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The Economic Secretary to the Treasury (Miss Melanie Johnson): The amendment is an irresponsible attempt to reduce fuel duty below the levels proposed by the Government. Clause 1 already cuts the duty rates on the main road fuels used in the UK. The duty on ultra-low sulphur petrol will be cut by 2p a litre and that on ultra-low sulphur diesel by 3p, to equalise the
duty on the two products. Those reductions form part of a package of measures that will protect and enhance the environment, and are also equivalent to an overall cut of 4p a litre for motorists and 7p a litre for hauliers.The Government have a prudent and responsible strategy that balances the interests of motorists with legitimate concerns about the environment--about which we have heard remarkably little in this afternoon's debate--while ensuring that we continue to raise valuable revenue from fuel duties for spending on vital public services including health, education and transport, which is another issue that the Opposition seem keen to disregard.
4.45 pm
Mr. Salmond: I spoke at some length about the increase of £5 billion in Government revenues that has resulted from the fact that the price of oil is much higher than the Government expected two years ago. Will the Minister say what, in 1999, the Treasury expected the price of petrol to be now? If we are to believe the Treasury forecast, the expectation must have been that the price would be below current levels. If that level was considered sustainable for the environment in 1999, why is it not so in 2001?
Miss Johnson: The hon. Gentleman made that point earlier, and I shall respond to it in detail later. However, there has been no reference in the debate so far to the Red Book. It was noted earlier that there have been considerable fluctuations in the spot price of Brent crude oil. The graph at box 6.3 in chapter 6 shows that that price rose from a low of $10 a barrel in January 1999 to a high of between $33 and $34. I am sure that I do not have to remind the hon. Gentleman that that threefold increase makes a considerable difference to the price of petrol at the pump.
Mr. Salmond: The Minister makes my point for me. I have demonstrated already that in 1999 the Government expected oil to cost between $10 and $12 a barrel for the foreseeable future. What was the Government's expectation in 1999 of what the price of petrol at the pumps would be in 2001? It must have been lower than the current price, so why is that forecast level not sustainable in environmental terms now? It is a reasonably simple question, and I hope that the Minister will address it now.
Miss Johnson: As I said, I shall come to that point in the course of my response. I want to be as logical as possible, to prevent the debate from jumping around from point to point.
The hon. Gentleman did not mention the fact that the amendment would cost the Exchequer more than £800 million a year. That is a substantial amount of revenue, and he must explain how he would recoup the money and so be able to match the Government's spending plans. He must also explain how he would meet the environmental targets. The Scottish National party is keen to be seen as a tax-and-spend party. It needs to offer more of an explanation of how its economic policies hang together, and of how it would be able to deliver--fiscally and in terms of public finances--policies based on the tax-and-spend premise.
Mr. Salmond: I give the Minister the credit of assuming that she has read my party's taxation document,
which explains that we propose to increase the rate of taxation for people earning more than £100,000 a year by 5p. Whether the Government think that that is right or wrong, the Minister's statement that we have not explained how we would raise the revenue to finance the proposal in the amendment is totally invalid. In passing, may I point out that our proposal would still leave the highest marginal rate of tax considerably below what the Chancellor considered to be the appropriate rate just a few years ago?
Miss Johnson: I am well aware of what the Scottish National party's manifesto contains, but when he moved the amendment, the hon. Gentleman did not explain to the House how his party's proposals on spending and taxation would be squared. It is good to hear him confirm the party's commitment.
However, the hon. Gentleman's policy contains an inconsistency. His party's taxation document talks about fulfilling Britain's international commitments, especially in reducing levels of carbon dioxide and sulphur dioxide, and related environmental obligations. It is unclear how the amendment would contribute to achieving such objectives.
The package of measures in the Bill represents a balance between economic, environmental and social concerns. As I have argued, a single cut in fuel duty--which is one of the amendment's proposals--could have adverse effects on the environment. Instead, the Government have announced a package of measures that will protect and enhance the environment. The package is equivalent to a cut of 4p per litre for motorists, and 7p per litre for hauliers. Those who wish to cut fuel duty must explain how they would do that. The Government's first priority is a stable economy.
Let me turn to the points made about the global economic climate by the right hon. and learned Member for Rushcliffe (Mr. Clarke) and to the remarks made by other right hon. and hon. Members. The Chancellor said today that all countries should take the necessary action to sustain growth. He made the point powerfully, supported by all that we have done, that our policy is much better placed than before in the face of global instability. As he said, we are on course to deliver stability and sustain growth. One reason for that is our tough and decisive action in introducing tough fiscal rules, reducing the national debt and making the Bank of England independent, which has succeeded in delivering the lowest rate of inflation for 30 years.
The right hon. and learned Member for Rushcliffe spoke proudly of the previous Government's legacy. We come back from time to time to the idea of the Tories' golden inheritance. I can never manage to square that with the fact that under the previous Government there was £28 billion net borrowing, and that between 1979 and 1997 more was spent on debt and unemployment than on the national health service. What sort of golden legacy was that? In contrast, in 2001-2 alone we will be spending £30 billion more on the national health service than on unemployment and debt. We also inherited an unemployment figure that had reached 3 million, and a 15 per cent. interest rate.
The right hon. and learned Gentleman says how lucky we have been--supposedly--but neglects to mention the Asian crisis and what we have done in international
environments to stabilise the global economy and to work for continuing stability through the institution of such organisations as the financial stability forum.
Mr. Kenneth Clarke: The hon. Lady has become slightly confused in giving the usual Labour account of the Government's awful inheritance. She will recall that the Government came into power after three years of growth, low inflation and consistently falling unemployment. The public finances were on course for balance. At the last election we debated the black hole in Labour's finances, but when the Government came to power it did not appear. Does the hon. Lady agree that that is because they failed to mention that they would increase the tax burden so heavily, as they did over the next three years, and freeze public spending so severely for their first two or three years in office? They are only just beginning to emerge from the consequences of that, so under this Government the increased spending on health and education, for example, is still below the levels achieved under the Major Government.
Miss Johnson: The right hon. and learned Gentleman is again rewriting history. We inherited a 44 per cent. debt-to-GDP ratio, and have reduced it to 31 or 32 per cent.
Mr. Howard Flight (Arundel and South Downs): That is too low.
Miss Johnson: The hon. Gentleman says that that is too low. He wants to borrow more and enter the cycle of boom and bust that characterised all previous Conservative Governments.
Miss Johnson: I shall give way to the hon. Gentleman.
The Chairman: Order. This macro-economic debate is going wide of the amendment, and I do not want it to spread.
Mr. Flight: Does the Minister believe that the long-term gilt yields underlying annuity costs, and the poor deal that pensioners buying annuities get, is a desirable part of Government policy, or would she like pensioners buying annuities to get better value?
Miss Johnson: Our position on annuities has been made clear many times to the hon. Gentleman, and was set out in the Red Book and the Budget statement. I shall not be drawn further on that, Sir Alan, as I realise that I am testing your patience.
The Chairman: In the time-honoured phrase, may I refer all hon. Members to the comments that I made a few moments ago?
Miss Johnson: We shall abide by them most faithfully, Sir Alan.
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