Export refunds compensate EU food and drink exporters for the inflated costs of purchasing within Europe. Cereals, for example, can be over 50% more expensive than those sold in other parts of the world. The refunds allow European producers to compete in countries like America, where the price of raw materials is much lower. They are not in themselves a subsidy, but a consequence of CAP farm subsidies, and simply put EU food and drink producers on an equal footing with competitors in the rest of the world.

However, the European Commission has pledged to save over 75 million Euro a year by slashing refunds available to certain key producers. Scotch Whisky and other spirits will bear the brunt of the cuts.

Hugh Morison, Director General of the Scotch Whisky Association said: “The Commission has quite arbitrarily, singled out a handful of industries to shoulder these cuts, and intends to recover 25% of its total refund savings from the Whisky industry alone. This is a disproportionate burden, and one that the Commission has so far failed to justify. Scotland is a small nation. There is absolutely no economic justification for targeting its primary export in this way. It is blatant discrimination against the Whisky industry and other cereal based spirit producers.”

Despite repeated representations from both industry and the UK Government, the Commission has remained unyielding. Sources say that the Commission’s proposals will be voted on within the next week or so, although a more definite date is not yet forthcoming. If the recommendations are ratified, the Scotch Whisky industry could lose over £10m a year in export refunds.

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