Westminster Hall debate on Scotch whisky: US tariffs - Jan 30

David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)

I beg to move,

That this House has considered the effect of US tariffs on the Scotch whisky industry.

It is a pleasure to serve under your chairmanship, Ms Buck. I am delighted that the Minister, my hon. Friend the Member for Moray (Douglas Ross), is responding to the debate, because he is the Member of Parliament with the most whisky distilleries in his constituency. He has been a powerful advocate for the industry since he was first elected.

For some years, the Scotch whisky industry has enjoyed a renaissance. There is a romance about Scotch, a heritage that is unmatched, and a global reach that is unrivalled. As an economic reality, Scotch whisky provides jobs and investment in rural communities, underpins a supply chain that extends across the UK, and has become central to Scotland’s tourism offer, attracting visitors to our shores from all over the world. As Secretary of State for Scotland, I spoke often of the whisky industry’s stand-out success. By the end of my tenure, I could recite the numbers in my sleep: £4.7 billion in exports to 180 countries globally, 40,000 jobs supported across the UK, 20% of UK food and drink exports, 41 bottles exported every second.

Global Britain, which is being debated in the main Chamber right now, is surely about reinvesting in the UK on the world stage; championing rules-based trade; and demonstrating that the UK is open for business, outward-looking and confident in its trading prospects. The Scotch whisky industry has led the way on that in its 150 years of exporting. Distillers large and small bestride the world and the brands have become some of the most recognised globally, as I saw for myself when promoting the industry in countries as diverse as Argentina, Mozambique and Japan, always with positive support from the Scotch Whisky Association and its members.

This great Scottish and British export has been put under considerable pressure since the imposition by the United States last October of a 25% tariff on the import of all single malt Scotch whisky and Scotch whisky liqueurs. I asked an urgent question in Parliament ahead of the tariff’s imposition and during the debate that followed, along with other Scottish Members, I set out the industry’s concerns about its potential impact. The Prime Minister spoke to President Trump, as I requested in those exchanges, and many MPs lobbied US Ambassador Woody Johnson.

Regrettably, the tariff imposition went ahead. I should be clear, however, that the US is legally entitled to impose the tariff because of the World Trade Organisation’s ruling on the long-running dispute between the EU and the US about aircraft manufacture. To cut a long story short, the WTO found that both Europe and America had given illegal subsidies to Airbus and Boeing. The WTO said that until the subsidies were repaid and their impact eliminated, each side was entitled to impose retaliatory tariffs on the other’s exports to encourage compliance. That may be legal, but it is a bitter blow to the Scotch whisky industry.

The US is Scotch whisky’s most valuable global market; more than £1 billion of Scotch whisky was exported there in 2018. The disconnect between the source of the dispute and the UK products affected by the tariffs is particularly galling. The US chose not to impose tariffs on imports from UK aircraft manufacturers, so Scotch whisky is bearing almost two thirds of the total tariff liabilities imposed on UK exports to the United States.

Our cashmere and shortbread industries are feeling the pain every bit as much. As the Minister and my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont) have highlighted, those industries have also been targeted and their imports to the US subject to a 25% tariff. Given the importance of cashmere to the Borders, my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk raised his concerns directly with the EU Trade Commissioner. Depressingly, they have not even replied, which suggests that the EU does not recognise the economic impact of those taxes on businesses in rural Scotland.

Peter Grant (Glenrothes) (SNP)

I commend the right hon. Gentleman for his tenacity in pursuing this matter, which concerns us all. He has highlighted the vastly disproportionate effect that the tariffs will have on the Scotch whisky industry. He has also referred to other important Scottish exports that are affected. Has he seen any analysis of the proportionate effect on Scotland’s economy, compared with the economy of other parts of the UK, of the imposition of those tariffs? If that has not been produced, does he agree that it would be a good idea for the Government to produce it?

David Mundell

I thank the hon. Gentleman for his helpful intervention. I will come on to the initial feedback in relation to the impact of the tariffs. If we cannot resolve the issue in the short term, however, his suggestion has much to commend it.

As the hon. Gentleman alluded to, it is the small businesses, the new distilleries, that will be worst-hit as a consequence of a dispute in an industry with which they have no connection. Large spirits companies have portfolios of products that make them less vulnerable to market changes, but as Diageo chief executive Ivan Menezes recognised today, it is “devastating” for the industry as a whole. He said:

“It’s not a big impact on Diageo on the single malts into the US, however for the industry in Scotland, it’s devastating. It impacts small distillers, farmers and employees there. Thousands of jobs. That’s our focus. We hope sense will prevail between the US and the UK and the EU to get these tariffs down.”

It could get worse. Following a WTO ruling last December that the UK, among other European countries, was still in breach of WTO rules in its support for Airbus, the US Government proposed to increase existing tariffs and expand the coverage to include more products. As early as next week, we will know whether the tariffs on Scotch malt whisky or other Scottish products will rise or widen in their scope. Most troublingly, they could include blended Scotch whisky.

Meanwhile, since June 2018, the EU has imposed a 25% tariff on US whiskies in response to US tariffs on steel and aluminium. That is another long-standing dispute and another unrelated sector bearing the painful consequences of Governments’ failure to resolve disputes. It is a far cry from the mid-1990s, when the US and the EU, together with Canada and Japan, agreed to remove all tariffs on imported brown spirits. That unleashed an increase of 270% in total Scotch exports to the US. That is impressive, but it is put in the shade by the 400% increase in US whisky exports to the UK over the same 25-year period. Friendly competition has been good for both industries, for tax revenues and for consumers.

It could not be clearer that the UK Government need to resolve the outstanding issues on UK subsidies to Airbus to ensure that the UK is fully compliant with international law in the WTO’s view. That is evidently key to ensuring the return to tariff-free trade in whisky across the Atlantic.

Mr Alistair Carmichael (Orkney and Shetland) (LD)

I commend the right hon. Gentleman for bringing this issue to the Floor of the House. He is making a compelling argument for the virtues of free trade, something that we have not had to do for some decades now, although I fear we may be returning to it again in the future. Does he agree that there is a fundamental disconnect here? If the sector that is in breach of WTO rules is not the one that suffers the penalty, there will never be any incentive for the behaviour to be improved.

David Mundell

The right hon. Gentleman makes an excellent point. His constituency makes two excellent whiskies, Highland Park and Scapa. People involved in the distilleries have nothing to do with the steel and aluminium industry; they have nothing to do with competition in the aircraft industry. It is completely wrong that they should be drawn into what is not their dispute. That is why we must resolve the underlying disputes.

