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A dram with a kick to it

Pauline McLean | 18:45 UK time, Tuesday, 1 September 2009

When the business lobbies complain about red tape and increased expense, it's usually to point out the cost they face of unintended regulation.

But what if the , introduced from today, are fully intended? What if the ramping up of the cost of selling alcohol is exactly what the regulators want?

The ministers who passed the law in 2005 and those implementing it now may not admit as much, but it seems the need for two licences (premises and responsible licensee), the segregation of alcohol and other goods in larger shops, the end of two-for-one in on-sales and happy hours, etc etc, seem intended to put people out of the business.

The only catch with that explanation is the manner in which the law was passed in 2005. I was at Holyrood that day, and it was a burach.

The Licensing Act was probably the worst example of bad legislating in 10 years of the Scottish Parliament, as both government and opposition tore up any carefully constructed pre-legislative advice, consideration and balance, and spent the day having a dutch auction for the most draconian amendments they could manage.

I also recall ministers telling me, as the dust settled the next day, that they had years to sort out the mess. And yet they didn't. Nor did their successors.

Those innocently wanting to add a modest splash of alcohol to their supermarket trolley before 10am, and being stopped from doing so, might like to keep that in mind.

And so we turn to the next Licensing Bill, which is expected in the new session at Holyrood.

The idea of minimum alcohol pricing has brought plenty criticism from the industry, particularly in on-sales.

The Scotch whisky industry has led the lobbying effort on behalf of others, because it carries status and immense amounts of exporting clout.

With that in mind, Gavin Hewitt, chief executive of the Scotch Whisky Association, has today issued a blunt warning about the impact of the law on export markets.

We've heard this before. But this summer has made the relationship between the Scottish Government and the whisky industry a fractious one due to the Diageo/Johnnie Walker restructuring row, and there's less of an understanding of shared interests and mutual understanding.

In his speech to a conference on Scotland's international ambitions in Edinburgh today, organised by the Scottish Council Development and Industry, Mr Hewitt, a former diplomat, was not all that diplomatic in his approach.

There was a very thinly-veiled criticism of the Government's handling of Diageo's plans for closing its Kilmarnock plant.

Enterprise minister Jim Mather had just told the conference that the case being made to Diageo was for "enlightened altruism" in aligning its corporate objectives with those of its workforce, and Mr Hewitt was withering in his dismissal of that argument.

"Like any other sector, the Scotch whisky industry can't stand still," he said.

"Taking out costs and streamlining facilities are as much part of our business as for any other industry. It is essential when operating in a high cost base, such as Scotland, and competing in the challenging global market where we do most of our business."

But it was the minimum pricing plans that are now the main target of the whisky lobby's concern.

It has long been arguing that foreign tax authorities have been watching the tax regime for Scotch whisky in its home market.

A rise in duty from the Budget at Westminster is, we've been told, used to justify a rise in duty overseas too.

Using health grounds to justify a further attack on pricing - which is an exemption allowed under World Trade Organisation rules - is seen by the whisky/drinks lobby as a further opportunity for foreign governments to discriminate against Scotch.

That argument has long come with distant sound of crying wolf, but now the argument comes with more specifics.

In South Korea, for instance, the locally-produced spirit, soju, is weaker than whisky, at 25 per cent alcohol by volume, so the Seoul government could use health grounds to impose swingeing duty on stronger spirits, effectively creating a trade barrier aimed at Scotch.

The same goes for Russia's, Japan's and China's domestic spirits markets.

Hewitt's case is that the Scotch Whisky Association has lobbied against such health-related measures by foreign governments as spurious health grounds masking barriers to free trade, but if the same arguments against alcohol are being used by the Scottish Government, that argument becomes hard to sustain.

His call today was for a more joined-up approach to supporting the industry.

"Above all, we need a business environment in Scotland conducive to doing business - where companies, from both home and abroad, are attracted to invest, and where government is seen as benign".

Could he have been referring, once more, to the row over Johnnie Walker?

    As for the threat of American boycott of Scottish exports to its biggest single market, in the wake of the Lockerbie bomber release, the US blogosphere is being watched for Scot-bashing.
    But the important next event is when Congress returns to Washington from its summer break. We'll find out then if its members have the appetite for stoking it further. Just as the French were criticised for their response over the invasion of Iraq in 2003, perhaps Americans will drop any Scottish references in product names, meaning they'll drink Freedom whisky and secure their parcels with Freedom tape.
    But look at it from the other point of view. In emerging markets, and particularly Muslim ones, I'm hearing the release has done Scotland's reputation and trading prospects no harm at all.

Comments

  • Comment number 1.

    You say the 'OnTrade' are against minimum pricing but you are wrong.

    The industry refers to the 'OnTrade' as pubs, nightclubs, hotels etc. In actual fact those who dispense drink direct to the drinking consumer and we have long supported 'Minimum Pricing'. As a member of the Scottish Licensed Trade Association I know this position has been documented and presented for decades to politicians.

    The big resistors to Minimum Pricing is in fact the 'Off Sales' sector in particular the All Powerful Supermarkets who sell at below cost in large volume driven offers to the public. Which probably costs a loss of half a billion pounds in VAT revenue to our cash strapped treasury but the simple sum to work that out is beyond the chancellor.

    If Minmum Pricing was introduced it would not actually affect the majority of pub goers but stop this sectors abusers from absurd sales practices. It would also mean that if you buy 'Water' at a supermarket you won't be confused by the current state of play were alcohol is cheaper to buy!

    You are probably right in the thought the government is trying to close down the ontrade hospitality sector (pubs are already closing across UK) as the cost pressures, red tape, interference and total lack of compassion is killing our trade. Add to this 'Darlings' wonderful VAT (2,5% or higher) increase to hit us on 1st January 2010. We did not enjoy the opportunity to reduce our prices as he put duty up to deny our sector that opportunity.

    Don't feel bad about your confusion, MSP's have the details to hand and still can't work it out.

    One supermarket worker can sell the same volume of alcohol as 100 barstaff on a shift but can their income tax support the 100 unemployed barstaff when the pubs are no longer economically viable and close. Just what our job strapped country needs right now. Uk Government joined up thinking? They could not even join hands.

  • Comment number 2.

    "...particularly Muslim ones, I'm hearing the release has done Scotland's reputation and trading prospects no harm at all."

    Too bad our chances of selling Whisky in Muslim markets weren't too hot to being with.

  • Comment number 3.

    If pricing of alcohol is the main concern, can someone explain why the UK government has such a low duty rate on cider in comparison with wines beers and spirits?
    The equivalent rates (not including VAT) and for simplicity based on a 75cl bottle, would be, wine £1.61, spirits @ 40% £6.79, beer @ 4.5% 56p, RTDs @ 4.5% 76p, cider (regardless of strength) 24p.
    Since cider appears to be one of those drinks that is of concern esp the very high strength varieties, surely it's possible simply to increase the duty rate to level the playing field a bit.

  • Comment number 4.

    I meant also to say. That if duty on cider was calculated the same way and at the same rate as spirits, a 75cl bottle of high strength (say 8%) would be £1.36.

  • Comment number 5.

    Labouring the point I know, but here's a different way to express the disparity in the way duty is calculated & applied which perhaps shows the stark difference between products clearer.
    Current UK government alcohol duty for each product equates to a rate per unit of alcohol of:-
    Spirits 23p
    Wine 18p
    Beer 16p
    RTDs 23p
    Cider 4p

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