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Yvette Cooper: As I said, we have set out the information today in exactly the same way as we have done in previous years. I welcome the right hon. and learned Gentleman to the debate, as he was the author of the Conservatives’ fuel duty escalator, which was introduced
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in 1993. I can tell the House that, had that escalator continued, fuel duty would be nearly 30p higher today, while the petrol price, including value-added tax, would be nearly 35p per litre more expensive. Indeed, had we increased fuel duty each year simply in line with inflation rather than with the escalator, fuel duty would also be 10p per litre higher today. As a result of the decisions that we have taken on fuel duty, vehicle excise duty and other car taxes, the tax revenue from fuel duty and VED is in fact lower now than in 1997, in real terms.

Mr. Redwood: The Minister must know that she is hundreds of millions to the good so far this year, given the Budget estimates on total oil taxation. Will she tell the British public how many more pence per litre they are paying at the pump in total in tax on North sea oil routed through a British pump than was envisaged in the Budget forecast?

Yvette Cooper: As I have said, we announced today that we are not going ahead with the 2p increase in fuel duty that was proposed for this autumn. I want to come on to the detail of the Opposition motion, as the Opposition have set out some details of their proposals.

Stewart Hosie: I come back to the issue of cost, as it is rather important. Will the Minister not confirm that the cost of the change will be £500 million this year? That will be more than offset by the increase in North sea tax, given that the projections were based on a price of $84 a barrel, not $145 a barrel, which was the price yesterday. Will she at the very least confirm that the cost will be £500 million, but that that will be more than offset by increases in revenue from the North sea?

Yvette Cooper: The hon. Gentleman is right to say that the figures that we set out at Budget time for increased revenue resulting from fuel duty will not now be as expected. However, the overall impact on the public finances of the increases in the world oil price, and other changes that have occurred simultaneously in the world economy over the past few months, will be set out as part of the pre-Budget report. We have to recognise that what has driven the big increases in oil prices, and in the price at the petrol pump, is changes in the world economy, the rising demand for oil from China, India and developing countries, and the fact that supply has not increased to keep up.

Before I turn to the detail of the Conservatives’ motion, it is worth looking at what they did not include in their motion. There is no mention of the causes of the rise in world oil prices, no call for action on the world stage to increase oil production in the short term, no plan for working with international partners to get oil markets moving, and no proposals to cut dependency on oil in the medium term. Little wonder, because when it comes to those big questions, the Opposition have no answers at all.

The Conservatives turn their backs on Europe and their international partners, will not back nuclear power or the planning reforms needed to get alternative energy supplies moving, and will not face up to the big challenges facing the country. They will not do the things that are needed to reduce our dependency on oil, gas and fossil fuels in the medium and long term, or to reduce dependency across the world. The demand for oil from developing countries will not go away, so for the sake of the
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economy, and the planet, we need to reduce our dependency in the medium term. That means working with Europe and the G8, and doing all the things that the Conservative party, with its bunkered, anti-European mentality, refuses to do.

Sammy Wilson (East Antrim) (DUP): All the issues that the Minister mentioned may well be matters that should be considered in the House, but is today’s debate not supposed to be about fuel duty?

Yvette Cooper: It is indeed, and that is why I want to spend some time doing what the Opposition motion asks us to do, and consider the implementation of what the Opposition call

in a way that

Hon. Members across the House will have noted that that proposal was first put forward by the Scottish National party during proceedings on the Finance Bill, and that there was a deafening silence from the main Opposition party on the issue, despite the fact that it had considerable opportunities to raise the matter during proceedings on the Bill.

Justine Greening rose—

Yvette Cooper: I will happily give way if the hon. Lady will point me to the sections of the Committee proceedings in which she discussed and strongly supported the proposals for such changes to fuel duty.

Justine Greening: I shall be delighted to. If my memory serves me correctly, it was on 15 May, at the end of the seventh sitting. I spoke very empathetically about the proposal, but said that we could not support it. In fact I was so empathetic that the right hon. Lady’s colleague, the Exchequer Secretary to the Treasury, said that I was supporting it, so she obviously thought that I saw some merit in the idea then.

Yvette Cooper: It is funny that the Opposition just forgot to vote when they had a chance to, when the proposal was put before the House.

I have been given the report of proceedings in the Finance Bill Committee when this matter was discussed. When the Exchequer Secretary said that the hon. Lady seemed to be supporting that proposal, she responded:

The hon. Lady clearly did not, as of a few weeks ago, support this kind of stabiliser. I am happy to give way to her again if she wants to clarify the position.

Justine Greening: There is nothing particularly stunning about the fact that we saw a lot of merit in the fact that the Scottish nationalists were trying to tackle the underlying problem of a volatile oil price and its effect on fuel costs, but we felt that the particular way in which they were doing it would not quite work. There is nothing cynical about that, or complex; it is just that Ministers have such weak arguments that they now have to resort to picking out phrases and taking them entirely out of context.