Mr Carmichael

The right hon. Gentleman refers to Highland Park and Scapa, both of which are products that are owned by larger groups, and so will probably be better able to sustain the damage brought by the tariffs. Surely, however, we must view the industry as one unit. The small, start-up distilleries, from Arran back in the 1990s to Kilchoman and Ardnahoe on Islay now, are the businesses that will suffer the most serious impact; they play an important role for the success of the conglomerates.

David Mundell

I absolutely agree. It was very welcoming to hear Ivan Menezes, head of Diageo, one of the most successful spirits companies in the world, focusing on that. He said that although Diageo has a portfolio of spirits and can weather the storms, this is devastating for the industry as a whole; Diageo wants to see a resolution through its own offices and through the Scotch Whisky Association for the whole industry.

Since a tariff was imposed on 18 October, export figures appear to paint a bleak picture, although there may have been some additional exporting ahead of the possible introduction of the tariffs to avoid them. According to the Scotch Whisky Association, single malt Scotch exports to the US in November 2019 fell by 33% by value compared with November 2018, following a fall of 26% in October. Although it is too early to tell the longer-term impact, if such drops in exports are sustained over a year and mirror the fall in US whisky imports to the EU in the last 18 months, that would mean a loss of around £100 million in exports to the United States, with a corresponding impact on investment, productivity and, eventually, jobs at home.

For medium-sized and smaller distillers, single malt is all they have and the US market is vital. They have invested in single malt because that industry is growing. Over the last decade, global sales of single malt have grown 166%, and growth in the United States has been even higher—up 230% over the past 10 years. These small and medium-sized distillers cannot shift their investment and are being hit particularly hard.

Distillers are waiting now to see what will happen in the next few weeks. They have paused investment, reduced exports and delayed launching new brands. Some have cut jobs in the US and have stopped hiring in Scotland. Over time, as stocks in the US market run down, the impact will be clearer. Some brands will disappear from the US market altogether, as it becomes uneconomic for smaller distillers to export them. Market share and brand recognition built up over many years, once lost, will take a considerable time to rebuild. The longer the tariffs are in place, the more profound the impact will be on the industry and in Scotland.

Three months ago, when it became clear that import tariffs would be imposed on Scotch whisky, the UK Government asked the Scotch Whisky Association to suggest a package of support for the industry to help distillers cope with an unprecedented challenge in its largest marketplace worldwide. That request was welcome, but the industry is now looking for action to follow through on the proposals submitted. The Budget is due soon, and yesterday my hon. Friends the Members for West Aberdeenshire and Kincardine (Andrew Bowie) and for Berwickshire, Roxburgh and Selkirk (John Lamont) and I met the Chancellor to discuss those proposals and how the industry, and cashmere and shortbread, could be helped more generally in the current circumstances. I look forward to his formal response in or before the Budget.

Obviously, any increase in excise duty in the March Budget would be unacceptable, and the potential impact of the introduction of a digital service tax on UK/US trade discussions and on whisky needs to be understood. It is too simplistic to suggest that France’s decision not to proceed with the digital services tax as planned is the reason why champagne and cognac are not subject to the tariffs, but the full implications of the unilateral introduction in the UK of a digital service tax need to be understood before that step is taken.

It is instructive that the EU has already agreed to increase the co-financing for wine promotion schemes to help boost exports in the face of the tariff on wine. Since the EU imposed tariffs on US whisky, the US government have delivered a $3 million package for trade promotion activities in the EU. The UK Government can learn from those actions. Support must clearly be focused on the need to build a more secure UK base while the US market, which is the cornerstone of investment and business plans, is under threat. We also need to see a resolution of the underlying dispute, starting by taking unrelated sectors out of the line of fire, as the right hon. Member for Orkney and Shetland (Mr Carmichael) said.

On a visit to Roseisle Distillery on Speyside last December, the Prime Minister committed to removing the EU’s tariffs on US whisky as soon as the UK is legally able to following its departure from the EU. That was a welcome statement. I know the Prime Minister, the International Trade Secretary and the Trade Minister have raised this issue at the highest levels in the US Administration in multiple meetings and calls. As we embark upon a trade negotiation with the US, eliminating existing tariffs on both single malt Scotch whisky and American whisky would be an important early confidence-building measure. I urge the Government to make that explicit when publishing the UK’s negotiating objectives for trade talks with the US; otherwise, one could understand why an industry as pro free trade as the Scotch whisky industry would start to question the value of such talks.

We need to find a solution that works for the Scotch whisky and US whisky industries together. We need to return to tariff-free trade in whisky across the Atlantic. We need to see a laser focus from the Government on resolving the Airbus issue. I hope the Minister will commit to pressing colleagues in the Department for International Trade and 10 Downing Street to do that, and will reassure us that the concerns we have raised about a digital service tax are well understood within the Government, to ensure that no further unintended or collateral harm is done to the Scotch whisky industry.

Every time a small Scotch whisky distiller exports a bottle of single malt Scotch whisky to the United States, it is writing a cheque to the US Government for an additional 25% of its value, to pay for a dispute that has nothing to do with it. We should think about that for a second. On average, one bottle of single malt is exported to the US every second, and every second since 18 October, each bottle has had an additional 25% tax added to it. That equates to 5,400 bottles being taxed over the course of the debate, if it runs its duration. No business or industry could sustain that for long.

The scale of the industry, and its importance to Scotland and the wider UK economy, should focus minds on a swift resolution to this dispute. From my constituency in the south of Scotland, to communities on Speyside and on the islands of Scotland, ambitious small businesses are paying the price for a trade dispute that is entirely unrelated to their industry. That cannot be fair or proportionate, and we cannot allow it to continue.

Ms Karen Buck (in the Chair)

It might be helpful to Members to know that we will start the winding-up speeches at about 2.40 pm. Given the number of people who want to speak, Members should limit themselves to about five minutes, so that everybody has a chance to be called.

1.50 pm

Patricia Gibson (North Ayrshire and Arran) (SNP)

I thank the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for securing the debate, and I am pleased to participate in it. I wish it were not necessary for me to do so, but recent US tariffs are a cause of great concern.

The impact of the 25% tariffs imposed by the US on single malt whiskies on 18 October, despite protestations, have gone unanswered by the UK Government. It is damaging to our distilleries and to Scotland as a whole, given that exports of single malt whisky are worth £1.3 billion. They account for 28% of all Scotch whisky imports, with the US accounting for 25% of all single malt exports last year. The increased price that the tariffs cause can and will cause significant damage to those exports. The Scotch Whiskey Association believes that single malt exports to the US will fall by 20% and that vital market share will be lost as a consequence, as the right hon. Gentleman set out.

The finest single malt whisky is distilled on the isle of Arran in my constituency, and the tariffs are a matter of great concern. Ultimately, jobs are threatened, and sustainability of employment is extremely important in island communities such as Arran. Hundreds of Scottish exporters, including our world-renowned Scotch whisky industry, face paying the price of punishing US trade tariffs. The impact of the tariffs is already being felt. In November 2019, the value of single malt Scotch whisky exports to the USA was £25.7 million, compared with £38.6 million in November 2018. That makes a mockery of any pretence of a “global Britain”, and it is important that the matter is sorted out urgently.

