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7.58 am
Mr. John McFall (Dumbarton): I thank my hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne) and the Minister for allowing me to participate in the debate. There are two large whisky companies in my constituency--Allied Distillers and J&B. Sadly, J&B is closing down as a result of the merger between Grand Metropolitan and Guinness. There has been a loyal and committed work force there for 30 years, however, and record production is still being hammered out week in, week out, and will continue to be until the closure in a few months' time.
The industry and its work force are also extremely good for the economy. Allied Distillers has consolidated its position in my constituency and looks forward to a good future in Dumbarton. It is also a good future for the country. As my hon. Friend said, there are sales worth £2 billion. For every job that is created in the whisky industry, another three or four are created outside the industry. Some 50,000 to 60,000 jobs in Scotland are being supported by the whisky industry and every worker in the industry contributes £80,000 to the Treasury as a result of the duty that is paid on the product. So it is a precious industry and I ask the Minister to be vigilant about issues that affect it such as export refunds. It is felt that the Scotch whisky industry is being singled out. It cannot afford to be singled out because of the workers and their commitment to the industry and because of the cash flow that it produces for the Government.
I know that the Government have listened carefully in the past few years. I congratulate them on the duty freezes, but, in the long term, there must be a structure on adequate duty levels. I look forward, along with my colleagues and Ministers, to ensuring that in the long term there is a level playing field for the Scotch whisky industry, and that it goes from strength to strength.
8 am
The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin):
May I begin by congratulating my hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne) on his good fortune in securing this debate? When I first saw that he had done so, I felt sorry that such an important debate was to take place last thing at night, and that it would have been much better to have a daytime debate. However, I did not realise that my wish would be fulfilled in such exhausting circumstances.
I also congratulate my hon. Friend on his choice of subject. As he proved in his speech, this is an important subject. He said, quite rightly, that it is a timely debate, given what is happening in the European Union Agriculture Council and the fact that this item will be discussed at the March meeting.
The points made by my hon. Friend were pertinent and salient. He demonstrated obvious concern for his constituents as well as knowledge of the industry and its importance to Scotland and the United Kingdom as a whole.
I also appreciate the concern of my hon. Friend the Member for Dumbarton (Mr. McFall), who, understandably, spoke with feeling about the industry in his constituency. Other hon. Friends with an interest in the subject are here, even after the all-night debate. My hon. Friends the Members for Dumfries (Mr. Brown), for Cunninghame, South (Mr. Donohoe), for Hamilton, South (Mr. Tynan) and for Stirling (Mrs. McGuire) are all concerned about the whisky industry and its economic importance.
The debate might seem technical if we talk in terms of export refunds for non-annexe 1 products under the common agricultural policy. It can sound like a minor subject, but what is at stake economically is very important. The whisky industry is important to the economy of Scotland and the United Kingdom. It is also important as a direct employer and in providing related jobs.
The industry is also a very valuable export earner for the United Kingdom as a whole. We are talking about exports worth £2 billion annually, of which about £1.2 billion is exported outside the European Union. Those are all reasons why the Government are determined to achieve the best possible outcome for the industry and our other industries that are affected by export refunds.
In many ways, this is not a new issue in European or agricultural politics. When I was a member of the Agriculture Committee in the European Parliament, we were frequently and understandably lobbied by the Scotch whisky industry and others that benefited from and needed export refunds under the common agricultural policy. What my hon. Friend the Member for Kilmarnock and Loudoun has described this morning is the latest twist in a familiar tale. As he pointed out, the whisky export refund is one of a series of export refunds paid under Community rules to compensate exporters for the higher prices of agricultural raw materials supported under the common agricultural policy.
Other industries also receive such export support--other spirit drinks industries, including gin and vodka, but also, importantly, processed food and drink, confectionery, cakes, biscuits and so on, as well as pharmaceuticals. Many interests need to be taken into account.
My hon. Friend pointed out the reasons for the latest form of pressure on such export refunds. He correctly explained that under World Trade Organisation agreements, the EU is committed and obliged to make progressive reductions. That applies to export refunds both for agricultural raw materials, the annexe 1 products, and for processed agricultural products--the non-annexe 1 products on which the debate has focused.
