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Fuel Taxation

7. Mr. Tony Baldry (Banbury): What was the yield to the Treasury of tax on petroleum in 1997-98; and what is the anticipated yield for this financial year. [135955]

The Chief Secretary to the Treasury (Mr. Andrew Smith): Fuel duty receipts are forecast in the pre-Budget report 2000 to be £23.2 billion this financial year. That compares with £19.5 billion in 1997-98.

Mr. Baldry: Will the Chief Secretary confirm that, notwithstanding what was said yesterday, Britain will still have the highest fuel duties and the highest petrol prices in Europe? Given that we will have different rates of duty on diesel, low-sulphur diesel, leaded petrol, unleaded petrol and low-sulphur petrol, would it not be in the interests of consumer transparency to have the different rates of tax take per litre clearly displayed at the petrol pump so that everyone knew the exact amount of tax they were paying the Government for the fuel that they use?

Mr. Smith: The hon. Gentleman was a member of the Government who were responsible for a bigger increase--in absolute and percentage terms--in fuel duties, to which I have already referred. The truth of the matter is that, through the introduction of the fuel duty escalator, the previous Government were responsible for propelling prices towards the very level about which the hon. Gentleman now complains. We took away the fuel duty escalator and, moreover, in the measures that we

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announced yesterday to freeze duties from next year's Budget and to consult on the cut in duty on ultra-low sulphur petrol of 2p a litre--and a further cut of 3p on ultra-low sulphur diesel--we are bringing forward measures that address the hon. Gentleman's concerns.

Mr. Denis MacShane (Rotherham): Is my right hon. Friend aware how expensive it is to motor on the continent? The Conservative lot are so anti-European that they should take their cars and pay the motorway tolls in France and Spain. If they are in business, they should pay the social security costs. The plain fact is that running a business and driving a car are cheaper in this country than in most European countries. Will my hon. Friend look at the idea of varying taxes as and when that is needed? We need to get away from the one size fits all fuel duty and road licence charges, which were continually going up under the Tories. The measures that were introduced yesterday are a start, but we must continue to be flexible on fuel duty and road licence charges to help rural motorists, family motorists and hauliers.

Mr. Smith: My hon. Friend is quite right. Moreover, the general level of taxation is considerably higher for our European neighbours than it is here. One must also assess and take account of the overall burden of taxation and its effect on families and businesses. My hon. Friend is right about the level of tolls that are paid by many of our European neighbours and about the benefits that will result from the year-by-year assessment that the Chancellor announced in place of the automatic fuel duty escalator for which the Conservatives were responsible.

Sir Michael Spicer (West Worcestershire): Why have productivity rates collapsed in this country from about 2.5 per cent. at the beginning of the 1990s to 1.5 per cent. since the Government took over? Does that have something to do with rising taxes, especially fuel taxes?

Mr. Smith: That question is perhaps a little remote from the question of fuel duty, but I shall answer it anyway. As the Chancellor pointed out in his statement yesterday, crucial to a platform for improving productivity are economic stability--which we are delivering--lower interest rates than those under the Conservatives, which we are also delivering, and a high level of investment in manufacturing and industry, which is equivalent to more than 14 per cent. of GDP business investment and which continues to grow. Coupled with the measures that we introduced on skills and on promoting regeneration in some of our most deprived areas, as well as further measures including the £1 billion package spelled out in the pre-Budget report yesterday, that will help us to build on the gains that we have already made and continue to promote competitiveness and generate productivity as we all want to do.

Mr. Barry Gardiner (Brent, North): Will my right hon. Friend look at fuel taxation not only in 1997, but right the way back to 1987? Is he aware that in the 13-year period since 1987, the increase in the cost of running a car in this country has been only 5.6 per cent., which is less than 0.5 per cent. a year in real terms? Will my right hon. Friend assure me that, in all the measures that he and his colleagues in the Treasury are introducing, they will do nothing to jeopardise the Government's environmental

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commitments on running cars, even though the cost of running a car has been relatively cheap in that 13-year period?

Mr. Smith: I thank my hon Friend. He is right, as the total cost of motoring has barely increased in the period that he described. The reason for that is technical advance in design and manufacture in the motor industry. The measures on which we are consulting in the pre-Budget report, notably in relation to ultra-low sulphur petrol, will help to stimulate further developments, given the benefits of that petrol's engine efficiency and the new generation of engines that will subsequently come on to the market. We have acted consistently, having regard to the needs of motorists and listening to public opinion. We have also acted consistently on our environmental principles, which are advanced by each of the measures that we announced yesterday.

Mr. Oliver Letwin (West Dorset): As the Chief Secretary was not keen to answer the question put by my hon. Friend the Member for Banbury (Mr. Baldry), would he give the House a categorical answer to a simple question about petroleum revenue tax? When Ministers, including the Prime Minister and the Chancellor, met representatives of the oil industry, did they or any other Minister give any explicit or implicit assurance to the oil companies that PRT would not be raised?

Mr. Smith: My right hon. Friend the Chancellor met the oil companies on Tuesday, and the matter was never discussed.

Mr. Andrew Mackinlay (Thurrock): Put that in your pipe and smoke it.