The Prime Minister vowed to remove tariffs on US whiskey once the UK leaves the EU. In doing so, he is putting his trust in a President who has consistently used punishing tariffs as his first political lever. Scotch whisky is crucial to Scotland’s thriving food and drink sector, with the EU market in 2018 valued at around £1.4 billion, which is equivalent to about 30% of Scotch exports. The grim reality is that Scotland will face great vulnerability when it loses its collective bargaining strength because it is no longer a member of the EU.

In such a challenging context, has the Minister considered the possibility of reforming the UK excise duty structures to ensure a fairer tax on Scotch whisky? It is taxed more than any other category of alcohol in the United Kingdom—for example, it is taxed 16% more than wine. Estimates suggest the Scotch whisky industry is larger than the UK shipbuilding industry, and considerably larger than the UK fishing industry. It supports around 42,000 jobs across the UK, including 10,500 people directly employed in Scotland. Scotch whisky is estimated to be the UK’s ninth-most valuable export. I hope that the Minister will do all he can to support the industry at this very challenging time, and that he will seriously look at reforming the excise duty structures.

Even the Minister must understand and appreciate that, because we will lose our collective bargaining strength when we are no longer a member of the EU, we are in a very exposed and vulnerable position. We are facing extremely difficult trade conditions as negotiations proceed. We need to have been working with our EU partners. I am very sorry to say that that opportunity has now been lost.

1.55 pm

Andrew Bowie (West Aberdeenshire and Kincardine) (Con)

It is a pleasure to see you in the Chair, Ms Buck. I congratulate my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) on securing this important debate. It is timely not only because of the importance of the issue, but because it is Burns season. I am sure that everybody present is doing their part to support Scotland’s biggest export, and that they have been doing so over the past few weeks.

The contribution that the whisky industry makes to Scotland’s economy is huge, and exports are a crucial part. The industry exports the equivalent of 41 bottles of Scotch whisky every second, and it was worth £4.7 billion in 2018 alone. The contribution to our national productivity runs at £210,000 gross value added per employee, and the industry supports more than 42,000 jobs across the UK—these are figures we have already heard. The industry directly employs 10,500 people in Scotland, 7,000 of whom are in rural constituencies such as my own in west Aberdeenshire, where we have the well-known and loved brands Royal Lochnagar and Fettercairn. It is important not to forget that the tariffs also adversely affect small or micro-distilleries, such as Lost Loch or Deeside Distillery in West Aberdeenshire and Kincardine.

There is strong support for the whisky industry from every party represented in the Chamber. We all want an end to the unfair tariff regime imposed by the United States. I want the interests of Scotland’s whisky industry to be central to future trade negotiations with the United States, and I have faith that the UK Government will champion the industry in those talks. However, we can unilaterally take immediate action, both domestically and internationally, to help the industry through this difficult time. The response needs to come from both the UK and Scottish Governments, because it is not a party political issue. Targeted funding is needed to help the industry weather the tariffs, perhaps by investing in Scotch whisky tourism. We could do something similar to the Distilled Spirits Council of the United States, which provides the US whiskey industry with funding of over $1 million to promote American whiskies in Europe; we could respond to that in kind with our own ring-fenced fund, which could be a cross-government initiative. The UK Government in Westminster have a significant role to play, especially with the Budget coming up.

The industry has welcomed the freeze on duty in every Budget since 2017, and we need that to continue in the next one. When the freeze was introduced, the Treasury forecast that the revenue would increase by 3% in 2018-19. It did not: it increased by more than 10%. We have the fourth-highest spirits duty rate in the European Union, with only Sweden, Finland and Ireland having higher rates. Our producers are competing in suboptimal conditions, which, sadly, look likely to worsen before they improve. I want the Government to engage in radical thinking and to give serious consideration to cutting the duty, perhaps on a trial basis to see how the revenues respond. Ministers might be pleasantly surprised by the results.

As I said, all right hon. and hon. Members here today are champions of Scotland’s largest and most successful export. It is time that the parties worked together party to resolve the problems and to make the case for Scotch whisky, wherever we are.

1.58 pm

Kenny MacAskill (East Lothian) (SNP)

I thank the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for securing the debate. As he well knows, Scotch whisky is synonymous with the Scottish nation and is vital to the UK Treasury, and tariffs do matter. It is not the case that only some distilleries are already feeling the pain, as other Members have mentioned. It is quite clear that it could be a difficult challenge for the entire sector.

I am reminded of going to meet one of the industry’s chief executives—I think she was from Grant’s, in the Minister’s own constituency—many years ago. The tale she told about tariffs is apposite to what we are discussing today. She explained that, historically, Scottish and Irish whisky exports were at par—they were level pegging until world war two. There was a global lack of whisky following world war two, and the Irish Government, under a particular Taoiseach, decided to try to protect the home market in order to curry favour, as there was an impending election. The consequence was that Scotch whisky took off and Irish whiskey slumped. The tariffs that were imposed on Irish whiskey have meant that it has never been able to match Scotch whisky and will never catch up, so the historical record shows that tariffs can be extremely harmful. Given that I heard that from the chief executive of Grant’s, I am sure the Minister will take cognisance of it.

As colleagues including my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) said, we face particular risks. Obviously, the backdrop is the dispute between the EU and the USA over Airbus, but Brexit is in danger of hindering, not helping, the position. We will lose the support of the world’s largest trading bloc; in return, we are seeking to curry favour and obtain a special deal and a special relationship with the United States of America, which is imposing tariffs. What reason do we have to believe that we will be treated any better on a trade deal that we are on this issue?

We should not be fooled about the supposed special relationship between the UK and the USA: it is mythological. As we have seen recently with Huawei and other things, President Trump wants what is best as he sees it for the United States of America, irrespective of the supposed close relationship between the nations. Anybody looking for evidence of that should look at the relationship between Canada and the United States. If any nation should have a close and special relationship with the United States of America, it is Canada, given that they share a continent and a land border. Yet, not on whisky tariffs but agricultural tariffs, President Trump’s behaviour towards Prime Minister Trudeau was reprehensible, bullying and haranguing—frankly, it was disgraceful. Why would he treat the United Kingdom any better that the 40 million or 45 million people who share the continent of North America with the United States?

We are deluded if we think that somehow or other, because the Prime Minister has this supposed special relationship with President Trump, we will get anything beneficial. The real risk, as my colleagues said, is that we not only face the challenges of tariffs—we must learn from history about the dangers that can come about, as the Irish whiskey sector testifies to—but additional challenges. It is quite clear that, in the United States, there are those who do not just want a tariff imposed on Scotch whisky but wish to have their product masquerade as Scotch whisky. We face the problem of US imports undermining the brand that we have to protect.

