote and protect the whisky industry. I am confident that the right balance will be found to protect the industry and to close the door on duty dodgers. I urge members to reject the Tory motion.
I am pleased to refer to my entry in the register of interests. I am a member of Amicus. Given the subject of the debate and the fact that, in a previous life I have been a solicitor and an advocate, I declare an interest in the disproportionate support that both legs of the Scottish legal profession have given to the Scotch whisky industry over the years. Long may that continue.
The debate has been spirited—I hope that it has been fuelled only by a passionate interest. I will not support Annabel Goldie's motion. I say that with some regret, as I share many of the concerns that she outlined, but I agree with Rhona Brankin that the motion is couched in disingenuous terms and I am unsure about the motive that lies behind it. It may be simple mischief making, as that opportunity is always open to opportunist Oppositions. It may be scaremongering or a feeble attempt on the part of the Conservative party to rebuild its links with the Scotch whisky industry—or indeed, with industry in general.
It is simply not the case that Her Majesty's Government is considering the application of tax stamps. That has been made clear by my friend Jackie Baillie and by the relevant Treasury minister, Paul Boateng, on a number of occasions.
If the Government is not considering the application of tax stamps, what is the consultation about?
It is an open-ended consultation on moves that were recommended by an independent investigation. The consultation will consider industry submissions—that is why the Scotch Whisky Association has produced its submission. The association wants to be part of the consultation and to assist the Treasury in examining other measures to combat spirit fraud.
I welcome the open consultation. I am sure that the Scotch Whisky Association needs no help from the Conservative party, the nationalists or me to advocate alternatives to tax stamps.
I am grateful to Mr Fitzpatrick for allowing me to make a point of information. A letter that I received from the Scotch Whisky Association said:
"The Treasury announced in November that it is considering applying strip stamps to spirits".
That seems to be more than a woolly, ephemeral, putative proposal. There seems to be real apprehension in the mind of the Scotch Whisky Association. Does the association not know what it is talking about?
I am always slightly worried when people narrate what others have said.
The point remains that the minister concerned has made clear the Treasury's position on the open consultation, which is progressing. I accept what he has said. The consultation is open and is being conducted with, among others, the spirits industry. The consultation will explore the costs, benefits and practicalities of a tax stamp system or any alternative regime.
However, I share the concerns that Jackie Baillie raised about the implications of a tax stamp scheme for the industry and its workers. I do not believe that the scheme is an effective solution to spirit fraud.
I am sure that the Deputy Minister for Enterprise, Transport and Lifelong Learning will have close consultation with the Treasury on the matter. I am also sure that the Treasury will enlist the support of the Secretary of State for Scotland. We know that the nationalists always want to turn such important relationships into a spat rather than a solution. On this occasion, it is unfortunate that the nationalists are joined by the Conservatives—although, from the small number of members on the Conservative benches, it seems that most of them are too embarrassed to take part in the debate.
Part of the reason why the Conservatives are not happy to be here is that there is no record of Conservative support for the Scotch whisky industry. It is Labour members who support the industry. The past four budgets have frozen—and therefore, in real terms, cut—duty on spirits. Whereas it was the Conservatives who put their foot on the fuel duty escalator and who created a spirit duty escalator, the Labour Government took its foot off the spirit duty escalator. I urge members to support the Executive amendment.
The amendment in the name of Mr Ewing does not deserve the support of the chamber, as he did not manage to speak to it in his speech. We got some kind of hint from Mr Hamilton as to what the nationalists mean by a spirit duty, although he did not say whether the duty is to go up or down—that is, and will remain, a secret. As ever, the nationalists have nothing to say about regulation. What do the nationalists intend to do about regulation? Does the amendment indicate, as we heard from one of their apologists recently, a desire to remove health and safety provisions?
The Executive, working in partnership with the Labour Government, will reflect the interests and aspirations of the Scotch whisky industry. It is nothing new that the Tories hardly mentioned the workers in the industry. Members should ask themselves seriously whether David Davidson, Andrew Wilson or Gordon Brown is the best person to take care of the Scotch whisky industry. I have a pretty firm view on that.
The closing speeches will be of four minutes.
It is clear from the passionate speeches that Scotch whisky is dear to the heart of many members. We heard that Jamie McGrigor wants free whisky at every Scottish Parliament reception. I am not sure that that is a good idea; it might undermine the quality of Jamie's speeches.
On a more serious note, the whisky industry is important to the economic well-being of many small and fragile communities, a classic example of which is Islay. That island has eight distilleries, which support 50 to 60 jobs directly and many more indirectly. Last year, the Bruichladdich distillery opened after being mothballed many years before. The whisky industry has expanded on Islay. The future of that fragile island community is linked inextricably to the fortunes of the whisky trade, which is why I am concerned about the UK Government's proposal to introduce tax stamps. As Brian Fitzpatrick said, the proposal is the subject of consultation, which is why we are having the debate. I hope that the minister will feed into the UK discussion the thoughts that have been expressed today.
