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Mr. Chaytor: When this or any previous Government have changed the rate of stamp duty, for example, which happens from time to time, has any Member suggested that the new rates should apply only to new houses? Of course not.
Mark Fisher: I very seldom disagree with my hon. Friend and I have a great deal of time for him, but he is completely wrong. We are talking about changing behaviour through the increase in VED, which is very different from stamp duty on houses. The increase is retrospective and principled, but it is not pragmatic because it will not change behaviour.
The hon. Member for Putney has won the argument—we ought to listen to that—but she has lost the solution. It is the worst possible precedent for this House to start passing taxation legislation by statutory instrument. Nothing could undermine parliamentary democracy more than that.
Mr. Jeremy Browne: I would be grateful if the hon. Gentleman could say whether he supports my amendment No. 7, on the basis that it seeks to achieve the effect that he desires, but without the statutory instrument being required.
Mark Fisher: I have to confess that I have not read the hon. Gentleman’s amendment, so I am at a loss.
Mr. Browne: I should have spoken for longer.
Mark Fisher: Yes, I was interested that the hon. Gentleman did not speak to his amendment very much—indeed, I do not think that he mentioned it, and I would have been grateful to have had it brought to my attention earlier. I will go away and read his amendment afterwards, but I cannot respond now.
The hon. Lady’s solution would set the worst possible precedent. We should not start making changes to taxation by statutory instrument. We do far too much by statutory instruments as it is. Such provisions are not amendable and they do not come before the House. That is a growing and pernicious development in our democracy. A mechanism that was intended purely for implementing agreed legislation is now being used, in effect, as primary legislation. It would be a disastrous step to take a big decision such as this—albeit a right one—by statutory instrument.
The hon. Lady has won the argument, but lost the solution. The House must choose tonight between a correct but unsatisfactory solution, and trusting—or hoping—that the pre-Budget report will show that the Government have listened to what is almost a unanimous view on this point.
4.45 pm
Mr. Andrew Smith (Oxford, East) (Lab): My hon. Friend makes a powerful point about how bad it would be to use a statutory instrument for this purpose. Is not the political reality that the extent of concern among Labour Members about the unfairness of this imposition on low-income families with older cars is such that the Government are going to have to look at the impact of motoring taxation in the round? As my hon. Friend suggests, the right way to do that is for them to come back to us in the pre-Budget report, and all Labour Members will expect our right hon. and hon. Friends on the Front Bench to do that.
Mark Fisher: My right hon. Friend is right. He used the word “expect”, but I think that there is an element of hope involved as well. However, this action must be required of the Exchequer Secretary. She might not be able to give us a categorical undertaking tonight, but I believe that she has heard hon. Members very clearly indeed. If the Government do not reconsider this matter in the pre-Budget report in the way that my right hon. Friend has suggested, the House and the people of this country will be very angry indeed. Whatever semantic arguments we might have about the meaning of “retrospective”, the truth is that the people of this country see this as an unfair retrospective tax—
Mark Fisher: I will not give way. We have had a very good debate, and I am sure that other people want to get in.
The people of this country, on whose behalf we are speaking, see this tax as retrospective and unfair, and the Government have to come back later this year and put this right.
Stewart Hosie: I wish to speak to new clauses 8 and 9. First, I should like to provide some background to new clause 8. As everyone knows, the spiralling increases in fuel prices are inflationary and they are strangling economies in remote rural areas. They are driving the haulage industry to the brink and putting the most enormous strain on family budgets.
I would like to put this into context. When I tabled a similar amendment in 2005, I said that, according to the AA, the price of unleaded petrol had risen to 86p and that it had gone up by 6p a litre over the previous six months. By the time we debated this issue on 15 May this year, fuel was priced at between £1.10 and £1.30 a litre. Now, six weeks later, it costs an average of £1.32 a litre. In 2005, I said that Brent crude had reached $60 a barrel, up from an average of $50 in the previous year. In the run-up to the last pre-Budget report, we saw an average of $83.60 a barrel, with an increase of $68 forecast. In the run-up to the Budget, we saw an average of $94 a barrel, and in four of the five working days before the Budget, we saw record prices. When I drafted this speech last week, the price was $132 a barrel, and we have crashed through $140 a barrel since.
