Chamber and committees

The figures that I lifted were from its latest published accounts on Companies House. I realise that there is a lag, but they suggest that, similarly to Exscientia, the improvement in its financial position has been recent. Back in 2020, if I am reading it correctly—again, this is from Companies House—Exscientia had only 65 employees. It was only in 2021-22 that we saw substantial growth, which it did not have when it was created back in 2012.

In Scotland, our trade surplus in goods is driven by fantastic, world-class quality food and drink, whether that is the abundance of seafood in Scottish waters, including top-quality salmon, or Scotch beef and lamb reared on our farms. We export soft fruits such as strawberries, raspberries and blueberries, alongside barley, wheat, oats and—of course—whisky. The sector delivers £8 billion of export sales, which adds to the trade surplus that is generated here, in Scotland. Our food and drink products are in high demand in markets across the world because we offer a diverse range of products with broad international appeal that have a reputation for quality, provenance and luxury.

Scotland and, to a lesser extent, Wales are the only countries of the UK that have a trade surplus in all goods and services. The most recent Office for National Statistics figures highlight that we had an overall surplus of £21 billion in 2021. We sell more to the world than we import—generating a surplus that benefits the UK economy—unlike the north-west of England, Yorkshire and the Humber, the East Midlands, the West Midlands, the east of England and south-east England, which all consume more than they produce and have an overall goods and services trade deficit.

Before I focus on the whisky industry, I should remind members that I am the co-convener of the cross-party group on Scotch whisky.

In 2022, the value of Scottish whisky exports was £6.2 billion, which equates to 1.67 billion bottles of whisky—or 53 bottles of whisky every second—exported to markets all over the world. Scotland’s whisky accounted for 77 per cent of Scottish food and drink exports and 25 per cent of all UK food and drink exports. The Scotch whisky industry exports to 174 countries around the world. The largest market is in India, which alone purchased the equivalent of 219 million bottles of whisky, followed by France and then the United States.

Those export sales help to support employment in Scotland, where 11,000 people are directly employed in the whisky industry. They also support 42,000 jobs across the UK. The number of Scottish people directly employed in the whisky industry is up from the 9,300 jobs estimated in 2008, as the number of distilleries has increased from 109 in 2009 to the 146 that we have today. The result is that we have more than 22 million casks lying maturing in warehouses in Scotland—the equivalent of 12 billion bottles of whisky.

However, the UK Government must be careful that its actions do not undermine investment in the industry. In the 2023 spring budget, the UK chancellor increased duty on whisky by 10 per cent, resulting in the duty and VAT amounting to 75 per cent of the average bottle price and widening the difference between the taxation of spirits and that of other categories of alcohol. In 2009, spirits duty per unit of alcohol was 23p. It is now 31.6p—up 43 per cent over the past 14 years.

We have a UK Government that takes 75 per cent of the cost of a bottle of whisky in tax but provides no support for energy costs despite distillation being energy intensive. The industry was also excluded from the energy bill relief that was offered by the UK Government.

The increase comes at a time when year-on-year growth and profitability are being undermined by the UK decision to leave the EU, despite the people of Scotland voting to remain. Analysis highlights that 44 per cent of businesses indicate that Brexit is the main cause of difficulties in trading overseas and attracting agricultural workers, particularly at harvest time, with high inflation and energy costs impacting on profitability and creating continued difficult trading conditions for the food and drink industry.

Brexit has also resulted in Scottish products losing their protected geographical indicator status, similar to the status that products such as Parma ham and champagne have. There is a new reciprocal agreement with the EU to give some protection to our products but that will not necessarily carry the same cachet as before with consumers.

I might not yet have any distilleries in my constituency of Edinburgh Pentlands, but I am fortunate to have the Scotch Whisky Research Institute. The institute, which is based at Heriot-Watt research park, conducts research covering the entire whisky-making process. The aim is to examine all aspects of the process from barley to bottle to improve sustainability and efficiency and to introduce new technology where appropriate.

On my visits to the institute, I have seen how it takes product safety and quality seriously. Another aspect of its work revolves around stopping counterfeiting and protecting the authenticity of Scotch whisky. Our whisky is a premium global product, and the work of the institute’s product protection group ensures that only spirit matured in oak casks in Scotland for at least three years can be called Scotch whisky.

Given the importance of Scotland’s food and drink industry to the Scottish and UK economy, I welcome the £5 million that the Scottish Government is investing in a new strategy and its ambition to support the industry’s aim to grow turnover by 25 per cent by 2028.

With the timing differences.

I have no relevant interests to declare.

It has been an interesting discussion. I have three quick questions to round things off. Professor Roy, you quite rightly said that forecasts play a central role in setting the budget, but you have highlighted forecasting errors in revenue from income tax at 12 per cent and from land and buildings transaction tax at 13 per cent. What impact did that have overall on the Scottish Government’s budget in terms of what was available to it?

You estimated that the reconciliation would be £745 million.

The difference between the higher and the lower forecast element could have been resource that would have been available to the Scottish Government.

It has to manage a lower amount than was previously estimated.

Have the forecast errors led to changes in the model going forward, so that you can reduce the level of forecast errors?

I come to my final point. I accept that you may not have seen these figures, but we were talking about the volatility around self-assessment taxpayers. What impact do you think the acceleration in the move to a cashless society has had? A report last year said that 23 million people in the UK no longer use cash, and that within a decade, the proportion of cash payments would be close to 6 per cent.