David Mundell: Why Sunak should deliver for the Scotch Whisky industry next month

4 Feb

David Mundell is a former Secretary of State for Scotland, and is MP for Dumfriesshire, Clydesdale and Tweeddale

On 3 March, the Chancellor can not only set out the next chapter in the UK’s economic response to Covid, but can set us on the road to economic recovery. He can also show that ours is a Government committed to delivering for all four nations of the United Kingdom, as he has done repeatedly through the crisis with policies like the furlough scheme.

In Scotland, that policy – which could only be delivered with the broad shoulders of the United Kingdom – has helped to support businesses and safeguard almost one million jobs. But the Budget is an opportunity to do more, to go further and remind Scottish voters of the government’s deep commitment to the Union and our determination to do best by our key industries that will be central to our collective economic recovery.

Take the Scotch Whisky industry. Distilleries up and down Scotland have been doing their bit throughout the pandemic, producing hand sanitiser by the gallon for local communities and frontline workers. It should be in this spirit that decisions are taken in this budget – pitching in when help is needed. And the Scotch Whisky industry is in need of help.

The industry is hurting. Despite the best efforts of my good friend the International Trade Secretary, Liz Truss, they’ve faced more than a year of tariffs on products going to the United States, their single biggest export market. Scotch Whisky exports to the US have fallen by almost half a billion pounds, and while efforts continue to bring an end to tariffs distillers need to know that the UK government backs them through these tough times.

Distillers, and the thousands of businesses they support across the UK, can then ill-afford an increase in domestic duty, which is already one of the highest in the world. It always shocks people when I mention in passing that 70 per cent of the cost of a bottle of Scotch is tax. You don’t see the French taxing champagne in the same way. They recognise it’s an iconic product in which they are world leaders. Scotch Whisky is the same for us. With a product in demand around the world and future opportunities on the horizon, surely a post-Brexit, ‘Global Britain’ will see fit to back a potential winner?

Not only would a cut in spirits duty in the budget recognise the harm done by tariffs and reduce the already onerous tax burden on the industry, it also makes economic sense. Philip Hammond froze duty in 2018, and the amount the Exchequer claimed in tax increased by hundreds of millions of pounds, delivering more than the Treasury expected they’d bring in from a tax increase. The Chancellor froze duty last year and the result was the same. And research by the Scotch Whisky Association has shown the Treasury could generate nearly £750 million over three years by reducing duty – money we sorely need after a year of unprecedented borrowing. History has shown that when the Conservative Party burnishes its credentials as the party for business and for low tax, the economy thrives.

During the run up to the Budget, I will be making the clear case for backing the Scotch Whisky industry with a duty cut, which will also help our hospitality sector as those business slowly reopen. Scotch Whisky and other spirits represent a third of all alcohol sales in pubs, bars and restaurants so the Chancellor can not only back Scottish businesses but set the path for the recovery of our vital hospitality sector too.

It is imperative that in this forthcoming Budget, the Chancellor, our man who represents the Conservative and Unionist Party inside the Treasury, continues to show his support for Scotland – support that is needed now more than ever.