We have enough difficulties with tariffs; we cannot face the challenges of protecting the brand of Scotch whisky. On that basis, the Minister can rest assured that the Scottish National party will give the Government our full support, but the Government are obligated to protect this national resource for Scotland, which is vital to the UK Treasury.

2.02 pm

Gavin Newlands (Paisley and Renfrewshire North) (SNP)

It is a pleasure to serve under your chairmanship, Ms Buck. I congratulate the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) on securing the debate. It is good to see him making the most of his release from the clutches of the ministerial machine and giving us an opportunity to debate this vital issue.

UK Governments of both shades have for far too long viewed whisky simply as a cash cow to top up the Exchequer’s coffers. I welcome the fact that the Government have started to listen to the industry in the past couple of years and have delivered a freeze, but more must be done.

There are more direct and indirect whisky industry jobs in my constituency than in any other in Scotland. That assertion has not been challenged in the nearly five years since my election in 2015, and I think I stand on very solid ground in making it. I have Diageo at Shieldhall and Blythswood; Chivas at Paisley for the time being, until it is moved to Kilmalid in the summer; the Glasgow distillery in Hillington, which I share with my hon. Friend the Member for Glasgow South West (Chris Stephens); and logistics jobs at many haulage firms across Renfrewshire. Trump’s tariffs, following a Boeing-Airbus trade dispute that is wholly unrelated to Scotch whisky, are putting the jobs of my constituents and hundreds of others across Scotland at risk.

The Scotch whisky industry is a modern, efficient, high-value industry that marries tradition with modernity in a way that is rare—in many ways unique. It has brought increasing success and economic benefits to Scotland. As has been said, new distilleries are opening and former ones are coming out of mothballs to come on stream and meet the demands of an industry that has been a roaring success over the past years. I am deeply concerned that, with Trump’s re-election campaign looming, those jobs will be collateral damage in the pursuit of electoral college votes, and that further harm will be wreaked not just on the economy as a whole but on local economies such as my constituency and those of many of my hon. Friends, and indeed hon. non-Friends—[Interruption.] “Non-Friends” is better.

One example of the impact of the sudden imposition of tariffs and the stark possibility of further tariffs being levied on single malt or blended Scotch comes from the aforementioned Glasgow Distillery. In October, a large retailer in the US agreed to take on board its Glasgow 1770 single malt, to be launched this June. It was a planned investment of more than £100,000 to enter the US market, and would have included taking on extra staff and doubling its distillery capacity over the year to help with anticipated demand from the US, at the cost of a further £500,000. Less than 24 hours after the deal had been agreed, the Trump Administration put in place the 25% tariff. The distillery’s plans for its US launch are now on ice until that is resolved, particularly given the threat of a 100% tariff on all Scotch whisky hanging in the air. It also planned to launch a blended malt in March-April, which would allow it to enter the US market with a product not included in the tariff, but it needs clarity on the second tranche of tariffs to plan with any certainty.

I worry that the UK Government, despite some warm words, are doing little to mitigate the impact of Trump’s tariffs. As has been mentioned, excise duty on Scotch whisky remains among the highest in the world. Domestic demand is flattening at the same time as the US tariffs are affecting demand across the Atlantic. We need a root-and-branch review of taxation on alcohol to look at the balance to be struck between protecting public health and tackling alcohol abuse, and ensuring that a quality industry such as Scotch whisky and booming sectors such as gin distilling—a massive growth industry in Scotland and elsewhere—is taxed fairly in a way that supports employment.

The UK Government must ensure that jobs in my constituency, across Scotland and right across the UK—the industry has a wide supply chain across the UK—are not sacrificed in their desperation to secure a trade deal. The kamikaze Brexit that they support but that Scotland most certainly does not begins to take effect tomorrow night. Scottish National party Members and many others have consistently warned the UK Government of the real and substantial economic impact that Brexit would have on our trading relationships with the rest of the world. Trump’s tariffs are evidence of that. I call on them—as I hope colleagues from all parties will—to put our modern, productive whisky industry near the top of their list of priorities for the coming months and years.

2.07 pm

Wendy Chamberlain (North East Fife) (LD)

It is a pleasure to serve under your chairmanship, Ms Buck, and to make my second speech in a parliamentary debate. I want to illustrate the impact on the US tariffs on whisky in my constituency. North East Fife is not only the home of golf but the spiritual home of whisky. The earliest written reference to Scotch whisky appears in the exchequer roll in 1494, which says that Brother John Cor, a Lindores monk, was commissioned by King James IV to turn eight bolls of malt into aqua vitae. Today, North East Fife is the proud home of four distilleries: Daftmill, Eden Mill, Kingsbarns and the recently revived Lindores.

Lindores is a fantastic example of the variety of positive benefits that the industry can bring. In addition to its distilling—its first single malt is currently in the vaults—it is a hospitality venue, playing host to weddings, other private events and visitor tours. Eden Mill and Kingsbarns have visitor centres, and as I said in my maiden speech, produce gins, further adding to the diversity of drinks production. Daftmill is a small distiller, located on a working farm, where production is dictated by the seasons. Its output may be small, but it is in high demand. The annual Fife whisky festival, centred in Cupar, is now a well-established event, attracting distillers large and small from across Scotland and beyond to North East Fife. This debate is not just about distillers; the supply chain is affected too. Take Crafty Maltsters—farmers based in Auchtermuchty, who have diversified into malting their own barley. Scotch whisky production in North East Fife brings many economic benefits in many ways.

In North East Fife, we feel the impact of larger whisky operations in neighbouring constituencies. I should declare an interest: prior to my election to Parliament, I worked at Diageo for four years. It has a large packaging plant in Leven, in the constituency of the hon. Member for Glenrothes (Peter Grant), and some of my constituents are among its employees. During my time there, I saw how larger businesses in industry can, through corporate social responsibility programmes, deliver real benefits. Diageo’s “Learning for Life” programme supports unemployed people into careers in hospitality through four weeks of training and a work placement with a local employer, with courses running throughout the UK. One of the most satisfying aspects of my time with Diageo was volunteering for that programme and seeing the difference in attendees over the six-week period.

Producers across Scotland work hard to support the communities in which they operate, so I am grateful to the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for securing this debate. US tariffs on whisky have had and threaten to have a very damaging effect on the industry and the wider supply chain. As hon. Members have already heard, the US is the largest market for single malt, so it seems unfair that that success story should be put at risk because of a dispute that was not of the industry’s making.

