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I particularly want to direct my remarks to business. Basingstoke has more than 60,000 jobs, of which almost
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4,000 are in the transport and communications sector, and almost 8,000 are in manufacturing, so the cost of fuel matters to businesses in Basingstoke, which is one of the top 10 areas of employment in the south-east of England. It makes a lot of money for the Government and they need to listen harder to businesses such as those in my constituency. Visiting and talking to people who are running businesses day in and day out in this economic climate might bring home the reality of some of the Government’s policies.

On Friday, I was in a plastics manufacturer in my constituency, Holloid Plastics, which has been operating for more than 50 years. It is having to consider not just an annual price rise, but six-monthly price rises to try to keep on top of the fuel increases that it is having to endure. A delegation of local road hauliers recently came to the House and I was pleased to meet Mrs. Sandra Hunt and Miss Sarah Hunt. They are from L. Hunt and Sons Ltd, which has been in my constituency for more than 100 years, and they run a road haulage business out of Upton Grey that is enduring immense pressure as a result of the increases in fuel costs and that, again, has seen two price rises to its customers since April. Such price rises will be handed on not just to customers of road haulage companies but to their customers in turn, fuelling more of the inflation that we have seen in recent weeks and months.

It is the Government’s failure to grasp the scale of the problem that concerns businesses most, and perhaps in her closing remarks the Exchequer Secretary could show that she has been listening to the concerns of businesses and families today by showing that she will consider some of the practical measures that have been put forward by my hon. Friends. The country really needs certainty and fairness when it comes to the future in this area. We have the highest diesel costs in the EU, and that is a result of the level of taxation, and that has been so for more than a decade now. Particularly concerning is the fact that the gap between the UK and other EU countries has increased markedly since the late 1990s. The UK duty rate has been increasing much faster than elsewhere and that is of particular concern.

I welcome proposals of my hon. Friend the Member for Runnymede and Weybridge on the fair fuel stabiliser, for which local businesses in my area have been calling directly. The Conservative party is taking on those issues and providing practical solutions in introducing the proposals for consultation. When fuel prices rise, we do not want to see the instability that the current situation is creating. The stabiliser could provide just the sort of solution that could help businesses to have a more stable and certain future. We cannot continue to lurch from one tax crisis to another, whether it is the 10p tax rate today or delaying a 2p tax rise for six months. As my hon. Friend said, this is simply no way to run our economy. I urge the Chancellor and his right hon. and hon. Friends to look more carefully at the fair fuel stabiliser as a way of providing the real long-term help that businesses in Basingstoke and throughout the country really need.

6.18 pm

Mr. John Redwood (Wokingham) (Con): The issue before the House today is of consummate importance to businesses throughout the country and to our electors, so it is stunning to me that the Chief Secretary to the
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Treasury comes before the House and is unable to answer the simple question of by how much the pump price has gone up since the Budget as a result of the tax increases that the Government have imposed, or have allowed to be imposed by market movements, because some of the tax is ad valorem and some is fixed. We have a Chief Secretary who either does not know or will not tell us that very simple point of great interest to our constituents.

Worse still, as my right hon. and hon. Friends pointed out when she was still with us, the Chief Secretary was unable to tell us what the loss of revenue would be from today’s very wise decision to forgo the extra 2p that had been due in the autumn. The Government had been threatening us with that rise for so many weeks and months, despite all the evidence that they were collecting far more tax than they were planning for in the Budget forecast, and all the evidence of the damage that petrol prices were doing to our constituents around the country.

It is surely not beyond the wit of the Prime Minister to find a Chief Secretary who knows how to do a few sums, and understands that she is paid a good salary to come to the House and tell us about the cost consequences of the Government’s proposals. We would like to know how much extra revenue the Government are already getting from the windfall on North sea oil taxes as a result of the rise in the oil price, and from the windfall at the pumps that we have been describing.

An external estimate says that the Government got more than £500 million extra in the first six weeks of the financial year—an absolutely massive sum. One assumes that the figure has been higher in each succeeding six-week period, because the oil price has risen that much further. We have at last gleaned from the Treasury—it has confirmed—that it did its forecasts at $84 a barrel. The price today is $139 a barrel, so we can all see that there must have been a huge increase in the tax that they have claimed. We should then ask who is having to pay all the additional tax that the Government are allowing to be imposed, or have deliberately imposed through their own positive decisions.

