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Clause 7

Rates of duties and rebates

Mr. Heathcoat-Amory: I beg to move amendment No. 12, in page 3, line 39, leave out '£0.4926', and insert '£0.48'. Even in the context of a tax-raising Budget, the impost on road fuels was particularly savage. The amendment seeks to moderate the increase to bring it back into line with the so-called escalator that we left behind when we lost office. The private motorist and commercial road users face steep increases, and, as ever, the Library has been helpful in working out the implications of the new transport fuels policy that was announced in the Budget. The increase in the escalator from 5 to 6 per cent. in real terms, the fact that the Government have brought forward the implementation date, and an extra increase in the duty on diesel and super unleaded petrol, add up to an additional tax burden of £9 billion over this Parliament. By any standard, that is a huge additional burden, and it is an inefficient way to reduce car use, if that was the intention. Of course it has an effect on the private motorist and a most unfortunate effect on those in rural areas where many people must have cars--there is no realistic alternative to the car for getting to work or for use in the course of daily routine. Against the huge, almost staggering, increase in the overall tax burden, the £50 million that is to be allocated to rural bus services over three years is gesture politics at its worst. It is an insult to people who live in those areas.

Mr. Dafydd Wigley (Caernarfon): Does the right hon. Gentleman agree that the burden will hit rural areas at a particularly inopportune time, in view of the severe decline in farm incomes? A reduction of 89 per cent. has been reported in a study in Wales in the past year. This is the worst time for such additional impositions to be placed on rural areas.

Mr. Heathcoat-Amory: I entirely agree. The right hon. Gentleman and I have rural constituencies. I represent the second main dairy county in Britain, and the hon. Gentleman's area has a marked concentration of agricultural and allied industries, both of which are suffering grievously from reduced prices and subsidies and the strength of the pound. The increase in fuel duty on top of those factors is a burden that people find hard to understand from a Government who talk much about their inclusiveness and their aim to help what they call rural communities.

Mr. Cranston: I should like to draw the Committee's attention to what the right hon. Member for Wells (Mr. Heathcoat-Amory) said in January 1995 when this issue was being addressed:

"I accept that some things are more expensive in rural areas. Some things are more expensive in urban areas. That is the interplay of a market and the inheritance of the past."--[Official Report, 23 January 1995; Vol. 253, c. 104.]

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Would the right hon. Gentleman like to comment on that?

Mr. Heathcoat-Amory: That was an entirely different debate. I conceded at that time--and I have always recognised--that those who live in rural areas rely more on cars. That is the issue that we are debating. It is undoubtedly true that some services are more expensive in rural areas, and nothing that the Government can do could alter that. What I said at that time is right, and I withdraw nothing whatever from it. It does not contradict my point that the increase in petrol and other fuels, which affect everyone, are especially burdensome for people in rural areas who are already damaged, as the right hon. Member for Caernarfon (Mr. Wigley) said, by the poor state of farming.

Mr. John Bercow (Buckingham): The hon. Member for Dudley, North (Mr. Cranston) mentioned the debate of 23 January 1995. Is my right hon. Friend aware that, on that day, the Financial Secretary, who was then in opposition, said of an increase in fuel duty:

"People living in rural areas will be badly affected."--[Official Report, 23 January 1995; Vol. 253, c. 99.] She also said that to portray such a measure as environmental was cynical. Was she wrong then, is she wrong now, or does not she know which?

Mr. Heathcoat-Amory: The difference is that, in 1995, the hon. Lady was not in a position to do anything on this matter. Now that she is in office, she is able to deliver. During the debate, we shall see whether her words were hollow or whether she intends to deliver on her intentions at that time. We are debating the effects on rural areas of the increased duty, but the increase will also affect industrial costs, which are also incurred in rural areas, and the United Kingdom's entire distribution chain. All raw materials have to be moved and all goods distributed; the fuel that propels most of that movement is diesel, the fuel of industry. The Budget signals a duty increase on diesel higher than that on petrol. Furthermore, the Red Book signals that future Budgets will widen the gap and that diesel duty will go on increasing at a higher rate than the duty on petrol in spite of the fact that diesel duty in the United Kingdom is already the highest in the European Union. The Freight Transport Association reports that it is 70 per cent. above the average of EU member states, so there is a competition point. Industry and exporters in particular are suffering because of the high pound, and the Government are burdening them with a tax increase that goes to the heart of the productive economy. It is not hard to see what will happen. Not only will competitiveness, investment and the capacity to create new jobs be hit; there will be every incentive to hauliers conducting international business to fill their tanks abroad. That is not a trivial problem. If all the lorries that go to the continent leave with empty tanks and return with full ones, there will be a significant drain on the Revenue. When working out the yield from the increase in diesel duty, the Financial Secretary must have estimated the effects of what will be lost through hauliers

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and others filling their tanks overseas. There will be a significant loss of revenue if big articulated lorries with empty tanks fill up in France rather than in this country.

