Cabinet (Meetings)

First Minister's Question Time – in the Scottish Parliament at 11:59 am on 18 March 2004.

Alert me about debates like this

Photo of John Swinney John Swinney Scottish National Party 11:59, 18 March 2004

To ask the First Minister what issues will be discussed at the next meeting of the Scottish Executive's Cabinet. (S2F-732)

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

Mr Swinney will not be surprised to learn that, at the next meeting of the Cabinet, we will discuss progress towards building a better Scotland.

Photo of John Swinney John Swinney Scottish National Party

I am sure that ensuring the health of the Scottish economy is one of the components of building a better Scotland. The Scotch whisky industry accounts for 40,000 jobs in Scotland, contributes £1.6 billion in tax to the public purse and is worth £2 billion in overseas trade. Yesterday, the Chancellor of the Exchequer imposed on the Scotch whisky industry a measure that has been described by that industry as a catastrophe and a "hammer blow" to Scottish producers. Will the First Minister lead a national campaign to reverse that hammer blow to a flagship industry in Scotland?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

Like the industry, we were disappointed at yesterday's announcement, but we continue to have discussions with the Treasury and have received assurances from it that it will amend the original proposals to make it easier for the industry to implement the new scheme to deal with tax fraud in the spirits industry more generally. However, it would be very dangerous for us in Scotland to lead any kind of campaign—national or international—that sought to run down the image of the whisky industry, which is strong today and which will remain strong. Regardless of what steps are taken to tackle tax fraud, the industry needs to be promoted by this Parliament rather than to become involved in some sort of guerrilla action against the Government.

Photo of John Swinney John Swinney Scottish National Party

All that I am asking the First Minister to do is to speak for Scotland on this occasion and to protect one of our vital national industries. The Government's measures are based entirely on fraud figures from Her Majesty's Customs and Excise. The National Audit Office has investigated those figures and concluded that they are difficult to accept. The industry has proposed a range of measures to combat fraud, but the Government has dismissed those out of hand.

The United States Treasury has abandoned the measures that the Government is proposing, because it did not think that they were successful. The industry, the unions, the Scottish Affairs Committee at Westminster and MSPs from all parties are against the Government's measures. Yesterday, the chairman of the Treasury Committee expressed his dismay and, today, the First Minister has told us that he is disappointed with the proposals. Will the First Minister go a stage further and turn his disappointment into action by leading a national effort to reverse the measures that have been introduced?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

No, I will not. I want us to keep the matter in perspective. It was important to make representations, because the industry and those who work in it were concerned. The United Kingdom Government's original proposals would have been too extensive and too prescriptive for the industry. In responding to the representations that have been made, the UK Government has not gone the full way that we asked it to go, but it has moved in the right direction.

It is clear from yesterday's announcement, first, that the Government will assist the industry with the cost of the measures; secondly, that the measures will be much more proportionate to the scale of the problem and easier to implement; and, thirdly, that the Treasury is still open to further discussions about implementation. That was guaranteed yesterday in a letter from John Healey, the Economic Secretary, to Lewis Macdonald, who made the original representations on our behalf.

I reiterate that, even though we made representations and influenced the decision that was made and will continue to seek to influence the decisions that are made on implementation, it is right and proper that we use our national efforts in Scotland to promote the whisky industry and its success. We should not get involved in the sort of battle in which Mr Swinney suggests that we get involved.

Photo of John Swinney John Swinney Scottish National Party

The battle in which I want the First Minister to get involved is a battle to protect and enhance growth in the Scottish economy. Growth is at the top of the First Minister's agenda.

Yesterday, the Scotch Whisky Association said that the Government's measures would

"have a severe impact on the productivity and compliance costs of the spirits industry."

The Government's £3 million compensation scheme for an industry that contributes £1.6 billion in tax to the UK is viewed as being inadequate to protect the industry from what it is facing.

Two years ago, the chancellor introduced a tax hike on the oil and gas industry and the First Minister did nothing to protect the Scottish jobs that were lost. A second industry has been hammered by the UK Government: the fishing sector has been halved in size. Now the whisky industry, which supports 40,000 Scottish jobs, is under attack. Three great Scottish industries have been treated with contempt and three times the First Minister has been posted missing. Why, when Scottish jobs are at threat, will he not start fighting for the whisky industry and act by leading a campaign against this hammer blow?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

Our job is to promote Scottish jobs and our job as parliamentarians is to deal with serious issues such as tax fraud and to make representations on how those issues should be dealt with.

Since Christmas, Mr Swinney has twice tried in the Scottish Parliament to promote illegal activity: once in relation to fishing and again in relation to genetically modified crops. He cannot have a consistent position that advocates, in relation to the issue that we are discussing, ignoring the fact that tax fraud is taking place. Tax fraud is taking place and needs to be dealt with.

We disagreed with the Government's original proposals and the Government has moved some way towards our position and the position of the industry. The job of the industry and the British Government now is to ensure that the proposals are implemented in a way that is the most effective and that will have the least impact on productivity and competitiveness. However, what will have most impact on productivity and competitiveness is the investment that the Scottish industry can make in its equipment and staff. Yesterday's budget encourages the Scottish industry to make that investment by ensuring that we have a strong economy.

The Scottish whisky industry will benefit from the successful promotion of Scotland and the promotion of the industry. That is what we will continue to do. It will certainly not benefit from any attempt to cover up or ignore the fact that there is tax fraud in the industry and that that fraud has to be dealt with.

Photo of John Swinney John Swinney Scottish National Party

The Scotch whisky industry put proposals to the Government that the Government threw out, choosing instead to introduce the measures that we are discussing. Everyone in Westminster who has voiced an opinion on the matter, including the chairman of the Scottish Affairs Committee, says that the measures are bad for the industry. I do not know who the First Minister has been speaking to in the industry, but the information that I have seen, which was published by the Scotch whisky industry, says that the measures will have

"a severe impact on the productivity and compliance costs of the spirits industry".

How can the First Minister square his stated determination to grow the Scottish economy with his silence when the United Kingdom Government undermines the strength of one of our vital national industries?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

It is rubbish to suggest that we have stayed silent and it would be right to suggest that we have made representations and that they had an impact on the final decision. It would also be right to put this question in its proper context. Yesterday, a budget was announced that recognised that, throughout the UK, including in Scotland, growth has been more sustainably high than it has been for 200 years. Yesterday, a budget was announced that allows us to continue the progress that has been made over recent years—including in the Scotch whisky industry—in research and development, innovation, commercialisation and all the things that are needed to grow the Scottish economy.

Our job in the Scottish Parliament is to support the industry in a positive sense, to promote it internationally and in Scotland and to ensure that the industry supplies not only 40,000 jobs, but more as it grows in years to come.