We are back to the new Labour/old Labour story. The party seems to believe that only the rich should be allowed to drive, because the tax will bear disproportionately on those with older cars and lower incomes. We see much evidence around the country that families on low incomes in rural areas, or with work or school-run patterns that cannot be met by public transport, are under enormous pressure. Such families are in genuine fear of going to the filling station and filling up. They think about which other journeys they can cut out, or how they can adjust their lives in some way to try to deal with the weekly hit of an enormous fuel bill.

It is those on the lowest incomes who will have to sacrifice journeys or sacrifice the car. People on high incomes such as ministerial incomes and better—the lawyers and consultants whom the Government hire—will not find the situation that difficult. It may be slightly tricky for them, because they may have to cancel the extra glass of champagne, but it is not the end of the world. However, there are so many people for whom this means digging deep into their limited family budget, and being really afraid of what their Government are doing to them.


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We have learned in this debate—this was not challenged by the Chief Secretary, at least—that at least 60 per cent. of the price at the pump goes to the Government. It may be more. It certainly is if North sea taxation is added; if we factored in the idea that the petrol we get at the pump is pumped via the North sea through a British refinery, the tax would be even higher. However, we can definitely conclude—and the Exchequer Secretary will have to agree—that most of the money collected by the oil companies at the pump goes to the Chancellor. We can agree that the amounts are massively higher than was forecast in the Budget, and than they were last year. We must conclude that when it comes to higher petrol prices, the Government are undoubtedly the main villain of the piece.

Families with difficult choices struggling on modest incomes are not the only casualties; another casualty is the British haulage industry. How many times have the official Opposition had to make the case in this House for British hauliers? How many times have the hauliers had to block the streets and undertake democratic protest because their Government are deaf and do not understand the point? Driving the British haulage industry out of business is not a green policy but a policy of the madhouse, because it will substitute foreign hauliers for British hauliers. Foreign hauliers do not pay the same taxes to own and run their lorries. They will bunker abroad. They will fuel up in Calais or the nearest port of departure from the continent and try to drive back to the continent with an almost empty tank so that they can refuel in a jurisdiction where the fuel is cheaper.

David Taylor (North-West Leicestershire) (Lab/Co-op): The right hon. Gentleman talks about the comparative costs of haulage in other European countries. Although he is right about fuel, he must factor in two other elements of the cost equation: first, that corporation taxes on the haulage companies are lower than in European countries; and secondly, that wage rates and suchlike are lower. Therefore, the overall cost of operation for companies in France, Holland and elsewhere is probably not substantially different from what it is here.

Mr. Redwood: I think that the hon. Gentleman will find that as regards most of those cost areas there is an advantage to being on the continent, not in Britain.

Mr. Edward Timpson (Crewe and Nantwich) (Con): Does my right hon. Friend agree that the situation is much more unsustainable for hauliers in this country? For example, the operations director of a transport company based in my constituency, who operates nearly 100 large goods vehicles, tells me that if the price of diesel remains at its current level, that will cost his company approximately £1 million per annum on top of what he is already paying, which works out at nearly £4,000 per working day. That is clearly unsustainable.

Mr. Redwood: That is a good example of my general point. Anyone who knows the haulage industry knows that on many cost grounds, particularly all those related to Government conduct, we have a much worse deal in Britain. That is why we are losing business, why jobs are going, and why haulage companies are closing down. If Labour Members still do not know that, they are in for
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a rude awakening at the polls. It will be yet another example of their not understanding what is going on and not speaking up for the people in this trouble.

The Chief Secretary to the Treasury and the other senior politicians in the Government seem to think that all this is a silly political game about black holes in public finances. I hope that I have illustrated that there is no black hole in this area of the accounts. There is a massive increase in revenue, and we are asking the Government to give a little bit of it away while oil prices are high, and at the same time have a stabiliser so that if the oil price plunges the Government will not be short of revenue, as they would otherwise be. Ministers do not even seem to be able to work out that if one charges an activity at 60 per cent. or more, and charges other activities at 40 per cent. or so, one will have more revenue if there is a rise in the price of the 60 per cent. tax item and less revenue if it falls. Anyone else can see that that must be true, because it is being taxed so much more highly than the other activity that it may be displacing to some extent when the price rises.

