PAUL Walsh, the newly appointed chairman of the Scotch Whisky Association, has warned the Chancellor his budget will put into play the "laws of unintended consequences" which could prevent future investment in Scotland.
In his first major speech as chairman of the SWA, the chief executive of Diageo said the recent budget hike on spirits in the UK had left the industry "both surprised and disappointed" and warned that its relationship with the Government had now bro
ken down.
In a hard-hitting address to the World Whiskies Conference in Glasgow, Walsh also warned India that the SWA would return to the World Trade Organisation to secure fair market access in line with international trade rules if it failed to provide a level playing field at state level.
He said: "Scotch whisky contributes some £2.5bn (around £80 a second) to the UK balance of trade – representing a quarter of UK food and drink exports by value – and supports over 60,000 jobs across the UK.
"So clearly we were surprised and disappointed to hear the Chancellor's budget this year. I think it is fair to say that we had a very constructive dialogue with Government until then, but I'm unsure I can say the same now. Against this backdrop, the laws of unintended consequences come into play.
"One such consequence, for example, could be around investment in distilling in Scotland. If cider is to be treated so favourably in comparison to Scotch whisky, ironically perhaps a better investment could be orchards in Poland rather than distilleries we could build in Scotland."
Scotch exports rose 4% to nearly £2.5bn in 2007, despite ongoing disputes over import tariffs in several emerging markets. Referring to reports in Scotland on Sunday from Dr Vijay Mallya, the head of India's largest drinks company, that the Indian spirits industry wants a "constructive dialogue" over the tariff issue, Walsh said he welcomed that development. But he also warned that the industry would continue its fight to reduce the 450 barriers to trade in its markets around the world.
He said: "Real progress towards fair market access was made last year with India's overdue but welcome reform of the discriminatory additional customs duty. This has helped to create for the first time a more level playing field for imported products.
"But challenges remain, particularly at state level, where we must work to ensure the introduction of non-discriminatory tax treatment of domestic and imported products. If such steps are not taken, we will not hesitate to return to the WTO in the future to secure fair market access in line with international trade rules."
He dismissed suggestions that the new "blended malt whisky" category would undermine the credibility of single malt whisky purely for commercial gain.
He said: "I think most people agree that the overall package of proposals delivers important benefits. I'm also aware that there continues to be some debate on a couple of aspects of the legislation.
"I have to say, though, that some of the criticism of the proposals is misinformed, misleading, and comes from a narrow perspective.
"This legislation has the consumer at its core. Clearer labelling of our products, protection of the regional names, and new rules to prevent potentially deceptive practices should not worry anyone in the industry with the interests of the industry as a whole at heart and with a commitment to ensuring that consumers have full confidence in, and knowledge of, what they are buying."
Walsh said that, despite the turbulent economic climate, the SWA was set to reveal "impressive export growth for Scotch whisky in the coming months".
"There is real optimism across the whisky industry at present, with broad-based growth being experienced in both traditionally important markets, such as the USA and Europe, but also new opportunities fast developing in the emerging markets of tomorrow."
The full article contains 650 words and appears in Scotland On Sunday newspaper.
