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Helen Goodman: The oil price is particularly volatile, so how, at the time it goes up, would we make a judgment as to whether it is a spike or a structural change? That is a significant flaw in the proposals.
Stewart Hosie: The volatility is precisely the point. To avoid Governments having to scurry about freezing duty levels, the process should be automatic depending on the circumstances. I am happy to concede that there will have to be a facility to take cognisance of whether the price rise is a prolonged spike or a structural change. I accept that our new clause is not perfect, but I hope that the Government will take on board its principle. I also hope that the hon. Lady takes that answer in the spirit in which it is intended.
Helen Goodman: Is the hon. Gentleman suggesting a mechanism rather like the commodity agreements in international markets in the 1980s whereby when prices go up the duty is cut and when they go down there is a symmetrical arrangement the other way round?
Stewart Hosie: We are suggesting that when prices rise, that pays for a reduction in fuel duty, but when world oil prices rise there is a freeze on any duty rises that are planned, to help to ameliorate some of the worst consequences of such rises. It is not our intention to deny the Government any money by changing when the price goes down.
So far this year, Brent crude has touched $60 a barrel and is averaging well over $50 a barrel. In three months, the Exchequer has made almost £1 billion more than expected, and we judge that there is plenty of room in the coffers for this limited measure to give assistance to hard-pressed hauliers and motorists. It has support from the haulage industry and from several parties in the House. It is a sensible response to a genuine problem for road users, especially those who have no option but to travel to make their living or whose livelihood is in transport and haulage.
Mr. Walker: Is not the hon. Gentleman particularly concerned about the impact that fuel increases have on rural communities and people who have to use their cars to travel long distances just to go about their everyday lives?
The hon. Gentleman must have seen my summing-up. It is no surprise that Members who
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back the new clause represent, by and large, rural and semi-rural constituencies. However, not only rural areas in Scotland, Wales, Northern Ireland and large parts of England are at stake. Every single product we buy in any shop or store is, to some extent, carried by hauliers by road. The implications for the industry and for the prices that we all pay for everything are affected by high fuel prices at the pump and high oil duties.
The new clause is a sensible response to a genuine problem. The first element would reinvest VAT revenues to lower fuel duties, should the price at the pump stay high for a prolonged period. The second would freeze oil duties on the basis of market conditions, not the Chancellor's whim.
Some may argue that higher fuel costs will take motorists off the road, but as I suggested earlier, the new clause would not minimise or negate any planned or managed duty rises for the purpose of environmental benefits, because it simply provides for removing or ameliorating the worst effects of spiking, prolonged spiking and high world oil prices.
I ask all hon. Members who are considering voting against the new clausethe empty Labour Benches suggest that Labour Members are in their officesto remember the businesses and consumers in much of Scotland, Wales, Northern Ireland and large parts of England that need a haulier to get their goods to market. I ask everyone to think of hauliers whose margins are already tight, to consider transport businesses that are offshoring and going out of business, and to think of the families and consumers who do not have the option of a regular bus, train or tube service to get to work or perform the most basic task, even getting to school.
The new clause is a sensible amendment to moderate high oil prices and to mitigate prolonged rises in the price at the pump. We need a road fuel regulator to benefit the people who put us all here a few short weeks ago. I ask the Government to consider seriously at least the principle of the new clause. I hope that it can gain as much support throughout the House as it deserves.
Mr. Mark Francois (Rayleigh) (Con): I wish to respond to new clause 7 on behalf of the official Opposition. The hon. Member for Dundee, East (Stewart Hosie) introduced it succinctly. In essence, the new clause tries to establish a device for reacting to increases in the price of oil and for reducing duty automatically when certain conditions, which the amendment specifies, occur. It is an important subject for the Treasury and for taxpayers, including hauliers and motorists generally.
Duty on hydrocarbon oils raised slightly less than £23 billion in the financial year 200304, representing roughly 5 per cent. of total Government tax revenues in that year. According to the Library, the UK has the second highest pump price for unleaded petrol in the European Union after the Netherlands, and the highest pump price for diesel, which is clearly especially important for hauliers. The UK also has the highest taxation on petrol in the EU, with approximately 70 per cent. of the pump price of unleaded petrol being accounted for by a combination of taxes and duties.In addition, there have been further increases in world oil prices in recent months. Oil was trading last week at more than $59 a barrel. When I checked this morning,
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Brent light contracts for August had opened at just over $58 a barrel. Given that VAT is part of the final price for petrol and diesel, that has brought in additional revenue to the Treasury.
In the light of that position, the Government issued a written ministerial statement only yesterday afternoon, in which they confirmed that, following sustained pressure from G8 Finance Ministers, the Organisation of Petroleum Exporting Countries is committed to increasing production quotas by up to 1 million barrels a day by September 2005. Nevertheless, the Government are abandoning their planned inflation increase in the price of main fuel duties, including petrol, which was scheduled to come into effect on 1 September this year. That was probably a fair decision. Given the current oil price, it would not have been right to proceed with a further increase at this time.
The House has to decide whether, given yesterday's decisions, it would be appropriate to accept new clause 7 as well. To decide, we must examine the elements of the new clause. We have no major objection in principle to the suggestion in proposed subsection (1B) that the Chancellor should include an annual projection of estimated trends in oil prices as part of his Budget statement. Oil is a major fuel for the world's economy and fluctuations in its price have implications beyond simply the price of road fuels, extending to air travel and important sectors of manufacturing industry.
As was rightly pointed out by Labour Members earlier, the Red Book already contains a number of assumptions about future oil prices, so the Treasury has told us something of its expectations. I presume that those who tabled the new clause wanted to formalise that projection: perhaps they thought that the Chancellor could make it one of the headline projections in his statement, along with those on growth and borrowing. As I said, however, the Treasury already puts some of the information in the public domain.
Subsection (1C) proposes a mechanism whereby if the price of nominated fuels rises by more than 3p a litre over six months, the Government will scale down the increase in duty by an amount equivalent to the extra VAT that is payable on the increase. The new clause does not really make it clear how the calculation would be made or how the arrangement would operate. Would the six-month average be a rolling average, for example? The wording seems to imply that, but we would like clarification.
Subsection (1C) also does not make it clear how long the discount would last. Would the period between the 3p trigger and the coming into effect of the attendant regulations be very brief, or could the regulations be retrospective over the entire six months if necessary?The new clause says that the Chancellor must produce regulations, but it is not specific about the timing. Moreover, a brief spike in the oil price lasting for, say, a fortnight could theoretically affect the average sufficiently to trigger the mechanism. A fair amount of work and administration could be required for what constitutes a relatively small price reduction.
There is also the practical question of how people would be reimbursed, if they were reimbursed at all, for duty that they had already paid at the pump earlier in
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the six-month period, before the trigger kicked in. Or would the refund go to the oil companies, but not to the motorists or hauliers?
Mrs. Nadine Dorries (Mid-Bedfordshire) (Con): In my rural constituency, I represent many market gardeners, farmers and road hauliers who must battle adverse weather conditions as well as adverse pump prices. The new clause seems to involve a great deal of uncertainty, whereas what those people need is more certainty.
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