Mr. Speaker: Order.

Mr. John Hume (Foyle): May I raise with the Chief Secretary a question that I asked yesterday on a matter of serious concern in my part of the world? The petrol industry in Northern Ireland has suffered most from the fuel crisis. A litre of petrol costs 85p on our side of the border, whereas it costs 60p a litre on the other side, so the petrol industry in Northern Ireland is being totally wiped out. Would the right hon. Gentleman seriously study the problem to see what he can do to help?

Mr. Smith: As ever, I listened attentively to the hon. Gentleman. The Government perpetually keep the situation closely under review, specifically to address the abuses to which he refers and the links with paramilitary activity. Resources for tackling smuggling have been substantially increased, and we are confident that that will have an effect on the situation. We shall, of course, maintain close liaison through the Northern Ireland Office with the devolved Administration to ensure that further steps are taken whenever possible.

Business Taxation

8. Mr. Nick St. Aubyn (Guildford): What representations he has received from the business community on business taxation in advance of his pre-Budget report. [135956]

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The Financial Secretary to the Treasury (Mr. Stephen Timms): We have received a number of representations on a variety of business tax topics, including representations from the Confederation of British Industry, the British Chambers of Commerce and the Institute of Directors.

Mr. St. Aubyn: The Chief Secretary has just told us that on Tuesday the Government gave no assurances to the oil industry on petroleum revenue tax. In the past three to four months, has the Financial Secretary or any other member of the Treasury team given any assurances to the oil industry about the level of petroleum revenue tax? If so, could he share with the House what those assurances were?

Mr. Timms: No such assurances were given.

Mr. Lawrie Quinn (Scarborough and Whitby): Would my hon. Friend give particular consideration to businesses in rural areas such as Scarborough and Whitby, which have had many difficulties in recent years? Looking forward to the forthcoming rural White Paper, would he explain to the House what help may be available to areas that are in need of special assistance at this time?

Mr. Timms: My hon. Friend will be aware of the favourable business reaction to the announcements that my right hon. Friend the Chancellor made yesterday about a more than £2 billion reduction in transport taxes and the package to make VAT easier to administer for small businesses. Both those measures will be welcome to businesses, particularly to small firms in my hon. Friend's constituency. He is right that the rural White Paper will also make important announcements. We are concerned to ensure that businesses in rural areas have the benefits of a competitive economy, building on the stability that we have achieved in the past three years.

Mr. Edward Davey (Kingston and Surbiton): Is the Minister concerned that yesterday's Treasury estimates show that business investment is slowing dramatically, from a 7.5 per cent. growth rate last year to 1.75 per cent. this year and 1.5 per cent. next year? How does the Minister explain this lamentable business investment performance? Is it to do with the increase in business taxation or the Government's failed exchange rate policy?

Mr. Timms: We have a good record on investment in the economy. In the past, instability was a major cause of problems with investment, but the new stability that has been secured in the past three years is leading to a substantial improvement. Business investment reached record levels, at 14.5 per cent. of gross domestic product, last year. Investment as a proportion of GDP is now higher in the United Kingdom than in the United States. The UK receives 40 per cent. of all US and Japanese investment in the European Union. The picture on investment is actually very good.

Mr. Nigel Beard (Bexleyheath and Crayford): Does my hon. Friend agree that present planned investment in transport infrastructure can make a major contribution to increasing productivity in the economy? That was suggested this week by the Director-General of the CBI,

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who dismissed the transport infrastructure spending plans of the right hon. Member for Kensington and Chelsea (Mr. Portillo).

Mr. Timms: My hon. Friend is absolutely right. Sustained public investment not only in transport but in education and science is vital if we are to build on the success achieved over the last three years. We now have a stable platform, but we need investment in infrastructure--and, as my hon. Friend says, our spending plans will deliver that.

Mr. James Clappison (Hertsmere): Should we not set what the Minister says, and what is in the pre-Budget report, against the fact that the Government have imposed an additional £10 billion worth of tax and regulation on business? Should we not also set what the Minister and the pre-Budget report say about tax changes against what the director general of the Institute of Directors--one of the bodies cited by the Minister--has said about what happened yesterday? He said:

Now that the Chancellor has been forced to eat humble pie as a result of his treatment of motorists and pensioners, is it not time the Government began to address some of the problems that they have created for business? Those problems are reflected in the fact that our growth rates are slipping behind, in productivity difficulties, and in the fall in our share of world exports.

Mr. Timms: It is hard to know where to begin in responding to all those erroneous points. As far as I recall, the hon. Gentleman supported the 22 tax increases introduced by the previous Government. He asked about simplification of taxes. My right hon. Friend the Chancellor made an important announcement yesterday about easing the burden on small businesses with regard to the administration of VAT, which has been widely welcomed. The Federation of Small Businesses said yesterday that the measures would

I would have expected the hon. Gentleman to welcome that.

We have cut the main rate of corporation tax from 33 per cent. to 30 per cent., and the corporation tax bill for small businesses benefiting from the lower rate has fallen by about 25 per cent. I would have expected the hon. Gentleman to welcome that as well.

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