Bill Ramsay: How Scotland's whisky industry could be an economic key for the future

Trade unionist and campaigner Bill Ramsay explains why he believes Scotland is underserved by its 'Big Whisky' industry

HAVING set a 10-year goal to not only narrow the attainment gap but actually eliminate it, the first minister has set her and subsequent Scottish administrations a huge challenge. 

As convener of the EIS equality committee I of course applaud the initiative, particularly as we have a hard cash commitment of £750m from the Scottish Government. However, I fully share the concerns of all who work in education on exactly how this goal will be achieved, and I said as much at the EIS AGM in June. 

I speak as a long standing member of the SNP, rather than the EIS equality convener, when I ask where the £0.75bn pounds will come from.

Read more: SNP members renew calls for ‘task force’ on Scotch whisky industry

This is a crucial question given the overall financial context that I assume is shared by every other member of the SNP. That context is the reality of a UK Treasury and the inevitability of continuing cuts to the Scottish public purse.

If there is to be £0.75bn of new money, albeit over a 10-year period, it will have to be raised from somewhere, somehow. It could be borrowed or it could be transferred from existing, already reducing, budgets. Another third option is to raise the money as revenue from the Scottish economy - whether devolved or independent.

I am of the view that the third option should be considered first - let me explain why. This new money should come in the form of a new revenue stream. Moreover, this revenue stream should be from a sector of the Scottish economy that can easily bear the load.

Two options immediately spring to mind. One is land taxation, of which we have heard much, and given the election of Andy Wightman to the Scottish Parliament under the Scottish Greens banner, I assume we will hear a lot more. 

The other option is the hugely profitable whisky industry. Diageo, the largest drinks company in the world and owner of around 43 per cent of Scotch production, declared an operating profit of £3.006bn on sales of £10.813bn in 2015 – a profit margin of almost 28 per cent. 

Diageo, the largest drinks company in the world and owner of around 43 per cent of Scotch production, declared an operating profit of £3.006bn on sales of £10.813bn in 2015 – a profit margin of almost 28 per cent. 

Total export sales of Scotch in 2015 were £3.855bn, suggesting an overall operating profit from Scotland’s iconic product of around £1.08bn. But hold on a minute. This "total export sales of Scotch" is calculated on the selling price as it leaves the UK’s shores. 

From official statistics we know this selling price to be around £3.33 per bottle. Even allowing for a 50 per cent mark-up, when did you ever see a bottle of Scotch in a duty free shop priced at £5.00? A typical price might be around £25.00 – so where’s the other £20.00 going?

This is what gives rise to the suspicion by economists that the real value of exports is not a "mere" £3.855bn, but closer to £25bn. If the true export value is £25bn a year, then real profits might be close to £7bn.

£1bn a year could be levied on the whisky industry and it would still be incomparably profitable. If it were left to me I would do what Peter the Great did with vodka and make Scotch a state monopoly, but I am not Scotland's finance minister.

The groundwork has been laid in relation to a whisky tax and the concept has received the imprimatur of feasibility from some interestingly diverse and heavyweight quarters. 

Perfectly understandably, 'Big Whisky' is not happy and its hugely varied, diverse and outsourced lobby machine has been involved in a quiet, though effective, campaign of containment against any ideas involving the redistribution of the wealth created by the amber fluid since at least January 2013 and, I suspect, for many years before that with the Treasury cash cow myth we all grew up with.

From official statistics we know this selling price to be around £3.33 per bottle. Even allowing for a 50 per cent mark-up, when did you ever see a bottle of Scotch in a duty free shop priced at £5.00? A typical price might be around £25.00 – so where’s the other £20.00 going?

Big Whisky managed to see off the early 2013 attempt by the BBC to raise the matter. A few months later the STUC congress, after first signaling it might examine the concept, decided not to.

Then, last year, the SNP Standing Orders Committee decided it was a matter best left well alone. However, as the Bruce morality tale puts it, if you don't succeed at first, then try again. Happily the motion has been submitted again. It states:

Conference calls for a task force to consider:

- How to further develop the employment potential of the Scottish Whisky industry

- Look at the feasibility of reforming the licensing regime for distilleries

- Ensure that more of the revenue raised by the industry stays in Scotland

- Examine the feasibility of increasing the revenue from the industry

The concept of a whisky tax got its first airing, thanks to Douglas Fraser, the BBC's business editor. In the first working week of January 2013, he ran a story and a related half hour documentary on a proposal put together by Biggar Economics that could raise between £250m to £1bn in additional revenue beyond that already raised by the chancellor. (Note that the treasury's take is already factor into the overheads mentioned earlier).

http://www.bbc.com/news/uk-scotland-20931496

By the weekend, the media and the political community had lost interest. This is particularly interesting given the on-air welcome the concept got from bigger economic hitters as diverse as Professor John Kay and the former RBS chair George Mathewson. Indeed, only a few weeks ago, another economist John McLaren, added his voice to those who considered it worthy of further examination.

This is what gives rise to the suspicion by economists that the real value of exports is not a "mere" £3.855bn, but closer to £25bn. If the true export value is £25bn a year, then real profits might be close to £7bn.

