The situation in the Highlands
An outbreak of moonshine distilling
The situation of distilling in the Highlands was radically different from the Lowlands. Highland distilleries were not huge industrial plants like in Southern Scotland.
Distilleries were merely owned by local farmers sometimes joining in cooperatives, and the production was not that massive. Highland production represented less than 10%, but on the other hand, no concession to quality has been done. The Highland whiskies were much better, but also much more expensive than the Lowland ones.
Distillation was never the main activity, and nearly no one was dependent on it for his livelihood. Generally, local peat was used to heat the stills, and some people began encouraging the use of Lowland coal, as peat reserves are not inexhaustible.
Despite this facts, many distilleries were forced to close, due to a strengthening of the distillation laws. Tax increases were also problem for the Highland producers. This situation, combined to a increasing demand or good whisky from the Lowlands encouraged the rebirth of moonshine distilling and smuggling.
Distilleries like Ardbegowned by Alexander Stewart and Craigentinny in Edinburgh bankrupted.
Distilleries in Campbeltown (which were officially excluded from the Highlands in 1795) were driven underground. Also in Speyside, moonshine distilling and smuggling were raising again.
Moonshine distilling and smuggling became part of the local traditions, and remained unpunished because of the complicity of local authorities.
New hard times for the distilleries
Catastrophic harvests during the first years of the 19th century made the government take the decision to prohibit distillation, as the grain was hard needed for food production. In addition to bad harvests, the Napoleonic wars on the continent made import of grain nearly impossible. This import restrictions did apply to brandy too. Many notables had to change their drinking habits and started drinking whisky. The successive taxes increases during the first years of the century had a limited effect on local consumption.
The consumption of whisky was resuming and the great Lowlands distilleries knew a new era of prosperity. English marked was opened again, but only to big producers, as the law oblige exporters to produce their spirit in stills of at least 3000 gallons.
The Highland distilleries did not benefit from this new conditions, and their problems with illegal distillation remained. Starvation in North Scotland continued, and the landlords joined (slightly) the authorities to fight moonshine distilling, arguing that grain was so hard needed for food processing that is was a crime to use in for producing whisky. However many landlords collected part of their rents in whisky.
Dealing illicit distillation a decisive blow
The authorities began to understand that the only way to kill moonshine distilling was a liberalisation of the rules and a significant decrease of the taxes on whisky. So, in 1816 taxes were divided by 3 and the use of smaller stills (at least 40 gallons) was allowed again. The effect was nearly immediate. The number of distilleries acting in the Highlands increased from 12 to 39 in 1817 and to 57 in 1859, and from 24 to 68 in the Lowlands.
The use of smaller stills made the use of other distillation techniques possible, with often better results. Legal distilleries, owning greater stills, found it very difficult to produce whisky with a quality comparable to the one produced illegally.
However, starvation broke out again the same year, and at the same time a new increase of moonshine distilling, due to lack at grain. And the struggle between excise men and moonshine distillers began again. Harder than ever.
The promulgation of the "Excise Act" in 1823, decreasing the taxes again, and the end of the 12 months notice for exports to England meant the end of the monopoly of the Steins and Haigs in the Lowlands and the monopoly of moonshine distillers in the Highlands.
Encouraging measures made the generalisation of use of malt instead of grain (used in the big distilleries in the Lowlands) in the distillation process possible and contribute greatly to the increase of the quality of Scotch whisky.
Legal restriction were nearly disappeared, and the success of the whisky industry was from now depending of the market laws.