The Government must learn how to do the sums. They must understand that if they gave a bit away now, it would do them a lot of political good, help the British economy, and do a little to ease the phenomenal squeeze that they have decided to place on the British consumer and the average voter out there. At the same time, by adopting the Conservative proposal, they could have some kind of insurance against the possibility that there is speculative money as well as underlying demand in the oil market, and that the price will come down. It is a very unusual market that always goes up, and it would be foolish of the Government to plan all their Budget assumptions on the basis that the price of oil will always go up now that it has reached about $140 a barrel; indeed, it has been a bit higher than that in recent trading.

The black hole is the Government’s black hole. If we are engaged in a debate about black holes, as the Chief Secretary says that we are, we would like to know exactly how much Northern Rock has cost them— £5.3 billion so far, and rising. We would like to know how much all these tacky packages to try to win votes in by-elections have cost them. They are probably already overrunning by £10 billion, yet they have the gall to criticise the Opposition for coming forward with a very modest proposal that would make a small reduction in the part of the tax budget that is rising so colossally because of how the Government have set it up. Now that the Government have at last realised, long after everybody else, that they cannot go on with a 2p rise in the autumn, it is important that they should think again and take something off the already over-burdensome high taxes at the pump.

I cannot remember such an intense squeeze on customers and consumers developing as quickly as is now happening as a result of the combined impact of the credit crunch and inflation. The inflation is occurring in the areas where the Government meddle most: in energy prices, where they have not allowed the permits to go ahead for an expansion of energy supply; in the oil products market, where they impose cripplingly high taxes and allow them to go up when the price is going up; and in food markets, where we have rigged prices thanks to the common agricultural policy and the Government’s failure to get proper reform from our partners. We urge them
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to do themselves, as well as the country, a favour by seeing common sense and the need to cut those petrol prices immediately. That would reduce the retail prices index in the subsequent figures, which would help with other Government spending pressures because so much Government spending is linked to the RPI. Above all, it would help my constituents and the Minister’s constituents, who have had it beyond belief with these price rises, and blame the Government for the petrol price rises because so much of that money is tax.

6.29 pm

Stewart Hosie (Dundee, East) (SNP): I enjoyed the maiden speech of the hon. Member for Henley (John Howell). He is in the extraordinary position of having been a candidate with one policy and making his maiden speech with another. However, he has the advantage over all his Tory colleagues, in that the next time we vote on a fuel duty regulator, modulator or stabiliser, he can vote for it without the embarrassment of having not done so in the past. Having got that out of the way, I can say to the hon. Members for Putney (Justine Greening) and for Runnymede and Weybridge (Mr. Hammond) that they have done the right thing. They have fully considered the issues that affect 23 million motorists, the haulage sector and many others. They have clearly reached their own conclusions in their own time and developed a model for how their plan will work. However, it is fundamentally the same idea as many hon. Members have had.

My comments are not about claiming the credit, even though I tabled an amendment on the subject to the Finance Bill in 2005, but about building a coalition of support to back all those in the real world and deliver a modulating, moderating or regulating impact to temper increases when prices spike. Many support that.

Two weeks ago, when I tabled an amendment to the Finance Bill, I provided the context, so I will speak for only a few minutes; I want other hon. Members to be able to contribute to the debate. From 2005, when petrol was 86p a litre, the price has increased to an average of £1.32 a litre—£6 a gallon. In 2005 Brent crude had reached $60 a barrel—almost a 20 per cent. increase on the forecast for that year. Two weeks ago it was $132 a barrel, and yesterday the price reached $145 a barrel.

I have also consistently said that the rises that we have experienced are inflationary. Yesterday the inflation figures were published, showing, at 3.8 per cent., a half point rise to almost double the Government’s target. Fuel and energy prices have risen by 24 per cent. in the past year. We are considering essential items, and for those on low incomes and others, such as the haulage sector, real inflation far exceeds the Government’s official figures.

At 53.2 per cent., the UK has the highest tax take on a litre of diesel anywhere in the European Union. At £1.32 a litre for diesel—it is dearer in many parts of remote and rural Scotland—it is 35p more expensive than it was a year ago. Almost half of that rise—14p—happened between mid-April and mid-June, according to the AA. That is precisely the sort of spike that a regulator, modulator or stabiliser is designed to smooth out. Only in Norway, with an average price of 137p a litre, is diesel dearer than in the UK. For normal people,
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that means that it costs £30 more a month to run one diesel car, or £46 more a month for a two-car family with petrol cars. People will need to earn nearly an extra £1,000 a year to pay for the increase in fuel that a two-car family will experience.