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Yvette Cooper: I notice that later in the debate, when talking about the suggestion that the hon. Member for Dundee, East (Stewart Hosie) had made to deal with the price rises, the hon. Lady said:

I look forward later in today’s debate to hearing her explain quite why the technicalities of the hon. Gentleman’s proposals were not workable, but that her own proposals are.

I come now to the workability, or practicality, of the proposals of the hon. Member for Runnymede and Weybridge (Mr. Hammond). The Opposition say that if their proposals had operated since the Budget, fuel duty would be 5p lower today. Their proposal is effectively for a 1p change in duty for every $6 change in the price of a barrel of oil. That would certainly keep Her Majesty’s Revenue and Customs, and the industry, busy. Over a quarter of a year, we have seen not simply a $6 variation in the price of oil, but a $60 variation. On 6 June, oil prices rose by $10 in a single day. Yesterday they fell by $10 in the space of several hours, ending the day $6 down.

Under the hon. Gentleman’s proposals, therefore, fuel duty would have gone up by 1p yesterday alone. If fuel duty changed every time oil prices varied by more than $6 from the Budget forecast, rates would have changed more than 25 times just since the Budget 18 weeks ago: down on 18 March, up again on 19 March; down on 26 March, up again on 31 March; down on 2 April, down on 9 and 18 April. In one week in May, duty would have changed four times in a week: up, down, up, down. This is not a fuel duty stabiliser; this is a fuel duty yo-yo. Oil prices are now not only high, they are very volatile, and right now some of that volatility is absorbed by the private sector, as it does not reflect every change in the price at the pump, but that would not be the case under the hon. Gentleman’s plans. Under his proposals the Government and the taxpayer, rather than the industry, would take the risk and pay the price of smoothing the figures on the forecourts. Ever-changing rates would cause complexity for oil producers and tax collectors, and be confusing.

Rob Marris: May I also point out that the Conservative party’s proposal lacks intellectual bravery? If it was intellectually brave about this, rather than putting forward a mechanism that would see the pump price rise by only half the increase in the oil price, if it arranged its figures differently it could stabilise the price completely, but it is not prepared to do that, because it realises that it would be unworkable. One of the Conservatives’ five principles is for certainty, but even under their own mechanism there will not be certainty of pump prices.

Yvette Cooper: My hon. Friend is right. In the end, the point is that when setting fuel duty, it is right to look at what is happening in the markets—at oil prices and at the prices at the pump. That is why we have decided not to go ahead with the increase in fuel duty in the autumn. It is also right to look at the impact on public finances and at what is practical and workable. That is where the Conservative proposals repeatedly fall down.

I now turn to what the impact of such a proposal would be not only on the public finances but on other tax and spending plans. The hon. Member for Runnymede and Weybridge claimed that the Budget forecasts would
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remain unchanged by the proposal. That claim is simply irresponsible. The proposal claims that windfalls from certain taxes would pay for the Conservatives’ plans. Their figures take account of increased VAT from higher petrol prices and of higher North sea oil revenues, but they ignore the fact that fuel duty revenues are likely to fall, not increase, when petrol prices rise, as demand for fuel falls. They ignore the fact that people spending more on fuel will spend less elsewhere, reducing VAT revenues from elsewhere in the economy. They ignore factors such as production levels, capital and operating costs and the strength of sterling.

Stewart Hosie rose—

Mr. Philip Hammond rose—

Yvette Cooper: I have to choose between giving way to an hon. Member from the party that tabled the motion and giving way to one from the party that was really responsible for the original proposal. I give way first to the hon. Gentleman from the Scottish National party.

Stewart Hosie: The choice is difficult, I know. I want to bring the Minister back to what she just said about revenue falling as the price rises. Will she look at the Government’s own figures from the Department for Business, Enterprise and Regulatory Reform? They show that during the first three quarters of 2007, there was a net rise in the fuel price and a massive rise in the diesel price. Notwithstanding the change from petrol to diesel, and that kind of stuff, the figures show that despite a rise in price from 92p a litre to 97p a litre—a 5 per cent.-plus rise in nine months, more than twice the rate of inflation—net demand increased. I do not believe that the Minister’s assertion is right.

Yvette Cooper: When prices rise, particularly the price of things such as fuel, there will be a series of different impacts. Some people may drive less or consume less fuel. Others will spend less on other things, because in the end their spending will be limited.

Mr. Hammond: I am grateful to the right hon. Lady for giving way to me. The National Institute of Economic and Social Research report, on which our policy is based, assesses the net impact on Government revenues after taking into account all those factors. The people at the institute are not undergraduate economists; they understand the point that she is making and they have taken all those factors into account. Can the Minister say which independent research she is citing when she says that we are wrong, and that revenues will fall when oil prices rise?

