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[Sir Alan Haselhurst in the Chair]

Clause 1

Rates of duty on hydrocarbon oil

3.45 pm

Mr. Alex Salmond (Banff and Buchan): I beg to move amendment No. 27, in page 1, line 18, leave out "£0.4582" and insert "£0.4392".

The Chairman of Ways and Means (Sir Alan Haselhurst): With this it will be convenient to discuss amendment No. 28, in page 1, line 20, leave out "£0.4582" and insert "£0.4392".

Mr. Salmond: I take great pleasure in moving amendment No. 27 and in speaking to amendment No. 28, both of them proposals tabled by my hon. Friends and me. This matter, too, may be relevant on Friday 8 June, unless the Government choose to accept the amendments and to change course on a very important issue that affects large areas of the country, but especially Scotland--the fifth largest oil producer in the world--which suffers from the highest petrol prices in Europe.

During yesterday's debates on the Finance Bill, I was struck by the Treasury team's complacency in the face of a world economic environment that is moving into much stormier waters than the benign conditions enjoyed over the past four years. Given that the Treasury team, and the Chancellor in particular, were so quick to claim the credit for the past four years, they will, no doubt, also want to accept the responsibility for the economic difficulties that we are approaching.

Earlier today, I saw the Chancellor making a speech, and he said that he was not complacent. He sounded pretty complacent to me, and I should have thought that the Treasury team would do well to understand that, although they may still have boom conditions in the south-east of England, they now have bust conditions in Bathgate.

We also discuss the Finance Bill against the background of the Minister for the Environment yesterday making the point about the impact on the rural economy. Although these amendments would have an impact on every petrol consumer in the country, they are also designed to benefit the rural economy, which is hit first and foremost by high fuel prices. Yesterday, the Minister for the Environment told the House that the current estimate of losses caused to the rural economy by the foot and mouth outbreak amounts to some £140 million every single week, against which the Government's package of £200 million, as he claimed it to be, looks devastatingly inadequate to stem the economic impact on those important areas of the country. I make that point because the rural economy is hurt first and foremost by high and rising oil and petrol prices.

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It is obvious that the Government's transport strategy--eventually unveiled only a few months ago by the Deputy Prime Minister--has still to make any serious impact on making alternative means of transport available to people in the rural economy. It is also obvious that, although oil and petrol prices are high across the country, in the rural economy, especially in the highlands of Scotland, we have the highest petrol prices of all. For a range of reasons, although the amendments would help every motorist and every petrol user, and hence every person who depends on goods purchased--fuel is a significant component of the costs--they are also designed to help the hard-pressed rural economy in particular.

Under amendments Nos. 27 and 28, the duty would be reduced on ultra-low sulphur petrol and diesel by 2p a litre--about 10p a gallon. That would be in addition to the small but welcome reductions announced by the Chancellor in the Budget.

It is time for the Treasury team to come clean about what they believed a couple of years ago petrol prices were likely to be in 2001. Two years ago, we in the Scottish Grand Committee debated a range of matters that affect petrol prices, and the late Donald Dewar made a clear statement about what the Government's expectation then was on the price of oil:

We can take it from such an authoritative source that that was the Government's expectation just two years ago.

At that time, the Chancellor of the Exchequer assumed that oil revenues would be £1.2 billion in the current financial year. In fact, the latest forecast is for oil revenues to be £5.9 billion, rising to £6.2 billion next year, and £5.4 billion and £5.7 billion in the two years after that. Even that forecast was based on the assumption that oil prices would be much lower than those prevailing at present. Two years ago, the Government expected oil prices to be roughly $10 to $12 a barrel, but the price is now $27 a barrel. The Chancellor has benefited massively in terms of the exploitation of Scottish resources and filling the Treasury's coffers, so it is entirely reasonable for these modest but important amendments to seek a further concession for consumers at the pumps.

Mr. John Bercow (Buckingham): I understand the hon. Gentleman's argument, but in the name of transparency, does he not agree that it would be helpful if the proportion of the purchase price of petrol that is represented by tax and excise duty were displayed at the pump or on the bills that customers receive?