It is important that fuel is regulated for all the reasons that I have outlined, but also to avoid the super-spike to $200 a barrel and more that Arjun Murti from Goldman Sachs predicted for this year. We must plan for those eventualities and have the mechanisms in place now, so that the Government do not rush around panicking when they happen.

Let me briefly consider the Government’s action today, suspending or abandoning the 2p rise in duty. Of course, it is welcome—many of us have called for it for some time. However, it should have happened months ago as prices began to spiral way above inflation and the Government’s forecasts. That is why we need a regulator. The suspension should have been automatic, not based on any politician’s whim—and certainly not eight days before a by-election, although we in the Scottish National party claim credit for that.

The most important point is not about 2p here or 2p there; it is about having in place the regulator—or we could call it the modulator, the stabiliser or the mechanism—so that when the spiking occurs there are automatic corrections, and families and businesses can plan properly. In particular, that would mean that the haulage sector would not be crucified, and that, as we heard in the earlier example, modest companies would not have to find £60,000 net extra each year just to stand still.

With that, I will leave it, except to say that although there will probably be technical disagreements with the Tories when the full detail of their proposals comes out, I am pleased that they have moved. I hope that I had something to do with that. If we continue to build up support among all the parties, we might be able to help a great many people with such a measure.

6.35 pm

Mr. Alan Reid (Argyll and Bute) (LD): As we have heard in this debate, the high price of fuel is having a severe effect on the economy throughout the country. However, it has a much more severe effect in remote rural areas than in urban areas.

In my constituency, the effects are felt particularly severely on the islands and on the Kintyre peninsula, because fuel there is sold at a much higher price than in urban areas. That means that people suffer from a triple whammy: they pay higher fuel prices; there are no public transport alternatives; and they need to drive longer distances. Let me cite an example: on a recent visit to the remoter parts of my constituency, I found that the price at the pumps in Campbeltown, at the end of the Kintyre peninsula, was 6p a litre higher than at Glasgow airport and that at Port Ellen on Islay, fuel was selling at 15p a litre higher. On the smaller islands, the difference is always much greater.

The Office of Fair Trading has on many occasions looked into the reasons for the high fuel prices in the highlands and islands. On each occasion, it has drawn the conclusion that the extra premium arises not from anti-competitive prices—local filling stations are not ripping people off; there has never been any such
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accusation—which can be dealt with through regulations, but from the way the market operates. In a small village, the number of pumps at the filling station and the turnover at each pump is less than one would find in an urban area. That means that the income required to cover costs is greater than that for urban filling stations.

Another problem is that because remote filling stations are owner-operated, they are dependent on regional wholesalers for their fuel supplies, whereas urban filling stations usually have direct access to a supply of fuel without the need for the middle man of the wholesaler. Another problem that small filling stations face is finding the money for the fuel up front. Even a small island filling station will need to pay more than £10,000 up front to fill the tank. That is a lot for a small business to find up front, which leads to interest charges, and therefore additional costs. For islands, there is the additional cost of the ferry fare for both the tanker and the driver, and of the driver’s wages for the time that it takes to make the delivery and return to base. For smaller islands, that can mean two or three full days simply for one delivery. That all adds to cost.

One haulage company in my constituency pointed out to me earlier this week that it cannot get a discount fuel card that includes filling stations in Argyll. I was told that if it were operating in central Scotland, for example, there would be many fuel discount cards to choose from, with bulk-buying discounted rates. However, those rates do not apply in Argyll and Bute. All those costs add to the cost of both fuel at the pump and everything that is sold in the shops.

We proposed an amendment to the Finance Bill on Report that would have achieved the end of higher prices at remote rural filling stations. We proposed a rural fuel duty discount, which operates in many other countries. Highlands and islands MPs recently held a constructive meeting with the Exchequer Secretary. She and other Treasury Ministers have certainly been sympathetic and have promised to examine the evidence. I have sent evidence to the Treasury and will soon send more. I urge the Government to examine this evidence very carefully and to produce a rural fuel duty discount scheme for islands and remote parts of the mainland before the high fuel prices work their way through to job losses.


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