Select Committee on Northern Ireland Affairs Third Report



62. This is a very difficult issue. There is no doubt that the differential in fuel prices across the land border in the island of Ireland has serious consequences for fuel suppliers and road hauliers. It is also a wider problem in that, besides distorting trading patterns, it appears to have become a means of funding for paramilitaries and racketeers. It is therefore damaging the social fabric of Northern Ireland.

63. It would appear that the Government's position can be summed up as sympathy for those affected, but that wider policy considerations, such as the UK's Kyoto commitments and the Single Market and consequent limitations imposed by EU law, prevail, although the Government does not condone smuggling and is keen to limit it. There is a certain irony in this situation, in that the present position actually assists the United Kingdom with its Kyoto targets, as cross-border purchases and smuggled fuel count against the Republic of Ireland quota.[133]

64. There is a clear paradox, seen in the context of the geographical reality of the island of Ireland, between the Kyoto obligations of the Republic of Ireland, which is permitted a 13% increase in overall emissions of the basket of six 'greenhouse gases' to 2008-12, and those of Northern Ireland, which is part of a country required to decrease such emissions by 12.5% over that period.[134] Government policy should recognise this: there are no marked industrial and environmental differences between the two jurisdictions in the island, and some of the consequences of different fiscal treatment are at the root of this Report.

65. While we note that the Economic Secretary considers[135] that Customs and Excise now has the resources necessary to tackle the problem of road fuel smuggling in Northern Ireland, we recommend that its staffing in this area be kept closely under review by Ministers, and that the Government should not hesitate to increase further the staff resources devoted to tackling the problem if to do so would be cost-effective.

66. We also detected an element of complacency on the part of the Government about the significance of the problem. Lord Dubs commented:[136]

    ".... We believe the overall policy is important, both for Britain and for Northern Ireland, and there is sometimes a price to be paid for it. That price is that, because we have a land border, we have certain difficulties. I am concerned, on behalf of the business interests who are suffering, but we have had in the past situations where the movement has been the other way and people have found that things are much cheaper in the Republic and they have gone there. At times it has been cheaper in Northern Ireland. This changes from time to time."

The Economic Secretary said:[137]

    "... £100 million in the context of £21 billion overall from fuel duties as a whole is really a very, very small part of the overall picture."


    ".... in relation to duty, particularly duty on petrol and diesel, then until the European Union does set minimum rates [cross-border fuel procurement] is a problem that we will have to live with and it is a problem we will clearly take into account in terms of setting the overall United Kingdom policy and it is an issue that in terms of its immediate impact within Northern Ireland will obviously need to be dealt with within the context of Northern Ireland structures."

We would only reiterate that the impact on the Province is severe and that the loss of £100 million in revenue is material.

67. We recommend that the Government investigates further the experience of other EU Member States in dealing with the problems of price and duty differentials across national borders in relation to road fuels. The Treasury could provide us with no information on this, which slightly surprised us as there are other material differences in fuel duties and prices across Member States' borders and corresponding difficulties: the existence of the Dutch scheme alone is evidence of that. It may be that, at European level, a consensus might emerge on measures to mitigate the impact of the road fuel duty and price differentials between Member States which are both effective and consistent with the principles of the Single Market.

68. The Economic Secretary commented[139] that a draft Energy Products Directive[140] that would restructure the European Community framework for the taxation of energy products was under consideration. She pointed out that a part of the Directive, which the Government would support and which would increase the minimum rates of duty on road fuels, would, if agreed, assist in reducing the duty differentials between Northern Ireland and the Republic of Ireland. The Economic Secretary cautioned, though, that acceptance of the Directive seemed to be "quite some way off".[141] We recommend that the Government seek to encourage both the Presidency and the Commission to make early progress on agreeing this aspect at least of the Energy Products Directive.

133  Appendix 13, p.95. Back

134  Appendix 13, p. 94. Back

135  Q251, 262. Back

136  Q242. Back

137  Q280. Back

138  Q270. Back

139  Q269. Back

140  European Community Directive No. 6793/97, currently awaiting debate in European Standing Committee B. Back

141  Q269. Back

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