Specific reductions now need to be found in time for the EU's next budget year, beginning in October. At that time, the budget ceiling for non-annexe 1 products will be 415 million euro; that is almost 200 million euro less than the projected expenditure for the current year. In order to keep this year's expenditure within the budgetary ceiling set by the Berlin European Council in March 1999, since last December a cut of 4.5 per cent. has already been imposed by the Commission on all non-annexe 1 export refunds.
As I am sure my hon. Friend and colleagues are aware, the Council of Ministers was not happy with the Commission's approach. It made clear its view that, in future, any adjustments to export refunds that were necessary to meet WTO and budgetary commitments should be governed by a strategic and targeted approach rather than across-the-board cuts in refunds. The Council pressed for speedy progress of the Commission's communication on that issue in time for Ministers to give it further consideration at the forthcoming Agriculture Council.
The amount of targeting and the number of across-the-board measures remain vexed issues. The problem is not helped by the fact that the Commission's thinking and the full effects of its proposals are not yet clear. My hon. Friend referred to that point. The details of any proposed reductions are not clear. We need a better idea of the detailed impact on distillers. I assure my hon. Friend that we will challenge those proposals at the March Agriculture Council.
The general approach of the Commission's proposed strategy is known. It would be to withdraw eligibility for non-annexe 1 export refunds from a range of products; reduce rates for others; and provide more flexible access to inward processing relief to enable processors to access raw materials at world prices.
The Commission has the competence to act on most of those strategic measures, including the proposal to reduce the export refund on cereal-based spirit drinks--whose main impact would be on the UK in the Scotch whisky industry--although white spirits, such as gin and vodka, and beer would be similarly affected.
The pain of any reductions or eliminations will affect other industries and other countries. For example, in Germany, there is a particular worry about the effect on beer export refunds and on a particular class of yogurt that is exported. In Finland, Denmark, Austria and France, there are a variety of concerns. However, I am well aware of the concern in the whisky industry as to the extent and likely impact of the proposals.
Although it is within the Commission's competence to propose such measures, it is important to remember that it must also meet treaty obligations--one of which is protocol 19 to the UK treaty of accession, as my hon. Friend mentioned. The Government fully agree that the provisions of the protocol must be respected and we shall
seek to ensure that any action taken to implement the Commission's approach is compatible with the provisions of protocol 19.
Treaties of accession and protocols to treaties of accession are important. They were introduced to try to cover areas in which particular countries who were joining the European Community, now the European Union, could have certain key interests recognised that would otherwise have been in danger of being overlooked, because they were special to a particular country. Therefore, we are very conscious of the importance that the industry attaches not just to the protocol, but to its importance in the overall treaty of UK accession.
I assure my hon. Friend that discussions have taken place at an official level. My Department has been in close contact with the Scotch Whisky Association and with the sectors of the food and drink industry where the measures would have an impact. Further consultations involving Ministers will take place between now and the March Council. My right hon. Friend the Minister of Agriculture, Fisheries and Food has plans to hold such meetings over the next few weeks.
There are also discussions between Ministers in my Department and the Scottish Parliament. For example, I spoke yesterday with the Scottish Minister for Rural Affairs, Ross Finnie, about these and other matters. Indeed, there are regular meetings between my right hon. Friend the Minister of Agriculture, Fisheries and Food and Ministers in the devolved Administrations. We are fully aware of the importance of keeping in touch on these and other issues.
It is also important--I stress this to my hon. Friend--to get detailed information from the industry. The whisky industry and others need to provide us with all the possible ammunition in terms of fighting this particular European battle. We have a responsibility to consider the effects of the different proposals on all those parts of our industry that are at present entitled to export refunds. Given that we accept that world trade commitments must be honoured and are ultimately an important part of the agonisingly slow common agricultural policy reform process, we need to respect them.
At the same time, however, as UK Ministers we have a responsibility to ensure that our industries are not unfairly treated. To help to do that we need as much detailed information as we can get. In particular, we have asked the whisky industry for detailed analysis that would help us challenge the Commission's view that whisky is insensitive to the rate of refund.
I agree strongly with my hon. Friend's analysis of the real cause of the problem and with his belief that the best long-term solution is fundamentally changing the common agricultural policies and those protectionist aspects that cause our industry such difficulty. The UK is in the vanguard of the reform process. We need to push ahead with our allies--and we do have some allies in that process--to achieve agricultural reform.
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