Blend that rescued Scotch from rocks

Patrick Tooher looks behind the Chancellor's U-turn on whisky tax

THE CHANCELLOR'S unexpected largesse to whisky makers was one of the few surprises in an otherwise lacklustre Budget. Only the day before the 4 per cent reduction - equivalent to 27p on a 70cl bottle of Scotch - Brian Ivory, chief executive of Highland Distilleries, the Famous Grouse whisky group, told journalists that a tax freeze was the best that could be hoped for.

What Mr Ivory had underestimated was the influence of the powerful Scotch Whisky Association, the lobby group of which he himself is a council member.

The SWA denies it made a special effort this year to twist the Chancellor's arm, arguing that Kenneth Clarke was ultimately persuaded by the sheer force of the industry's argument to reverse last year's tax rise.

"Nobody was winning," argues Rebecca Tabor of the Communications Group, a lobbying group which advises the SWA. "The Treasury was losing money and an important UK business was being harmed."

Economics undoubtedly played a big part in the Chancellor coming round to the whisky industry's view. After all, the tax take from whisky actually fell by pounds 54m in the six months since whisky duty was raised in last year's mini-Budget because of shrinking demand. And Mr Clarke clearly accepted the notion that high levels of whisky duty - twice as much as those imposed on imported wine - discriminated against one of Britain's biggest export earners.

But the equally powerful brewing lobby, which had campaigned hard for similar reduction in beer and wine duty to combat cross-Channel "booze cruises", failed to get more than a tax freeze. So why then was the whisky lobby alone successful this time round? One reason may have been its change of approach to the Chancellor.

"In the past the Scotch Whisky Association and the industry have tended to be very negative," says Mark Hunt, corporate communications manager at Allied Domecq, which owns Teacher's whisky. "It is very easy to sit there and whinge about job losses and falling volumes."

Instead, Allied Domecq commissioned the Fraser of Allender Institute at Strathclyde University to study the impact of Allied Distillers on the Scottish economy. The findings showed that the Scotch whisky industry, which employs 14,000 directly but sustains almost 50,000 jobs in distilling and related industries, was more important to the Scottish economy than the Silicon Glen-based computer manufacturing industry or the finance, paper and pharmaceuticals sectors.

The report was sent to all MPs north of the border, including Scottish Secretary of State, Michael Forsyth, who is defending the ultra-marginal seat of Stirling. According to Mr Hunt, even Mr Clarke asked for a copy.

Pressure was applied from another quarter. So annoyed was Highland Distilleries with Mr Clarke's mini-Budget last year that it slashed its contribution to the Conservative Party from pounds 12,000 to pounds 4,000, and Allied Domecq stopped giving to the Tories altogether in 1993 - a loss to Smith Square of pounds 40,000.

But the SWA's traditional behind-the-scenes lobbying and leading delegations to see the Chancellor also paid dividends.

Surprisingly few MPs have a declared interest in the whisky industry. The SWA's only parliamentary consultant is Roger Sims, the Conservative MP for Chislehurst, who is standing down at the next election. The House of Commons Register of Members' Interests also shows that Michael Trend, the Tory MP for Windsor & Maidenhead, acts as parliamentary consultant to Grand Metropolitan's drinks arm, IDV. Meanwhile, the former secretary of state for transport, Paul Channon, the Tory MP for Southend West, and Sir Mark Lennox-Boyd, Tory MP for Morecambe and Lunesdale, are both part of the Guinness dynasty, which owns Bell's.

Not listed is the House of Commons Scotch Whisky Industry Group, mainly made up of Scottish MPs with whisky interests in their constituencies.

Their campaign was boosted by other high-profile politicians, including Lord Younger of Prestwick, the former defence minister and chairman of the Royal Bank of Scotland, and the veteran Tory backbencher Dame Jill Knight.

Having at last tasted success, the whisky lobby wants more. "The tax take on a bottle of whisky is still 65 per cent," notes the SWA's Campbell Evans. "At this rate parity according to alcohol content will take 14 years to achieve."

Mr Clarke's time horizons are somewhat shorter. His U-turn on whisky tax alone will not relaunch the Tories in Scotland in time for the election. He will have to go a lot further next time to drown Tony Blair in a torrent of beer and Bell's.

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