Mr. Tobias Ellwood (Bournemouth, East) (Con): I visited Scotland recently and visited some farmers who operate combine harvesters. They used to pay 36p for diesel, but it has now gone up to 70p. It costs them about £700 to fill up their vehicles. Does the hon. Gentleman agree that we cannot wait for the pre-Budget report, and that we must act now? That is why some of these new clauses must be agreed to. We should not ignore this opportunity to seize the moment.
Stewart Hosie: I agree entirely. I think there is an immediacy about this issue. When I met the hauliers who were lobbying their MPs here today, they pointed out that some of them and others involved in the protest outside would not be in business by the time of the next pre-Budget report, so the hon. Gentleman is absolutely right about the immediacy.
Stewart Hosie: I will give way once more, but then I want to make some progress.
Mr. Brown: I agree that a fair degree of urgency is required; the hauliers made that abundantly clear today. However, if the hon. Gentleman’s new clause is the answer to the problem today in 2008 and if it was an answer to the problem in 2005, why was it not an answer to the problem in 2006 and 2007?
Stewart Hosie: We deal with the realities as we find them and we table amending provisions when we can. I think that this proposal was the answer in 2005, 2006, 2007 and 2008 and that it will be the answer in future. I will come on to explain why later, but fundamentally we need a mechanism in place to deal with spikes—now and in the future. I believe that such a mechanism is the answer, but if the hon. Gentleman is asking me why I did not table amendments in the years he mentioned, that is an entirely different question. The answer to that has more to do with time than my interest in the subject or my ability to table the provisions.
Let me return to my opening comments. We have seen a quite catastrophic and phenomenal rise in barrel prices and prices at the pumps. Where that leaves us, according to the AA last week, is with an average diesel price that has broken through £6 a gallon. I am grateful to the European Union for its weekly oil bulletin of 26 June last week, which also sets the scene. It tells us that at 53.2 per cent., the UK has the highest total tax take on a litre of diesel anywhere in Europe.
Stewart Hosie: I will give way to my hon. Friend, but then I am really going to make some progress.
Mr. MacNeil: My hon. Friend may recall that when we last visited this issue on 28 April, I pointed out that diesel fuel in my constituency was retailing at £1.34 a litre. It is now, eight weeks later, between £1.43 and £1.46 a litre, representing a tremendous amount of money coming from the pockets of the Western Isles to the Treasury at Westminster—and that from an area already paying the highest fuel tax in the UK.
Stewart Hosie: That is absolutely right. Part of the intention behind the new clauses is precisely to help fragile economies where, for a variety of reasons, the price is highest, but it is not just the economies in fragile and remote rural areas that are struggling, and neither is it only certain industry sectors like the hauliers. Rather, we are looking at primary food producers in agriculture and fish, the tourist trade in parts of the country and, because of the inflationary effects, the household incomes of every family in the country—not just as they fill up their cars with petrol or diesel, but as they buy anything, at any time, in any shop.
Now that I have got to the second paragraph of my speech, I am going to make some real progress. At an average of 132p a litre, diesel is now about 35p more expensive than it was only a year ago. Almost half the rise—according the AA, about 14p—has occurred between mid-April and mid-June. It is precisely the sort of spike that the fuel duty regulator is designed to smooth out. At an average of 132p a litre, only Norway’s average
cost of 137p a litre is higher, but given that in many areas, particularly in the north of Scotland, that price was breached a long time ago, it is safe to say that in parts of the country we almost certainly have the most expensive gallon of diesel anywhere in the world. As I said, however, it is not just remote areas that are suffering; it is industry sectors of all kinds, and I am particularly grateful to the haulage industry for its support in my attempt to have the Government see sense. I am also grateful to the National Farmers Union, the Scottish Fishermen’s Federation, the Scottish Taxi Federation and many others for their support.