Yvette Cooper: Let me tell the hon. Gentleman some of the factors that the National Institute of Economic and Social Research does not take into account in its analysis. It does not, for example, take into account factors such as production levels, capital and operating costs, or the strength of sterling, all of which impact on North sea oil revenues and all of which have meant that those revenues have increased by less than we might have expected in recent years, given the rising oil price. The institute ignores the fact that rising oil prices can, through utility bills as well as fuel bills, affect inflation.
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That, in turn, raises tax allowances, reducing revenues, and increases spending on benefits linked to inflation. It is also important to include the impact of higher oil prices on companies’ profits, and therefore on the tax that they pay.

Let me quote someone whom I could not remotely describe as a competitor for the institute. He said:

That was the hon. Gentleman’s boss and party leader at the beginning of this month, before the Conservative party put forward its proposals. The Institute for Fiscal Studies has said:

Perhaps most significant of all is the fact that the model used by the National Institute of Economic and Social Research depends on all other things being equal—whereas in fact, there is not only an increase in world oil prices, but an increase in world food prices and a global credit crunch, and they are all taking place at the same time. All those things will have an impact on the public finances. In the face of a world slowdown, to take any one tax in isolation and claim that there is a windfall available to spend is economically illiterate, irresponsible or just disingenuous. The Conservatives’ proposals would have already cost an extra £900 million since the Budget, and would mean an estimated extra cost of more than £2.5 billion, to be paid for by additional borrowing, public spending cuts or tax increases elsewhere. Yesterday morning, the shadow Chief Secretary’s leader said that he would back our spending plans, cut stamp duty and introduce his fuel duty measures. In the space of a three-minute interview, he promised an extra £3 billion that he could not fund.

Mr. Hammond rose—

Yvette Cooper: I will give way to the hon. Gentleman if he will tell us where that £3 billion would come from.

Mr. Hammond: I might engage with the Chief Secretary on that when she has told me where the Crewe and Nantwich £2.7 billion came from.

The right hon. Lady has changed tack in the past minute and a half, so I would like to be clear about her argument. Is she now conceding that an oil price increase taken in isolation, with a shock to the economic model, produces a net increase in Government revenues after taking into account all the effects across the economy?

Yvette Cooper: No; the hon. Gentleman is talking nonsense. We have always been clear that there will be increases in some taxes but reductions in revenue from others as a result of factors such as an oil price increase. For example, there will be increases in the amount that needs to be spent on benefits as a result of rising inflation, which is in itself linked to rising oil prices. In addition to those factors, there are other pressures on the economy that responsible Governments need to take seriously when they take decisions on the public finances.

Mr. Kenneth Clarke rose—

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Yvette Cooper: I will give way once more, but I have done so many times and I want to make final progress towards the end of my speech.

Mr. Clarke: Well, I will make one final effort. Does the Chief Secretary really think that a Minister addressing the House of Commons should go into such copious detail about the likely impact on revenues and the economy of an Opposition proposal but refuse to give any information at all about a decision announced by the Chancellor of the Exchequer this morning? Corrections to the last Budget have already cost more than £3 billion in estimated revenues, and the forecasts of revenues from corporation tax and elsewhere given at the last Budget are plainly over-optimistic when one sees where the economy is going. It is no good her saying that every time the Government have changed their mind in the past they have not given those details, and we have had to wait until November. Will she address the question of where we are with the Government finances, and whether the Chancellor is planning to raise other taxes, reduce public spending or simply allow public borrowing to let rip?

Yvette Cooper: The right hon. and learned Gentleman is long enough in the tooth and has been long enough in the Treasury to know that, as always, we set out the forecast for the public finances at the time of the Budget and at the time of the pre-Budget report. Unusually, we said when we announced the additional increase in tax allowances that we would increase borrowing this year to pay for it. It is right to do that, given the pressures that the economy is under. We therefore set that out, in contrast to the Conservatives, who repeatedly set out policies that would result in huge additional costs yet never tell us where those funds would come from. This is not merely about the £3 billion of additional costs that the right hon. Member for Witney (Mr. Cameron) mentioned in the “Today” programme interview. Little wonder that he also said that he could not rule out tax increases, as he knows that he would need them to pay for his fuel duty plans. The results of the Conservatives’ Finance Bill votes alone would cost an extra £3 billion, but they never said how they would fund them. Their promises on Budget day would cost an extra £5.4 billion, but they never said how they would fund them. Their promises throughout the autumn would cost an extra £10 billion, but they never said how they would fund them. At the last election, they promised more than £35 billion in spending increases and tax cuts, but never said how they would fund that.

The Conservative motion is simply a con. Far from helping hard-pressed families, all that the Conservatives would do is push up their taxes elsewhere. Far from facing up to the serious problems of rising world food prices, they simply hide behind gimmicks, which would risk destabilising the public finances and the economy. Once again, we get showmanship, not substance. That is not what families or the economy need. That is why we should reject the motion.

5.10 pm

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