The Scotch Whisky Association suggests that the introduction of tax stamps will make the industry less competitive in the marketplace against foreign competitors. If that is correct, the introduction of such a measure could have serious and damaging consequences for the economies of small and fragile communities such as Islay.
No one denies that the problem of bootlegging must be tackled. That is the fundamental point in the discussion. However, are tax stamps the answer to the problem? Jackie Baillie said that she does not believe so. The UK Government seems to have done a U-turn on the subject. In March 1997, the UK Government wrote to the Norwegian Government stating that tax stamps were likely to be inefficient and ineffective as a means of combating fraud and illicit trade.
What has changed since 1997, when the Government did not believe that tax stamps would solve the problem of bootlegging? Why is the UK Government considering a measure to tackle bootlegging that in 1997 it believed to be unworkable? What did the independent inquiry find suddenly to substantiate the idea that the proposal is sensible and might deal with the problem of bootlegging? As we have heard, other countries, such as the USA, Greece and Ecuador abolished tax stamps because they were ineffective. Other countries considered the introduction of tax stamps but rejected the proposal as unworkable and incapable of solving the problem of bootlegging.
Will the member give way?
No, the member is in the last minute of his speech.
Am I?
Yes. I gave you four minutes.
The whisky industry is willing to work with the Government to tackle bootlegging, but the industry does not believe that tax stamps are the right way to achieve that goal. One reason why bootlegging is such a problem is the cuts in the service provided by HM Customs and Excise. The UK seems unable to deal effectively with challenges such as bootleg whisky and unsafe meat products. One answer that must be considered is the strengthening of Customs and Excise. During the past 12 months, illegal meat imports have caused irreparable damage to the rural economy by introducing foot-and-mouth disease. Last week, there was a worry that that disease had reappeared.
It is important that the matter is taken up in the right place, which is Westminster. My colleagues in Westminster are arguing the case. Alan Reid is in the forefront of the campaign to ensure that the tax stamp system is not introduced. The Scottish Executive must make known, in the strongest possible terms, the genuine concerns that have been expressed today. I am reassured that the minister takes seriously the whisky industry's concerns and, most important, the impact that the measure would have on small and fragile rural communities such as Islay. I look forward to the minister reporting back the results of his discussion with UK ministers.
I call Margaret Ewing. She has four minutes.
I do not want to challenge you, Presiding Officer, but I find it strange that I have only four minutes when Labour back benchers had seven and a half minutes in the earlier part of the debate.
It is not appropriate to dispute the time that is allocated for a speech. A period was allocated for the open debate and I called all the members who requested to speak. It is for the parties to decide how many people to put forward in that time. Members are notified in advance of the times for closing speeches; they should know what time is available.
I was not challenging you but merely making a comment.
Given the time of day, the debate has been interesting. I hope that Annabel Goldie's late arrival was not a result of supporting the industry too much yesterday evening.
I should declare an interest in the Scotch whisky industry: since 1987, it has been my pleasure, first as MP and now as MSP for Moray, to represent more than 50 per cent of the malt whisky distilleries in Scotland. Even in my constituency, I cannot mention my favourite malt for fear of offending the other distilleries.
As members have said, the whisky industry is an important aspect of the fabric of the community. For example, it provides employment in farming and transport. Transport is a vexed subject because it raises the issues of fuel costs, which are extremely high, and the need for improvement to the A95, which is the main whisky route. The industry also provides employment through tourism; the whisky trail brings a lot of money into bed and breakfasts and hotels.
The whisky industry is not solely a Highland issue. My colleague Alasdair Morgan is interested in Bladnoch, which is our most southerly distillery, but which despite developments is still mothballed. In the central belt, the industry provides many jobs in Shieldhall, the Vale of Leven and Kilmarnock.
I will deal with some of the comments that members have made about the SNP amendment. Apart from the opening line and the final paragraph, everything in our amendment reflects the views of the Scotch Whisky Association. In insulting the SNP, Brian Fitzpatrick insulted that association. He should sort out his neurosis.
Will the member give way?
No. I have been given only four minutes for my speech.
From what Rhona Brankin said, it seems that devolution is only a commitment to consultation—that is ludicrous. If we were talking independence instead of discussing devolution, the Parliament would be able to legislate on the matter. Why must we go, tartan cap in hand, to Westminster to ask it to do something?
I do not want to rehearse the various statistics that members have mentioned. Many of our small distilleries face difficulties with their profit margins. I spoke to several distilleries yesterday, one of which told me that it must absorb a 7 per cent rise in costs this year. It regards the extra cost from the introduction of strip stamps as disastrous.