As we move further into the 21st century, Britain should be at the forefront of taking down artificial barriers, whether economic, social or geographic. I worry on behalf of my constituents that we are seeing the opposite: the US President Donald Trump’s cavalier approach to trade, the barriers that the UK will impose on itself tomorrow night when we leave the EU, or the potential border that the SNP want in Britain with Scotland leaving the UK. As the Government seek a trade deal with the US, they must do all that they can to help the whisky industry by making removing tariffs an immediate priority and, in the meantime, by alleviating financial burdens on distilleries in the Budget. As other hon. Members have said, the Government must make sure that this Scottish success story continues to mature.

2.11 pm

Peter Grant (Glenrothes) (SNP)

I am very pleased to be speaking a lot sooner than expected, Ms Buck.

Ms Karen Buck (in the Chair)

Members have been admirably restrained.

Peter Grant

It is the first time that I have seen so many Members fail to reach the indicative time limit. I will try to reciprocate because the Minister will undoubtedly have a lot to say. I commend the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) on securing the debate and on the very detailed and thoughtful way in which he set out not only the value of the whisky industry to Scotland, but the very serious harm that the tariffs can and have caused.

Very few of us in the Chamber represent constituencies that would make someone think immediately of whisky, yet everybody who has taken part in the debate—and the Minister perhaps more so—has in their constituencies significant numbers of businesses that rely on the wealth of the Scotch whisky industry. Unfortunately, the debate has clashed with another major parliamentary highlight, the maiden speech of my hon. Friend the Member for Aberdeen South (Stephen Flynn). I have no doubt that, had he not been in the main Chamber, where he is supported by a number of hon. Members, he would have been here to speak.

Very few manufactured products anywhere in the world are as iconic as Scotch whisky—we are one of the few countries in the world to have a diminutive adjective for nationality that people immediately identify with our best-known export. As has been mentioned, the industry is critical to the economies of Scotland and the whole of the UK. It supports around 42,000 jobs and contributes £5.5 billion to the UK economy in gross value added. That is important to an economy the size of the United Kingdom, so how important must it be to one the size of Scotland?

What surprises a lot of people, no matter how often I remind them—I will continue to remind people and am grateful to the hon. Member for North East Fife (Wendy Chamberlain) for doing so, too—is that my constituency in central Fife is one of the cornerstones of that industry and of the wider distilled spirits industry. Diageo’s Cameron Brig distillery in Windygates produces 480 million bottles of spirits annually. The nearby bottling and packaging plant at Banbeath in Leven, which the hon. Member for North East Fife mentioned, packs 39 million cases of spirits every year. At the recently opened Cluny Bond warehouse at Begg, 1.1 million casks of the golden nectar are sleeping as they wait for the angels to come and work their magic. Those facilities represent Diageo’s recent investment of almost half a billion pounds in my constituency, providing jobs for a workforce that fluctuates between 1,000 and 1,500 people.

The statistics published last week in the most recent Scottish index of multiple deprivation confirmed that parts of Levenmouth, and Buckhaven in particular, are among the most deprived areas in Scotland. Cameron Brig is barely a mile from those communities, and the massive vote of confidence and real commitment to corporate responsibility—rather than just words in the annual report—are welcome signs that things may be starting to improve for thousands of my constituents. They see one of the world’s biggest brand names investing in them and their neighbours time and again.

Anything that jeopardises the long-term sustainability of the Scotch whisky industry, or fundamentally undermines the market forecasts on which Diageo have invested heavily in my constituency and others elsewhere in Scotland, is of concern to us all. It concerns me as the SNP Treasury spokesperson but also as a constituency MP that, although Diageo do not yet expect tariffs to cause any problems to the Fife operations, that will change if they are continued or extended to cover blended whiskies and other sprits.

We can already see the impact of the tariffs: during their first full month, there was a 33% fall in malt whisky exports to the USA, as hon. Members have mentioned. If that continues, it will equate to a £100 million drop in annual sales, which could reach £200 million or £300 million if the tariff is also applied to blended whiskies. Although we should not forget the damage that has been done to other exporting businesses, as the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale alluded to, it cannot be right that 62% of the entire UK tariff is hitting one industry that had absolutely nothing whatever to do with the escalating dispute. Will the Minister consider producing an analysis of the proportional impact of the tariffs in the different nations and regions of the United Kingdom? I will bet that it bears no relation whatever to the proportional analysis of the nations and regions that benefit from the Airbus operation.

It remains to be seen how effective the UK Government will be at persuading the American Government to think again, as it is very difficult to persuade an irrational President to do anything rational. The UK Government have the chance to use the Budget to help Scotland’s world-leading drinks industry to get through what is literally an existential threat to many businesses. The Scotch Whisky Association is asking for a 2% cut in spirits duty, and I hope the Government will give that careful consideration, although in reality, such a cut would return only a small proportion of lost sales revenue.

A more fundamental problem is the continued and inequitable way in which different kinds of alcohol are taxed in the UK. It is not fair, rational or defensible for different kinds of alcohol to be taxed according to how they are made rather than by their alcohol content. If someone at the pub buys a glass of whisky and a glass of wine that contain exactly the same amount of alcohol, they pay 16% more duty on the whisky than on the wine. The only justification for that is it has aye been, and that is no justification at all.

If the Prime Minister is to keep his promise to scrap the import duty on American bourbon, he should make it clear that he expects complete reciprocity from the President of the United States and the complete abolition of import tariffs on Scotch whisky. A number of hon. Members present were there earlier in the week when we met not only senior representatives of the Scotch Whisky Association, but the President and CEO of the Distilled Spirits Council of the United States. They are determined to see the import tariffs on Scotch whisky and the export tariffs on their product abolished. They do not want a protectionist Government to protect them artificially; they want to be able to compete on fair terms with top-quality spirits, not only from Scotland, but from elsewhere. That is one of the few cases that I have seen in which an industry that would expect to benefit from the imposition of import tariffs is among the first to shout out that they want them abolished.

This sorry affair is yet another indication, for those prepared to look with open eyes, that Britain’s place on the world stage—it is currently being debated in the main Chamber—is nowhere near as influential as some people like to think, and that getting any kind of rational trade deal from a wholly irrational President will be neither quick nor easy. I hope that this debate and other exchanges will make it clear to the bully boys in No. 10 and the White House that we will not allow either of them to treat the economy of our nation as a pawn to be sacrificed in the way that our fishing industry was sacrificed.

2.19 pm

Daniel Zeichner (Cambridge) (Lab)

It is a pleasure to serve with you in the Chair, Ms Buck.

I congratulate all Members on such sensible and thoughtful contributions. In particular, I thank the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for securing the debate and for his broad-ranging and sensible introduction to it. I also congratulate the hon. Member for North East Fife (Wendy Chamberlain) on what might have been her first contribution in Westminster Hall, which is a less aggressive place than our other Chamber. I was struck by her comments about Diageo and the European Union. I also thank some of my colleagues in the shadow International Trade team for helping me to prepare for this debate, which is just as much about trade as it is about food and drink.