Mr. Leslie: While we are talking about loss of revenue, perhaps the right hon. Gentleman will tell us the cost to the Exchequer of his amendment. I understand that it might be in the region of £400 million. Will he confirm that? How does he plan to raise that extra money?

Mr. Heathcoat-Amory: I shall come to the amendment in due course. To put the hon. Gentleman out of his misery, I assure him that we are merely returning the escalator to what we left behind in our Red Book. The Labour party has taken over all our expenditure commitments. Why cannot it take over our taxation estimates as well? If the hon. Gentleman supports that, he will support an amendment that would reduce the extra burden of taxation and return to the estimates that we left behind. There would be no loss of revenue, but a continuation of the revenue that we wrote into our last Budget. I am grateful to the hon. Gentleman for his intervention. The effect of the annual increase in fuel duties is estimated as equivalent to 1p on the basic rate of income tax every year. Those increases affect not just industry and distribution, but public services. Labour Members sometimes overlook the fact that ambulances and police cars run on the more expensive fuel. Without compensation, the increases in duty represent a real-terms cut in expenditure on those public services. The Government's excuse for the increase in diesel duty is to encourage the use of low-sulphur diesel. We all know that the compounds produced when sulphur combines with oxygen are part of the pollution problem, particularly in cities, but instead of creating an incentive by reducing the cost of low-sulphur diesel, the Government have increased the duty on that fuel by more than the increase on petrol. It has gone up by 9.4 per cent. That is the second increase in less than a year. The only incentive is that the duty on ordinary diesel has gone up by even more--by 11.7 per cent. That is also the second increase in eight months. They are using a stick rather than a carrot. The policy is particularly stupid given the Government's professed concern about global warming. My information from the industry is that taking a tonne of sulphur out of diesel releases 20 tonnes of carbon dioxide into the atmosphere because the procedure is very energy-intensive. There is then also the problem of disposing of the sulphur. Diesel is a more efficient fuel than petrol for carbon dioxide emissions. A vehicle can go further on a gallon of diesel than on a gallon of petrol, and the combustion of the fuel produces less carbon dioxide. If the Government are concerned about global warming, why are they encouraging an industrial process that releases more carbon dioxide? Why are they encouraging the use of petrol rather than diesel?

Mr. Geoffrey Clifton-Brown (Cotswold): Does my right hon. Friend agree that, in balancing petrol against diesel, the Government have also forgotten about the cancerous effects of the benzine and benzine-related compounds in petrol, which are absent from diesel?

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6.15 pm

Mr. Heathcoat-Amory: My hon. Friend is probably right, but we do not know what the Government have forgotten, because they will not tell us. We could have had the answers to my hon. Friend's question if the Government had fulfilled their promise to accompany their Budget with a green book setting out the environmental implications of Government policy. As the Treasury Committee has recently observed, no green book was forthcoming, despite a promise by the Financial Secretary that one would be published. Perhaps she will fulfil that promise when she answers the debate. Even if she cannot produce the book this afternoon, she can at least tell us when it will be published, in line with her earlier assurance. The Government are in a muddle. They are setting up contradictory incentives. Their environmental goals are not clear.

The amendment would return the duty increase to the 5 per cent. escalator that we set in motion, and would restrict its implementation to once a year. The arithmetic in the amendment may not be exact--it is for the Government to improve on it if they can--but our intention is clear. We have taken approximately two thirds of the 5 per cent. increase that we left behind in recognition of the fact that this is the second increase in eight months. We are reducing the escalator, because we should get back to annual increases rather than trying to squeeze them in every eight months. That would lift the burden of the £9 billion extra hit on the private motorist and the productive sector of the economy caused by the Government's new policy on the taxation of fuel. If the amendment is accepted, as it should be, we shall strike a blow for industry, public services and the private motorist.

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