Three months after the BBC documentary was aired I attempted to resurrect it with a motion, tabled by South Lanarkshire Trades Union Council at that year’s STUC congress in Perth. It should be borne in mind that, at this time, no institution has been asked to endorse the proposal - merely to look at it. Notwithstanding, the motion was resisted and voted down.

Those who manned the barricades in defence of Big Whisky included the RMT (the then general secretary, Bob Crow), Unison and, the real driver, the GMB, which has around 12,000 members in the industry, principally in bottling. It's a long story - there is short political dynamic at play here.

That day will be familiar to those who are au fait with the lobbying role that unions can sometimes play in partnership with employers in the nuclear and in the arms industry, which in truth, in a democratic society, has legitimacy.

However don't be too hard on the STUC as Scotland's new dominant political force, the SNP, knows its place also and did its duty by Big Whisky last year, too.

After my Congressional rebuff, economists Margaret and Jim Cuthbert, who also have an interesting and very simple proposal on distillery licensing, put me in touch with a fellow SNP member, Donnie Blair, a retired whisky executive.

£1bn a year could be levied on the whisky industry and it would still be incomparably profitable. If it were left to me I would do what Peter the Great did with vodka and make Scotch a state monopoly, but I am not Scotland's finance minister.

Thanks to Donnie's inside knowledge of how the industry works, for whom and to what purpose (the topic of another article possibly), we teamed up and submitted a motion as mentioned above for consideration by SOAC for the SNP conference in October last year.

However, given Donnie's knowledge of how the Big Whisky lobby operates and my own burnt fingers, we decided to have a wee mini, pre-conference press campaign around the motion. We got coverage in Commonspace and we got coverage in the business page of the Sunday Herald, which resulted in drawing in the Scottish Whisky Association from the lobby industry undergrowth into the blinking glare of public scrutiny with a public response. 

This in in turn allowed Donnie to respond in the following terms:

Tuesday 28 July 2015.

The response of the Chief Executive of the Scotch Whisky Association (SWA) to the news that a motion to SNP Annual Conference calling for a task force to look at the true plight of the Scottish whisky industry is unique. (Letters Sunday Herald, 26th July.)

This is the first time that the SWA has publicly responded to increasing concerns that the industry might be capable of delivering more tangible benefits to the Scottish economy than the fluffy macro-economic statements he makes in his letter. The SWA will move heaven and earth to ensure that the motion does not make it on to the Conference Agenda.

The groundwork has been laid in relation to a whisky tax and the concept has received the imprimatur of feasibility from some interestingly diverse and heavyweight quarters. 

The claim that the industry "adds £4.7bn of value to the Scottish economy" is just as often expressed by the SWA as "adds £4.7bn of value to the UK economy". It just depends on the audience to whom they speak. Big Booze is no different from Big Oil, Big Energy, Big Pharma or Big Tobacco in its ability to multiply their alleged contribution over several different constituencies.

But when the SWA fails to specifically rebut claims that 83 per cent of the industry is owned or controlled from outside Scotland; when it ignores statements from as eminent an economist as Professor John Kay that only two per cent of the global revenues stay in Scotland and when it refuses to counter the fears of industry experts that 98 per cent of its claimed £1.4bn annual supply chain spend goes to suppliers owned out with Scotland, then its integrity and loyalty to Scotland can only be cast into serious doubt.

Whatever the truth of the above, the SWA’s annual statistical reports from 1975 to 2013 tell their own story; we are selling less than 20 per cent more bottles of Scotch than we were 40 years ago. While Brigadoon slumbered, the global economy was growing apace – more than three times as fast as Scotch in real terms.

So, SWA claims that the industry supports 10,000 jobs must be placed in the context that it would have supported over 33,000 jobs had it simply matched global GDP growth over the last four decades.

As one of the "10,000 Scots who work(ed) hard to ensure that Scotch whisky retains its position as the world’s leading high-quality spirit drink" it sticks in my craw to hear the economic benefits of this world-renowned, perpetually renewable Scottish asset, which most other countries would give their eye-teeth for, so under-valued to Scotland by its own Trade Association.

'Big Whisky' is not happy and its hugely varied, diverse and outsourced lobby machine has been involved in a quiet, though effective, campaign of containment against any ideas involving the redistribution of the wealth created by the amber fluid.

It's for these and other reasons that my fellow SNP member Bill Ramsay, a senior trade unionist, and I have submitted the following motion, through our respective branches, for consideration by the Standing Orders and Agenda Committee of the 2015 SNP Conference in October. 

With well over 100,000 members it will be interesting to see if Big Whisky or Scotland's Big Party call the shots. We will actually know when Party HQ publishes the provisional agenda.

Sadly however the meeting did not take place as SOAC decided that other, more worthy, motions should be considered. Delegates from last year will recall a shortened three-day conference in which at least half of the motions were self-congratulatory back slappers from parliamentarians that moved party policy forward not one whit.

Hopefully this year the conference delegates will have more substantive fare to consider and that a motion on the potential our whisky industry has to contribute to making Scotland a more equal society will be part of that.

Note also that Donnie and I are more than happy to do a joint presentation to SNP branches and other interested parties throughout Scotland on the subject of 'Big Whisky - What Is It Good For?'.

Picture courtesy of sayot

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