The Scotch whisky industry is thriving and, as we have heard, incredibly important to the United Kingdom as our ninth most valuable export, contributing £5.5 billion to the UK economy last year and supporting 42,000 jobs across the nation. It is particularly important for Scotland’s economy, accounting for the vast majority of Scotland’s exports of food and drink, and providing 10,500 jobs, in particular in rural communities involved in the distillation, production and maturation processes.

Having the Scottish whisky industry embroiled in the increasingly tit-for-tat trade disputes that have been festering between the US and the EU over the past 15 years is a cause for profound regret. We can all agree that something is wrong when a trade dispute that originated in alleged subsidies for aircraft has escalated primarily to affect a whisky industry that has been doing nothing but mind its own business and thrive, without tariffs, for decades. With the 25% tariffs that have been slapped on American imports of single malt Scotch whiskies and Scotch whisky liqueurs from the UK, Scotch whisky now pays for more than 60% of the UK’s tariff bill arising from the Airbus case. That absolutely cannot be right. As hon. Members have outlined, we are now seeing real impacts of the row on people.

The EU as a bloc remains our largest export market for Scotch whisky, but as an individual country the US is our largest market, and clearly our largest export market for single malt Scotch whisky. The tariffs imposed on those products in October have therefore had considerable impact already, as we have heard, with the value of Scotch whisky exports to the US down 33% in November 2019 compared with November 2018.

Those hit hardest by the tariffs, as we have heard, are disproportionately the small and medium-sized distilleries across Scotland, which only produce single malt and have the US as a key market. The Scotch Whisky Association estimates that the industry could lose as much as 20% of its sales to the US over the next year if the tariffs remain. That would be worth £1 billion. As we are all aware, a decline in the value of our exports to the US of such magnitude will inevitably have knock-on effects on investment, productivity and jobs.

Scotch whisky has not been alone in being hit by the American tariffs, and it is worth repeating that the 25% tariffs also hit a range of our agricultural exports, including pork and cheese. The British Meat Processors Association tells us that they face some real difficulties, and we have already seen the value of UK pork exports to the US fall by 42% between November 2018 and November 2019.

The main subject today, however, is the impact on Scotch whisky. Following the US Trade Representative’s announcement of a further review of its tariffs in December, we now face the real possibility of the tariffs on single malt whisky being increased, or their coverage expanded to include the blended Scotch that is currently excluded. That would make an already challenging situation much more difficult.

Such bullying tactics by President Trump are sadly reflective of an approach to international trade that I fear we will only see more of as we leave the European Union. President Trump has made his desire to put America first explicit, and is playing fast and loose with the global rules-based system governing international trade. So far, he has unfairly attacked foreign industries with tariffs, blocked the appointment of judges to the World Trade Organisation’s appellate body and, recently, threatened to pull the US out of the World Trade Organisation altogether. We urgently need an end to that tit for tat, and the removal of tariffs on both sides, on both Scotch and American whiskies. The Scotch whisky and American whiskey industries are in clear agreement on that.

The Prime Minister’s promise to remove EU tariffs on American whiskey as soon as we leave the EU is welcome, and it is clear that he believes this will go some way to encouraging President Trump to remove tariffs on our Scotch whisky. What is less welcome, and remarkably counter-intuitive, are recent reports that the Prime Minister is threatening both the US and the EU with high tariffs in some bid to speed up post-Brexit trade deals. We are familiar with the Prime Minister preparing completely different positions to cover all eventualities, but will the Minister make it crystal clear that tariffs on American whiskey will be excluded from this threat? If he will not, how can the Government possibly guarantee that pursuing such an aggressive trade stance will not embroil the Scotch whisky industry yet further in a burgeoning trade war?

In the meantime, the Scotch Whisky Association has been waiting nearly three months for a response from the Government on their plans for short-term support for the industry while it is subject to the tariffs. I hope that the Government will confirm today what their intentions are in that regard.

The sad reality is that this entire episode demonstrates just how difficult our upcoming trade negotiations will be once we leave the EU. One of the main economic advantages of being in the EU was the fact that in trade negotiations the UK was part of a trading bloc of 28 countries. Now we are on our own. In a future trade deal with the US, therefore, we will have to face up to the full force of its demands to export to us hormone- treated beef and chlorine-washed chicken. We will also have to ensure that the geographical indicators for our produce—such as Scotch whisky and Cornish pasties—are not lost once we leave the EU’s protective framework. The signs to date of the Government’s commitment to protecting the good name and value of our regional goods are, frankly, not promising.

Our highly prized Scotch whisky industry is a high-profile casualty in this grim world of retaliatory trade wars between men with big egos, little sense of the damage they cause and even less regard for the wider consequences. We urgently need a return to a rules-based order to give stability and security. The jobs and livelihoods of people not just in the UK but in nations across the world depend upon it.

2.26 pm

The Parliamentary Under-Secretary of State for Scotland (Douglas Ross)

It is a pleasure to serve under your chairmanship, Ms Buck.

I congratulate my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) on securing this important debate. I also thank him for his unstinting commitment to the Scotch whisky industry, as a constituency MP and in his roles in the Scotland Office as a Minister and, latterly, Secretary of State for Scotland. This industry, which means so much to everyone who has contributed to the debate, could have had no greater champion in Whitehall and Westminster than my right hon. Friend during his time in office.

I am delighted to respond to the debate on behalf of the Scotland Office. The issue clearly covers several different Departments, such as the Department for Environment, Food and Rural Affairs—with an interest in the GREAT campaign, which I will come on to—and the Department for International Trade. The Minister of State, Department for International Trade, my right hon. Friend the Member for Bournemouth West (Conor Burns), was keen to be present to respond to this debate but had other commitments, given the “Global Britain” debate in the main Chamber. I have spoken a lot with him over the past few weeks, and the Scotch Whisky Association met the Secretary of State for International Trade about this issue earlier in the week.

As well as being the Under-Secretary of State for Scotland, I am the Member of Parliament with more Scotch whisky distilleries in my constituency than anyone else. The great, iconic Moray and Speyside industry benefits the whole of Scotland and the United Kingdom. Unlike my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale, however, I do not go to sleep memorising figures, but I will reiterate some of his.

Global exports reached £4.7 billion in 2018, so we can all recognise what a successful and important industry Scotch whisky production is for Scotland and the whole of the United Kingdom. Growing markets stretch from South America to the far east, and Scotch whisky is a key British product recognised for its quality. It is a global success story, our biggest export, our most cherished product and our national drink. Whisky is part of what makes Scotland.