Will the minister tell me what information he has about the brands and businesses that are involved in fraud? A recent action by the Scotch Whisky Association against a French company uncovered 2 million bottles of fake whisky. What information is available? To defeat fraud, we must know which brands and businesses are involved.
Everyone is against fraud. Apparently, the Government is approaching the issue with an open mind, which, it seems, is to be filled with endless consultation documents in the hope that proposals will emerge—that is if the documents are not shredded.
Will the member give way?
No. I am in my last minute.
Over all the years that Winnie Ewing and I have been involved in fighting battles with various Governments and the EU, the whisky industry has been most co-operative in trying to define policies and in enforcement. The industry is constantly in touch with Customs and Excise.
The industry has made it totally clear that it is opposed to strip stamps. I think that it would be wrong if we did not take on board the fact that the industry is united against that measure, which is being consulted on against all the evidence from elsewhere in the world.
In conclusion, and in the spirit of friendship that whisky always evokes, I invite everyone to come to the spirit of Speyside whisky festival on the weekend of 3 to 6 May, when they are assured of a warm Moray and Banffshire welcome. In relation to our amendment, I close by saying:
"Whisky and freedom gang thegither."
Part of Annabel Goldie's motion did, indeed, refer to a devolved matter. It also referred to the framework document, "A Toast to the Future: working together for Scotch whisky", which would allow the Scotch whisky industry and the Scottish Executive to map shared goals and a common direction for the whisky industry in Scotland.
The launch of "A Toast to the Future: working together for Scotch whisky" represents acknowledgement by the Scottish Executive and the Scotch whisky industry that we need to work together to build on the success of such a unique product and to enhance opportunities for its expansion and progress for the benefit of the industry, the jobs it supports and the wider economy of Scotland. The document was sent to all MSPs, MPs and MEPs to make clear the Executive's commitment to, and support for, that generic and important Scottish manufacturing industry.
The document deals not only with issues such as duty on spirits, but with issues for which Scottish ministers have direct responsibility, such as tourism, the environment, technical innovation and problems with alcohol use and community co-operation.
We pledged to support Scottish manufacturers when EU and UK policies impacted on competitiveness and we have done that. We pledged to keep regulatory burdens to a sensible minimum and we have done that. We pledged to work with the UK Government on tax and international trade issues, where it has primary responsibility. It has been noted today that Gordon Brown has achieved real-terms reductions in duty on whisky and that Labour ministers at the Department of Trade and Industry have achieved improvement in relation to duty in countries such as India. On all those matters, there is still progress to be made; however, we work with our UK colleagues and support their efforts in making further improvements in those areas.
Will the minister give way?
In a moment.
The co-operation between Governments is continuous and wide-ranging. There is a formal tripartite agreement between the DTI, the Department for Environment, Food and Rural Affairs and the Scottish Executive that deals with the subject of co-operation in support of the Scotch whisky industry. We will continue to do all that is in our power to ensure that the industry receives support.
I am grateful to the minister and I could not disagree with much that he has said. However, the debate is about duty stamps. Will the minister state whether he agrees that, as a measure to combat fraud, duty stamps will not work? Will the Executive oppose duty stamps?
What I did not hear in Fergus Ewing's speech—or indeed in any speech from the Opposition—was an alternative proposal. This is an area on which we need to focus: it is clear that if a case is to be made that duty stamps or tax stamps are not the way to go, fraud must be addressed and dealt with in other ways.
Before I move on to deal with some of the specifics of that issue, I shall mention in passing that we in Scotland also have a growing white spirits industry. In a debate on whisky, it is important to acknowledge that vodka and gin production is also increasing and that Scotland is now responsible for 70 per cent of UK production of those spirits. However, it is clear that Scotch whisky has a special place.
The part of Annabel Goldie's motion that refers to a reserved matter deals with the issue that Fergus Ewing has again asked about. I think it was Margaret Ewing who asked earlier whether we had considered the Scotch Whisky Association's proposals—she mentioned that such proposals existed. We have considered those proposals and acknowledge them as a significant contribution to the debate.
"Tax stamping of spirits"—HM Customs and Excise's consultation document—includes proposals for new ways in which to trace the origin of diverted stock and for investigating tracking technologies for the same purpose. The industry has also made it clear that it acknowledges that the warehouse sector in the UK and elsewhere has a role to play in identifying and dealing with fraud. We welcome that and the responses of the Scotch Whisky Association.
Will the minister give way?
I will take a brief intervention from Mr Hamilton.
In the last few seconds of the minister's speech, will he answer Fergus Ewing's question differently? If he is telling us that there is no alternative at this point, will he commit to working with the Scotch Whisky Association to find one? Can he say, at least in principle, what Jackie Baillie was able to say, which was that the Executive is not in favour of strip stamps?