Mr. Salmond: I very much agree with that. As the hon. Gentleman knows, three quarters of the price of every gallon of petrol or diesel is made up of the various levies imposed. They include the specific fuel taxes and VAT. One important factor is that, as the price of fuel increases, the VAT obtained from every gallon of petrol also increases. Although I agree with the hon. Gentleman that such information should be displayed on every petrol pump--that would be excellent for the transparency of fiscal policy--I suspect that the Treasury team would be not too keen on the idea.

The Scottish National party produced a helpful pledge card and we distributed 500,000 of them last September during the fuel tax protests in Scotland. I would willingly

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send such a pledge card to the hon. Member for Buckingham (Mr. Bercow). If he would like to distribute SNP publicity in England, I would be very pleased--as long as he promises not to advertise the fact too much.

The hon. Gentleman made a fair point about transparency, but I suspect that the Treasury team are desperate, despite the rising price of oil, to prevent people from realising that 75 per cent. of the price of every gallon or litre of petrol is made up of Treasury charges of one kind or another. That fact clearly places responsibility where it belongs: on the Chancellor and his Treasury team.

Two years ago, the Government expected a very different oil price environment and they have benefited massively from Scotland's resources pouring into the London Treasury. The Government expected the current price of petrol to be considerably lower, and that fact gives the lie to the suggestion that we sometimes hear--including from the previous Government--that the fuel price escalator and the approach taken to the price of petrol are entirely due to international obligations and the Kyoto summit. If the expectation that the price of a barrel of oil would be $10 had been realised, the price of petrol would obviously be much lower than it is. But it is not, and the Government have reacted incredibly slowly. It was only the pressure of the massive fuel price protests last September that led them to make any significant concessions at all and to fine-tune their fiscal position to take account of reality and the price that people paid at every petrol station in the country.

The Treasury team would do well to recognise that, when the fuel price protests were under way, the country of England was so anxious that, if we believe the opinion polls, even the Conservatives, for a very brief period, looked like a tenable option for voters. Such was the public anxiety--and people would have to be extremely anxious to turn to the Conservatives--that pressure was brought to bear on the Government when the average price at the pumps was 80.9p a litre. The average price today is 78.9p a litre, with price rises expected in the next few weeks. It is not beyond the bounds of possibility that the Government will have to fight the election campaign with the price of petrol approaching £4 a gallon and a public who are extremely sensitive to the issue. Although it might be against my electoral interests to argue that the Government should accept the amendments, they would be wise not to take for granted the public's tolerance of current petrol prices and the increases in the pipeline.

We know that last September the Prime Minister telephoned the oil companies to persuade them not to increase prices at the pumps, and there was a small delay. We saw again today the limitations of the Prime Minister's telephone calls when it comes to affecting major policy decisions. I dare say that the Prime Minister and the Deputy Prime Minister--the man who has suggested, against the backdrop of a major industrial closure in Scotland, that it is appropriate to slash public expenditure there--are probably on the telephone to the oil companies pleading for the increases to be delayed until after 7 June. The public will not be fooled, because they do not find it acceptable that we have the highest petrol prices in Europe. They have seen through the Government's claim that prices reflect an environmental imperative rather than a fiscal accumulation, which is what actually lies behind the petrol price strategy, just as

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surely as they saw through the previous Government who made the same claim when they kicked off the vast petrol price increases.

The public's tolerance is now such that they will not accept the same cavalier attitude as was displayed until last September. The Treasury will be wise to have a damascene conversion in the next few hours and to accept our amendments, so that the price of petrol is reduced as it should be, given the vast accumulation of revenues in the Exchequer and the fact that oil costs $27 a barrel. I suspect that if the amendment were put to the population at large to determine, there would be vast support for it.

We are debating the issue as we enter an election period. When it comes to the Division, all hon. Members will be wise to vote for a more reasonable attitude to the price of petrol at the pumps. That will help every motorist, every consumer who relies on purchasing goods for which the price of transport is important, and our rural areas that are especially hard pressed.

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