For all the continued success, this is a time of considerable anxiety for the industry, as we have heard today and in the months since the tariffs were applied. The US makes up a significant share of the market—more than £1 billion by value in 2018, of which some 33% was single malt Scotch whisky—so it is particularly disappointing that Scotch whisky has been targeted in this dispute, alongside other important sectors. The trade war is over an industry and area unconnected with the other affected sectors. The other affected industries in Scotland include cashmere. My right hon. Friend mentioned the efforts of my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont), who raised this issue at business questions last week and has been doing work in his local community. UK biscuits are also affected by the 25% tariff, a large proportion of which is Scottish shortbread. Moray is home to Walkers Shortbread, as it is to Johnstons cashmere woollen mills.

I have been fully aware of the problems faced not just by the Scottish whisky industry but by many others since the tariffs were applied at the end of last year. I do not underestimate the effects that those tariffs have, and will continue to have, on the industry, particularly, as others have said, on small and medium-sized businesses. Those include some craft distilleries, which have done so well to break into the market in recent years. I am determined not to allow the tariffs to threaten the jobs, communities and businesses across Scotland that rely on the whisky industry. The hon. Member for Paisley and Renfrewshire North (Gavin Newlands) made the point that many of us are fortunate to have distilleries in our constituencies—some more than others—but that the industry affects all our constituencies in Scotland and many more across the whole of the United Kingdom, because of the supply chain.

The UK Government are clear that the tariffs are not in the interests of the UK, the EU or US. We are working hard to support a negotiated settlement. Departments are working together. When the Secretary of State took office, one of his first jobs was to write to the US ambassador on this topic. I will say more about DEFRA and the Department for International Trade a little later. The issue has been raised at the highest level in the UK and the US Administrations. The President and the Prime Minister have discussed the issue on a number of occasions; many hon. Members have reiterated the Prime Minister’s comments about dealing with the tariffs. I want to continue to do everything I can to facilitate a conclusion. I am confident that the strong relationship between the Scotch whisky industry and the United States will continue to prosper, as it has done for many years.

The hon. Member for Glenrothes (Peter Grant) was quite right to mention the work of the Scotch Whisky Association alongside the Distilled Spirits Council of the United States. At the reception I hosted at Dover House on Tuesday, there was a strong message: two industries on each side of the Atlantic are working together with a common aim. They have been to the US, Brussels and London on visits. It was a powerful message to show those two organisations working hand in hand. It was said that a light could not be put between the two of them on this issue, and they make a compelling case.

I want to pick up on a few points made by hon. Members. The hon. Member for East Lothian (Kenny MacAskill) made a strong, passionate speech. I am delighted that visits to Moray are ingrained in his memory; his story of his visit to Grant’s was important to set the historical context of the debate. As well as mentioning the importance of the Scotch whisky industry to the whole of the United Kingdom, the hon. Member for Paisley and Renfrewshire North (Gavin Newlands) came up with a new parliamentary term: his “hon. non-Friends.” I hope we can agree on many things and be friendly in our discussions about this issue.

I commend the hon. Member for North East Fife (Wendy Chamberlain) for her maiden Westminster Hall speech; it was excellent. I like to claim—correctly—that I have the most Scotch whisky distilleries of any constituency in Scotland, with four. She is a long way behind me, but having the spiritual home of Scotch whisky is a claim I am not able to make. She made that point very well. Her work with Diageo before coming to this place is extremely useful to this debate. I am sure she will continue to contribute with that same passion and expertise.

The hon. Member for Glenrothes was right about the industry’s fear that the tariffs could not only increase on single malt Scotch whisky but go on to blended Scotch whisky. We are acutely aware of that and are doing everything possible to ensure that the Scotch Whisky Association’s message on that is heard loud and clear. My hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) made a strong pitch for the distilleries in his area, as he always does. He has made commendable efforts—as have others—to promote Scotch whisky since he came to this place in 2017.

As a Government, we are particularly disappointed that the US has chosen to use the WTO compliance panel report released just before Christmas as a basis potentially to increase tariffs. Our view is that the panel has made a number of errors in its assessment of UK and EU compliance, and an appeal has been lodged on that basis. We are clear in all our engagement that tariffs do not benefit any parties, and that the best outcome is through negotiation of specific issues within the Airbus-Boeing dispute. We continue to raise those at the highest levels in the US Administration. It is very helpful that the Scotch Whisky Association is making its case so strongly and is working with industry partners in the US to demonstrate that the tariffs are counterproductive on both sides of the Atlantic.

We recognise the vital generation of jobs that the Scotch whisky industry provides: some 42,000 jobs across both Scotland and the United Kingdom. They are often located in more rural areas of Scotland, enabling those places to thrive through direct employment in distilleries and through ancillary industries such as packaging and haulage, and the wider attraction of tourism right across Scotland. Understandably, tourism has not come up a lot in the debate, but distillery visitor centres have a great impact on local economies. A report last year showed the huge impact that those visitor centres make in communities that host distilleries. That should not be underestimated.

I am aware that Scotch whisky industry representatives have proposed a range of measures to address the potential impact of the tariffs. It is important to note that any such action would have to be within the WTO legal framework. I will continue to work with colleagues across Government to consider all the options.

I see that the hon. Member for North Ayrshire and Arran (Patricia Gibson) is typing away; we are all very busy. She might want to type in the Scottish Conservatives’ and the Conservative manifesto for the recent general election. She asked me if I considered reforming the taxation system for Scotch whisky. Not only have I considered it, but the Prime Minister has considered it and it was in our 2019 general election manifesto. I know that not only because the Prime Minister announced it, but he did so at the Roseisle distillery in Moray on one of the first days of the general election campaign, in early December.

I say nothing about the hon. Lady missing a key point in the Scottish Conservatives’ manifesto—I cannot honestly tell her that I remember every detail of the SNP manifesto—but it was the No. 1 key ask by the Scotch Whisky Association of all political parties. I hope I can reassure her that in November, the Prime Minister came up to Scotland to make that commitment. The Chancellor will work with his Treasury colleagues to ensure that the commitment to review alcohol duty more broadly will be taken forward. There will be further announcements about the review in due course.

As my hon. Friend the Member for West Aberdeenshire and Kincardine rightly mentioned, for the past two years, duty on Scotch whisky has been frozen, largely down to the efforts of Scottish Conservative MPs in dialogue with Treasury colleagues, ensuring that our iconic Scotch whisky industry did not suffer any increase in duty, along with other spirits in the same two Budgets.

