The Chancellor must step up support for whisky distillers suffering from rising energy costs
3 min read
When you imagine energy-intensive businesses, there are obvious examples that spring to mind. Images abound of grand factories and industrial towns, steel producers and mass manufacturers.
Slightly less obvious are the placid chimneys of our nation’s distillers – and yet these economic hubs for communities across Scotland and beyond are far more energy-intensive than other drinks producers. Distilling takes around 17 kilowatts per hour (kWh) to make a litre of alcohol – where beer brewing requires just 0.5kWh.
It is hard to understand, therefore, why the Treasury has determined that brewers, cider and winemakers qualify for full support with their energy bills, while distillers do not. In truth the whole draft list that the government has currently identified as entitled to additional support under the scheme coming next month seems to be the product of questionable priorities.
An inflationary increase will only deepen the penalties to the industry and to responsible customers
Whisky is a flagship product of our country. In the Spring Budget, the Chancellor needs to change course – and give the industry proper support.
The energy challenges whisky producers are facing are no trivial matter. More than half of distillers report that their energy bills doubled last year. Almost three quarters are braced for further hikes. The issue is particularly acute for home-grown small and micro-distillers for whom energy costs are a higher proportion of their total overheads.
Having worked closely with local distillers in my own constituency and beyond for years I know that scotch whisky makers have invested huge amounts modernising in all aspects – including through low carbon technologies – in recent years. It tells a tale that they plan to decarbonise direct emissions by 2040 – 10 years ahead of the government.
While they are making huge strides in cutting emissions – down more than a third over the last decade – energy and its costs remain as integral to whisky distilling as malted barley, yeast and water. Just like brewers and winemakers, they need our support.
All this goes without adding in the burden of inflation and taxation. The Office for National Statistics (ONS) suggests that inflation this year will total well over 10 per cent. Allowing spirits duty to rise in line with the retail price index from August would therefore lead to a substantial increase in tax. The exciseman already takes more than 70 per cent of the value of a bottle of scotch, gin or vodka. It is already the highest rate in any G7 country, an inflationary increase will only deepen the penalties to the industry and to responsible customers.
Scotch distillers directly employ some 11,000 people and help support a further 7,000 jobs. In economically fragile communities, in the Highlands and Islands in particular, they have built up a reputation for their unique products as tourist destinations in their own right – and as a linchpin employer for high quality jobs in places where these can be hard to come by. That success could easily be jeopardised if they are excluded from support just as they are under the threat of a further hike in duty this year.
The final details of the successor energy bills discount scheme are still being finalised. It is not too late to correct this imbalance and support our distillers before they take further damage. In the meantime, the Chancellor should ensure he doesn’t make the situation even more difficult and rule out further duty increases this year in the Budget on Wednesday.
Alistair Carmichael, Liberal Democrat MP for Orkney and Shetland
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