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I hope that my high praise does not cast a pall over the Financial Secretary's political prospects. He carries out his role well, but it must be depressing for
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him always to be asked to display his formidable intellectual powers defending various tax-raising mechanisms. That is what he has done over most of his illustrious political career, but the new clause gives him an opportunity to put his subtlety, inventiveness and powers of persuasion to another use.
Our proposal offers a mechanism for which I know the Financial Secretary has been searching. The proposed modulator or smoothing-out mechanism would enable him to use a tiny proportion of the Treasury's windfall gains to help hard-pressed business and constituents in this country's rural areas.
Adam Price (Carmarthen, East and Dinefwr) (PC): It is always a pleasure, and sometimes a challenge, to follow my hon. Friend the Member for Banff and Buchan (Mr. Salmond). The hon. Member for Rayleigh (Mr. Francois) referred to political co-operation across the islands and across differences of opinion on the constitutional future. Certainly, my constituentsfarmers, hauliers and otherswould be interested in the unholy alliance that is developing between the Front Benchers of the three main UK parties. The minority parties are proud to stand up for the interests of their constituents on this matter because of the crisis facing the haulage sector, which is of vital strategic importance in my area of Wales and in the constituencies of my hon. Friends.
The haulage industry had another disappointment yesterday with the announcement that we would not have the distance-based road tax scheme that it has been promised and that would have helped to overcome some of the competitive disadvantages that the sector faces in competition with foreign hauliers. We need action on behalf of the haulage industry, because it is going to the wall in west Wales and parts of Scotland, Northern Ireland and, indeed, England.
As we have heard, west Wales and the highlands and islands of Scotland have some of the highest petrol and diesel prices in Europe. In many areas, £1 a litre will soon be the norm, and we do not have the derogations from duty that are practised in some EU states. That is why we need some protection, and all that we are asking for in the new clause is a cap to provide some protection from the volatility of the international markets. Or will we allow the international oil markets to decide the fate of hauliers and other key sectors in our constituencies? That is not acceptable.
I read the Financial Secretary's comments yesterday that the delay in the increase in fuel duty was caused by short-term volatility, but that is exactly what he said two years ago. When does short-term volatility become a constant feature of oil prices? That volatility has many causesthe increase in demand from China and problems of supply. There is an interesting debate about peak oil, and some are pessimistic and others optimistic about the oil reserves. The new oil reserves peaked in 1960, so discovery of oil reserves has declined. Volatility will be a long-term feature of the oil market and prices.
Oil now costs some $60 a barrel, which is three times the $20 a barrel average of the past two decades. Some people talk of the possibility of a cold winter in the northern hemisphere pushing it up to $70 or $80 a barrel. Will we provide no protection for consumers and businesses in our markets? We need a smoothing
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mechanism, as the hon. Member for Eastleigh (Chris Huhne) suggested, so that instead of disruption and chaos we have a managed target price, set by the Chancellor. We should not allow a windfall tax to put onerous pressure on businesses and customers.
The issue will not go away. Non-OPEC oil production will peak at some time in the next 10 years and then most of the world's oil reserves will be controlled by a small number of countries whose Governments are unstable and corruptI obviously do not mean Scotland. As we shift from a hydrocarbon economy to a new energy economy, we need to create a mechanism to manage that transition. We need a managed approach to our current reliance on oil, and the new clause presents a possible way forward.
The Government need to act now. Instead of having a series of announcements about delays, let us have a regulated approach that will provide fairness, transparency and justice for consumers and businesses across the UK.
Mr. Alan Reid (Argyll and Bute) (LD): High oil prices are clearly causing a serious problem in rural areas, especially in the islands where the price of petrol at the pumps is horrendous. Unfortunately, however, I do not think that the new clause will tackle the problem. When the hon. Member for Dundee, East (Stewart Hosie) proposed it, he admitted that it was less than perfect. I think that was SNP speak for "It won't actually work"[Interruption.] The hon. Member for Banff and Buchan (Mr. Salmond) asks what is our alternative? It would be to move away from taxes on fuel to a system of road pricing, with higher charges for urban motorways and very small charges for rural roads, especially in the islands, but I suspect, Madam Deputy Speaker, that if I started to explain our future transport policy, you would quickly rule me out of order and ask me to concentrate on the new clause.
Mr. Salmond: I must have missed that amendment during our proceedings on the Finance Bill. If that is the Liberal Democrat proposal, it should have appeared as an amendment to a suitable clause in the Bill. We could then have had great fun asking a variety of questions about its technical aspects. If the hon. Gentleman believes that there are fewer technical aspects in what he has just described than in our new clause, I look forward to that debate with great interest.
Chris Huhne: May I intervene on a point which, unfortunately, I had to learn the hard way? The hon. Member for Banff and Buchan (Mr. Salmond) may not yet have spent enough time in the Standing Committee on the Finance Bill, or in any other part of the debate on the Bill, to learn that, for reasons that have been lost in the mists of time, it is the procedure of the House that if one produces an amendment that raises revenue as opposed to reducing it, it is not selectable for debate, as I found out. So, I advertise the fact that we proposed a nice pert little amendment designed to close a loophole that Treasury Ministers opened up in the Finance Act 2004
The new clause has three subsections. As has already been pointed out, the Chancellor of the Exchequer already carries out the provisions under (1B). In relation to (1D), this year, the Chancellor sensibly decided not to implement further plans to increase fuel duty. That simply leaves (1C), which is
Stewart Hosie: The argument was that there should be an automatic trigger and that any freeze should not be on the whim of the Chancellor. Is the hon. Gentleman happy that decisions to freeze duty levels are at the whim of a politician, rather than triggered automatically to meet specific circumstances?
Mr. Reid: The problem is that the hon. Gentleman has tried to word the new clause so that it covers all circumstances, but he has failed. The new clause is unworkable. It would be much more sensible to have flexibility, so that the Chancellor can act, I hope sensibly[Interruption.] If it were a Liberal Democrat Chancellor, he would act sensibly. Scottish National party Members are trying to use wording that will cover every possible eventuality, which is difficult, and they have failed.
Under proposed new subsection (1C), if oil prices were to rise, we would have to wait for six months, during which people would pay the higher rate of duty. Under the new clause, a small cut would be made in fuel duty; but, of course, that cut could not be refunded retrospectively to the motorists who had paid the higher rate of fuel duty. We know that oil prices fluctuate. Oil prices could rise rapidly, thus triggering the six-month wait to cut fuel duty, but oil prices could then fall and motorists would pay the lower rate of fuel duty until the next Budget, thereby causing a loss of revenue to the Exchequer.
The new clause is simply impractical, as the hon. Member for Dundee, East admitted in moving the motion. We clearly have a serious problem. In the short term, the answer is for the Chancellor to act sensibly and not to increase fuel duty. In the long term, the answer is to move to a system of road pricing, with higher prices for urban roads and motorways and lower prices for rural roads.
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