The Sunday Herald reported in April that out of the average £37,000 it costs to tank up a 44-tonne truck, the Government take £25,000 in tax. The same article confirmed that a typical 20-vehicle haulage business would have to make an extra £30,000 a year to cover the increase in fuel costs—and that was in addition to the extra £30,000 that businesses had had to find to cover the increased costs last year. That was in April, however, and since then there has been a price rise of 14p per litre. That example was given when the industry expected the oil price to reach $115 a barrel by midsummer. It was $132 a barrel last week, and has exceeded $140 a barrel since.
Here is the rub: there is no indication that the rises we have seen will stop. Arjun Murti, the Goldman Sachs oil analyst, predicts a super-spike taking the price to $200 a barrel. That may help to deal with the point raised by the hon. Member for Dumfries and Galloway (Mr. Brown). My attention was drawn today to an additional fuel-driven cost faced by hauliers in particular: the fuel levy on ferries on which they transport their trucks, which is having an impact on the west coast of the United Kingdom, in Wales, England and Scotland. It is affecting truckers travelling to Ireland, and no doubt elsewhere on the channel coast.
It must be right to introduce now the mechanisms that we will need to smooth out future spikes, rather than driving hauliers to the wall and families into financial meltdown, and seeing rural economies strangled by the lack of action in the Bill. Let us make no mistake: a failure to act will result in the most appalling financial troubles across the country. When the haulage firm Ramage went into administration, its adminstrators cited the high cost of fuel as a contributory factor. Families are seeing their extra monthly costs rise. It is costing nearly £30 a month more to run a single diesel car, and petrol is costing more than £46 a month more for a two-car family.
As I have said before, it is clear that remote and rural areas are struggling. In a recent debate in the Scottish Parliament, the Liberal Democrat MSP Tavish Scott spoke of the plight of one of his constituents in Brae in Shetland. Perhaps this is how the hon. Member for Taunton (Mr. Browne) should have approached his speech. Tavish Scott’s constituent told him that
“despite the fact that I car share I made a decision that I could no longer justify working in Lerwick”.
People are now questioning whether it is worth going to work. Jamie McGrigor, a Conservative MSP, said:
“Many rural industries depend on a good haulage service. Forestry, agriculture, fish farming and the food and construction industries—which deliver basic requirements—all depend on haulage, yet hauliers in Campbeltown are laying off drivers and selling their lorries.”— [ Scottish Parliament Official Report, 28 May 2008; c. 9068-79.]
All those points are backed up by the various trade representatives. Phil Flanders of the Road Haulage Association has said:
“UK hauliers are struggling as never before to cope with continually rising fuel prices... a number have ceased trading and many more are in the process of cutting back the number of vehicles they operate.”
Jim McLaren of the National Farmers Union of Scotland wrote to me saying:
“The cost of fuel, a significant constituent of which is tax in the form of VAT and duty, is jeopardising the future sustainability of Scotland’s primary production and transport sectors, at the same time as exacerbating food price inflation, which is affecting every household in the country.”
The Scottish Fishermen’s Federation, contrary to some reports, is backing the fuel duty regulator. It has said:
“We add our support... Transport is of course a vital component of the fishing industry and cost increases there have applied even greater pressure, felt most acutely by the more remote fishing areas of the North West and the Northern Isles.”
Given world food price inflation and concern over future supply, this is the wrong time to put further damaging pressure on the primary food producers in fishing and agriculture.
The Federation of Small Businesses has said:
“As the largest business organisation in the country and representing over 215,000 businesses, the FSB is firmly behind the introduction of any mechanism which automatically uses extra tax revenues generated by high oil prices to reduce prices at the pumps.”
Even the Scottish Taxi Federation has written to me, not only to express its concern about the impact of rising fuel costs on the taxi trade but to
“reiterate the federation’s full support for this amendment to the Finance Bill to introduce a Fuel Duty Regulator.”