The hon. Member for Cambridge (Daniel Zeichner) mentioned geographical indications; because Scotch whisky is a vital sector of the UK economy, we have supported and will continue to support it in a variety of ways—in particular the designation as a geographical indication, which affords protection against fraud and any undermining of its renowned quality standards. As part of the withdrawal agreement, the UK committed to protecting all EU GIs unless and until a subsequent agreement superseding it entered into force. That includes third-country GIs recognised in the EU following direct application to the EU. That will help to ensure a smooth transition to the future relationship with the EU. Existing UK GIs, which include Scotch whisky, will continue to be protected in the EU along with other fine Scottish products, such as Scottish farmed salmon and Scotch beef.

I mentioned that this debate over Scotch whisky includes DEFRA. The Government have played their part in promoting our whisky worldwide. The Food is GREAT campaign led by DEFRA, in partnership with the Department for International Trade and VisitBritain, is part of the UK Government’s GREAT Britain campaign. The Food is GREAT campaign aims to demonstrate the quality, craft, heritage and innovation of key UK food and drink products to consumers, trade and media worldwide, to help build demand for UK food and drink exports. This is Scotland’s No. 1 industry for international exports, so it is vital that the UK Government use their extensive international reach to support the sector’s export growth.

I am delighted to say that demand for Scotch whisky is growing around the world. Between 2017 and 2018, demand increased by 10% in Singapore, by 18.5% in Mexico and by 34% in India. Those are just some of the countries in which we have seen significant increases in recent years, and I am sure we all welcome that. We will work closely with the industry across the UK to refresh the UK food and drink international action plan, looking well into this decade and beyond at opportunities to continue to expand our markets and further increase our export ambitions as we negotiate a series of free trade agreements in the years ahead, as several Members mentioned.

The UK and the US are strong partners and allies, and the US-UK economic relationship is crucial. That is acknowledged by the US Administration. Indeed, we have already ensured trade continuity in the whisky industry by signing the agreement on distilled spirits and spirit drinks with the US. Among other things, that protects Scotch whisky’s status in the United States as only

“products of Scotland, produced in compliance with applicable…laws and regulations”.

Both countries are committed to mutually beneficial economic arrangements that benefit UK consumers and companies. In pursuing a future trade agreement with the US, there is the opportunity to deepen that relationship and set a global benchmark for how two leading, open and mature economies trade with each other.

We shall also, of course, negotiate an ambitious free trade agreement with the EU and work with global partners to transition existing EU FTAs and other sectoral agreements to ensure that the Scotch whisky industry continues to benefit from such arrangements.

It is clear from the debate that there are many great opportunities for growth for the Scotch whisky industry. The message coming through to us is that the spirits sector—as we heard, this is not just about Scotch whisky; gin and other spirits are booming—and the Scotch whisky industry in particular stand ready to take those opportunities. I am very grateful for that, and I have no doubt that the Scotch whisky industry will continue to flourish both at home and across the globe, but we need to do our part as well. There is no doubt that the tariffs that have been applied are already having a severe effect. If they continue, their projected effects are stark; it has been said that they may cost up to £100 million a year.

My right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale did an outstanding job of presenting the case on behalf of the Scotch Whisky Association and the industry. Perhaps the most telling figure he used, notwithstanding that the debate may finish slightly early, was that during a 90-minute debate, 5,400 bottles of Scotch malt whisky will leave the UK to go to the US. Each and every one of them will be subject to a 25% tariff, which the producer has to pay to the US Treasury. That is what happens in just 90 minutes, which shows the cumulative impact that the industry has faced in the 90 days or so that have elapsed since the tariffs were applied.

The Government are determined to do everything we can to support the industry. I believe our efforts have been aided not only by the strong message put forward by my right hon. Friend, but by the generally consensual nature of the contributions by Members of all parties. We must continue to highlight this issue and work on both sides of the Atlantic to remove these tariffs, so that not only Scotch whisky but other products, such as cashmere and shortbread, can continue to be iconic, sector-leading Scottish brands that are sold around the world, rather than being punished for being exported to the United States. We must nurture and continue to work with those markets, which have so many benefits, and I want to see Scottish products continue to lead the way. If we can remove these tariffs, we will be able to do that.

On that note, I thank you, Ms Buck, for your chairmanship of the debate, and I thank my right hon. Friend for securing it.

2.44 pm

David Mundell

Thank you, Ms Buck, for your chairmanship of the debate. By Scottish political standards it was very consensual, and I am grateful to the Members who took part. It was a particular pleasure to be, for the first time in 15 years, in a parliamentary debate that involved the hon. Member for East Lothian (Kenny MacAskill). In a different life, we used to spar in the Scottish Parliament.

It was also good to hear from the new hon. Member for North East Fife (Wendy Chamberlain), who brings a great deal of experience of this industry to Parliament. She touched on the importance of the whisky industry in rural communities. The industry provides jobs of a quality that is not otherwise available in rural communities. Across large swathes of Scotland, the whisky industry is the only industry that can provide such jobs, which is why it has huge importance way beyond simply the revenue it can generate.

Having heard other Members mention the whisky interests in their constituencies, I realise I was remiss in not mentioning those in my own. I should, of course, have referenced the revitalised Annandale Distillery on the outskirts of Annan, which produces two whiskies: Man O’Words and Man O’Sword. I think we have kept mainly to the Man O’Words tradition today. I also have in my constituency a large maturation facility near Poniel in South Lanarkshire, which is part of the Bacardi group under the Dewar’s label. Both are very important to my constituency.

I was pleased by the contributions from across the Chamber, but I was particularly pleased by the Minister’s remarks. He committed to responding to the SWA’s proposals about support for the industry. As he alluded to, that work should be done in conjunction with the Scottish Government; both Governments have levels of responsibility here. He also touched on tourism, and the whisky industry has raised issues about making distilleries more carbon-neutral. There are a number of issues. Duty, however, is very important, and his restatement of the Conservative party manifesto commitment to a duty review is extremely welcome. Given the hard work that he, others and—if I may be so bold as to say so—I put into getting that commitment, we want to see it followed through.

I hope that those in the Treasury, the Prime Minister and others take on board my points on concerns about a digital services tax and how that might impact whisky and other products. I hope we will be able to follow through on the Prime Minister’s commitment—which, as the Minister said, was made at Roseisle Distillery in his constituency—that the UK, once it is legally able to, will remove tariffs on bourbon and other US whiskeys. That would be a huge sign of our commitment to free trade and our positivity about resolving this issue. As I said in my opening speech, I want us to get to the point that we can go into trade talks with the US clear that there will not be duties on whiskies, whether they are from Scotland or the US.

I hope this debate has been a positive contribution to the ultimate resolution of this issue. It is clear that Members from Scotland representing all parties want to see this issue resolved and want this industry, which is vital for our country and our communities, to prosper in the way it has in the recent past. That can be achieved through the removal of US tariffs and the non-application of further tariffs.

Question put and agreed to.

Resolved,

That this House has considered the effect of US tariffs on the Scotch whisky industry.