If Mr Hamilton had listened, he would have realised that we have not only been working with the Scotch Whisky Association, but we have taken their proposals into account.
As I said, I did not hear alternative proposals from Opposition speakers, although I listened closely to the speeches that were made by members from throughout the chamber. I noted the views of many speakers, including Labour and Liberal Democrat members, about the way in which the issue should be developed. It is clear to me that UK ministers are prepared to respond if alternative solutions are proposed—I share their view. It is for MPs from Scottish constituencies to express their views to the Scotland Office. For our part, we will express our view following the debate and I am grateful to members for their contributions to that process.
Like the other members who have spoken, I must declare an interest in the subject—in single malts in particular.
During the debate I began to wonder whether the party in power understood why we proposed it. The Executive has ducked and dived all over the place. During Lewis Macdonald's first speech—however many minutes long it was—I found it difficult to write anything that was relevant to the debate. That said, the subject of the debate was very clear, but I do not believe that Mr Ewing was too clear in confirming to himself what the debate was about, other than to see it as another opportunity to battle to bring regulation from London to Scotland.
The document "A Toast to the Future: working together for Scotch whisky" is the basis of the debate. Annabel Goldie made it clear that that is what the debate was about and she tested what the Executive meant by the words in that document.
The basis of today's debate is the proposal on—or consultation on, as it has now become—the imposition of strip stamps on the industry. I must ask why an industry is being penalised and forced to pay for enforcement on smuggling and fraud, which is the role of Government. Lewis Macdonald wants to know what we can do as an alternative. If the Government is going to lose £460 million in duty, why does not it invest in support of HM Customs and Excise? George Lyon would like to include food in that.
Will the member take an intervention?
I hope that Rhona Brankin's intervention is better than her last one.
What does Mr Davidson say to the fact that the Labour UK Government has invested heavily in appointing additional Customs and Excise officers in Scotland whereas the Conservative Government presided over a reduction in the number of officers? Did the Conservatives increase the number of Customs and Excise officers in Scotland during their time in government?
Excuse me: the Labour party has been in power for five years. If Brian Fitzpatrick had done his sums properly, he would have realised that we reduced taxation. We did not just freeze it.
I come back to today's serious issue. Strip stamps will crucify the whisky industry—there are no ifs or buts about that. Jobs will be put at risk and the rural economy, which is under threat at the moment, will be at risk. The supply chain for grain is at risk.
One of my colleagues gave me a piece of advice to give to Mr Macdonald with regard to the EC water framework directive. Article 11.3(e) gives the Scottish Executive power to exempt distilleries from the framework agreement. Perhaps the minister would like to do his homework on that.
I turn to Fergus Ewing's speech. I agree that paying duty upfront is highly damaging, but the issue is not just the cost of the machinery and sticking on the stamps, but the payment of duty upfront. It is a stealth tax on the industry and it is not good. It is a hidden cost to an industry that has fairly high costs anyway. Such a cost is not helpful, although the Government claims that it is supportive of enterprise, job creation and sustainability.
The Scotch whisky industry is a flagship industry for Scotland and Scotch whisky is a world-renowned product. The industry cannot be moved to the southern counties just because it might be cheaper to produce whisky down there; whisky is a uniquely Scottish product. We should be doing our best to ensure that the Executive tells us what it is saying to the UK Government about issues that matter in Scotland. It is all very well for Lewis Macdonald in his two speeches to say how wonderfully the Government down south is dealing with the issue, but what we want to hear is the Executive's message in the consultations with the UK Government, not that it will work with the industry. The industry wants to know what the Executive is prepared to stand up and argue for. If the Executive is not prepared to argue the case, but is prepared simply to go with the flow, why does not it have the decency to tell us so?
Jackie Baillie made an excellent speech. I do not always agree with her, but she made a realistic and measured contribution to the debate, unlike some of her colleagues. I accept Maureen Macmillan's point about tourism and the fact that everybody refers to the places where whisky is produced in their areas. The point is that whisky is a national product; it is not made only in one distillery. There are some distilleries in my area. I am sure that the Ewings have sampled the products of most of the distilleries in their locality. I have certainly had a go at that, even though I have not visited all the distilleries.
Today, we have brought to the attention of the Parliament a problem that affects a Scottish industry, but there are ways to solve it. A clear message is coming from the chamber and the industry that strip stamps will not work and there is evidence from abroad that they do not work. They do not stop the problems of fraud and smuggling. It is the responsibility of the Government to deal with those problems. Setting up a new unit and investing in it to get back some of the lost millions of tax pounds would be a good use of taxpayers' money, from which we would see a return. That return would be the continuation and strengthening of an industry that we know and love. If there is going to be a big market in India—as everyone says there will—we must develop the product and be able to produce it. We must take every step that we can to ensure that we have an unfettered industry that can get on with what it does best.
I thank Mr Davidson for saving some time.