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5.30 pm
There comes a time when a tax becomes useless and dangerous. The fuel escalator tax has become useless because the technology, design and thrust of the car industry mean that less fuel is being used. It has become dangerous because of the effect that it is having on the road haulage industry--for all the reasons given by the hon. Member for Workington--and because of its effect on the cost of living and on the competitiveness of this country.
It is time for Labour Members to put constituency before party. They will have received the same representations as us, and many of them represent rural or semi-rural constituencies. My advice to them is, for once, disregard the Whips--do not take any notice of them and join us in the Lobby this evening.
Mr. Eddie McGrady (South Down):
I want put on record the particular and terrible problems that the increase in the duties on hydrocarbons are causing in Northern Ireland. The Committee may be inclined to switch off when a Northern Ireland Member gets up to say how uniquely difficult a problem is in Northern Ireland, but this problem has a visible, physical uniqueness there and causes disadvantage.
Northern Ireland has the United Kingdom's only land border with another sovereign state--a state with fiscal and customs and excise regimes different from those in the United Kingdom. I draw attention to the fact that there is probably not a single haulage business in Northern Ireland that is more than 50 miles from the border with the Republic of Ireland. In that context, we can best consider the increase in duties over the past number of years by referring to the period between 1990 and 1999. In the Republic of Ireland, there was an increase of 6 per cent. in the duty on unleaded petrol. In Northern Ireland, which is part of the United Kingdom, there was an increase of 242.2 per cent. That is an enormous differential.
The same applies to diesel fuels. In the Republic of Ireland over those 10 years, the duty increased by 14.8 per cent. In Northern Ireland, it increased by 264 per cent. over the same period. Those increases are cumulative and not attributable to any particular Government, but there is a crunch point at which it becomes impossible to trade in such conditions.
I refer the Committee to the enormous increase in smuggling. It is reckoned that a large percentage of wholesale and retail trade in fuels is illegal. Customs and Excise has told us in public statements that it cannot cope, is addressing only a fraction of the problem and catches only a few of the people involved. Let me put the meaning
of that smuggling into context. A person who can smuggle 25,000 litres, which is a relatively small amount, can make £4,600 profit on the load. If he is further engaged in illegal activity and does not even pay value added tax, profit can increase to almost £6,500 per load. Smuggling has a huge attraction for the worst elements in our society, who can make a fast and enormous profit.
Smuggling is one problem that we face, but the legitimate trade also faces the problem of the enormous differential between the customs and excise duties imposed over a 10-year period. We have come to the crunch and businesses are being put out of action completely. Large distributors are trying to hold the line, for a limited time, by reducing prices to their main customers in Northern Ireland. Local oil and fuel distributors cannot do that, so they cannot pass on any comfort or cushion to the petrol retailers, which means that, as we sit here, petrol retailers and small oil distributors are going out of business right along the border--from Donegal to South Down. Northern Ireland is semi-circumscribed by the land border, so everyone is within reasonable reach of cross-border trade and substantially reduced prices, either for bulk purchases or for fuel for individual cars.
In addition, most of Northern Ireland's communities--especially in the border counties--are rural and, except for a line running north to south, we have no railway system whatever. We are totally dependent on the roads system. Small retailers scattered throughout the countryside not only supply petrol, but cater for a substantial number of the household needs of rural communities.
Over and above that, the transport and haulage business is also in danger of being decimated or transferred. People have to transfer their whole operation only 10, 20 or 30 miles, and they are doing so. Businesses are setting up networks--this issue has been referred to in other contributions--not in Europe, but in the Republic of Ireland, 10 miles away across the land border. Those communities are losing all the jobs associated with road haulage and transport companies, with oil and fuel distributors and with local service stations, and they already suffer fairly high levels of unemployment; the continual increase in duties is having a terminal effect on those sectors.
The hon. Member for Workington (Mr. Campbell- Savours) referred to local councils looking elsewhere to buy fuel. Take it from me, the imposition of best value means that Northern Ireland district councils will buy their fuel from across the border--full stop, end of story. Buying across the border is best value, by a long chalk. If it would pay to register vehicles across the border, that could be done quite readily--by the stroke of a pen--without effecting any great administrative change. On top of all that, we have the additional difficulty of the road tax situation. Road tax in Northern Ireland is 11 times greater than that in some of our European counterparts.
It is easy for me to recite our problems--I am conscious that they have been caused over many years by the accumulated burden of customs and excise duties--but I have a suggestion that I hope the Economic Secretary will take on board, if she would care to listen. Our situation is not unique. There are other land borders throughout Europe and I draw her attention to the particular problem
of the customs and excise differential between the Netherlands and Germany. A special protocol is in place under which border retailers and distributors receive a special rebate. As one recedes from the international boundary, the rebate decreases. It means that there is a tempering of the differential between the borders of the Netherlands and Germany. That arrangement was put in place by the Dutch and German Governments with the approval of the European Union's competition agency.
Mr. Seamus Mallon (Newry and Armagh):
May I point to another anomaly? At present, given where we stand politically, we have agreed six cross-border bodies known as "new implementation bodies", and another six areas for enhanced co-operation between north and south. One of the areas is energy, and the objective is to harmonise the relationship between the north of Ireland and the Republic in terms of energy. Is it not contradictory that the Government are to spend £33 million in the first five years to set up those bodies to harmonise areas within the economic life of the island, yet they blink at the type of change that could allow harmonisation to take place to the advantage of people in the north of Ireland?
Mr. McGrady:
I thank my hon. Friend for his intervention, which well illustrates the totality of the problem between the north and the south of Ireland. The people of Ireland, north and south, have agreed to try to rationalise those differentials, particularly in respect of energy production and distribution, as well as fuel costs and transport problems, which is the subject that we are dealing with today.
In replying to the debate, will the Minister undertake to pursue the idea of a protocol, such as that between the Dutch and German Governments, and to see whether it could be applied to the much more difficult and detrimental differential that exists along the border between the Republic of Ireland and Northern Ireland? I ask this as a matter of grave urgency because we cannot wait for another Budget to turn things around. We simply will not survive it. As the smuggling becomes more and more profitable, it will increase and become a substitute for other activities, which we have now peacefully got rid of.
Firms are being transferred and small businesses, retail outlets, and local oil and petrol distributors are falling down commercially. It would be an exaggeration to say that that is happening daily, but it is certainly happening weekly. Ultimately, the suppliers of fuel in Northern Ireland will be those who import it illegally because the legitimate trader and transporter simply cannot survive if he competes in an honest way.
If honest men and women in the transport, distribution and retail industries want to survive commercially and to earn an income for their families, they are being forced into the hands of the illegal dealers. It is the only way in which they can survive and make a profit. In many instances, they are being forced into the hands not just of smugglers--there is a certain romanticism about smugglers in Ireland--but of paramilitaries. That is an entirely different prospect.
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