Its secretary, Bill Macintosh, made the point that taxi drivers’ average monthly bills have increased by about £160 over a very short period. He said that
“with fuel prices rising on a daily basis... we need help immediately.”
The Government must react positively to that demand for an immediate response, and that is what new clause 8 is designed to deliver.
5 pm
Mr. Carmichael: The briefing I received from the Road Haulage Association this afternoon makes it clear that it sees the fuel duty regulator as a short-term fix at best, and that what it is looking for in the medium to long term is an essential users’ rebate. That would be easy to introduce. There is the precedent of bus operators getting duty rebates. Does the hon. Gentleman agree that that would be simple, targeted and very cheap, and that if all the parties in this House were to work together we should be able to devise some mechanism for driving this forward?
Stewart Hosie:
I know that the long-term objective of the haulage industry is for there to be a Europe-wide professional users’ rate, and there is a lot of merit in that. There may be an opportunity to put in place an essential user rebate, and my new clause 9 hints at that with the suggestion that it might be done by using the hauliers’ “O” operating licence. Therefore, I have a great deal of support for that in the long term, but the hauliers are also telling me—and also, I am sure, other
hon. Members of all parties—that they need help now. Most importantly of all, we need to agree the principle that a Government who take 60 per cent. of the price at the pump, and who are taking a massive windfall from the North sea, must put something back when those who use the fuel need help and need it now.
In new clause 8, proposed new subsection (1AA) would oblige the Chancellor at every Budget and pre-Budget report to provide both a forecast for oil prices and his anticipated yield from fuel duty and VAT from fuel. If we are going to use these forecasts, it is important that they are laid down in statute. Proposed new subsection (1AB) would oblige him through statutory instrument to reduce the level of duty in direct proportion to the value of the increase accounted for by VAT. I dislike in principle statutory instruments and regulation, too, but my overwhelming priority is that something must be done quickly, and this is the best mechanism by which to achieve that. Proposed new subsection (1AC) would ensure that when the price of a barrel of oil increases above the forecast, the next indexed fuel duty increase is automatically disapplied. That is important, because when the price goes up we can no longer have normal indexed duty increases withheld as a political whim; this must be an automatic consequence of a rise in fuel prices.
I have read all the debates we have had over the past few years to determine how the Government might oppose the measure. They may well argue that VAT yield is static—that as more VAT is taken from fuel, there is a reduction elsewhere. That argument suggests that no one eats into their savings or increases their debt, and it flies in the face of the evidence from the retail sector published by the Office for National Statistics on 20 June that sales increased in May by 3.5 per cent. The Government may also argue that yield from fuel sales is down because the price has risen, but the evidence from the Petrol Retailers Association is that there was only a very modest drop in sales earlier this year when the price rose dramatically, almost exclusively “from morning domestic sales”, not from commercial trade or afternoon or evening business.
It is, I suspect, more accurate to claim that there is a long-term trend of increasing demand for total retail motor fuels. I shall refer briefly to a Department for Business, Enterprise and Regulatory Reform table on oil and oil products of December 2007. It shows that diesel sales increased in every quarter that is listed for 2007—the first three quarters—from 5.14 million tonnes to 5.32 million tonnes to 5.5 million tonnes. There is also a 7.8 per cent. increase between quarter three of 2007 and quarter three of 2006. Even taking into consideration the reduction in petrol sales as people move to diesel, there is still a net increase in diesel demand. At the start of those three quarters, diesel was 92p a litre, and it ended at 97p a litre—a 5 per cent.-plus increase, or twice the annual rate of inflation, in only nine months. Those who argue that there is elasticity in fuel demand should look at the figures from the Department for Business, Enterprise and Regulatory Reform. I argue that it is fundamentally inelastic. However, notwithstanding that an elastic situation can become inelastic over time, it is clear that there is an offshore windfall. Indeed, the Chancellor confirmed in his recent letter to my right hon. Friend the Member for Banff and Buchan (Mr. Salmond) that rising fuel costs
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