Finance Bill

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Clause 13

Rates and rebates: increase from 1 October 2008
Question proposed, That the clause stand part of the Bill.
The Chairman: With this it will be convenient to discuss new clause 4—Fuel duty regulator—
‘In the HODA 1979 (c. 5) in section 6 (excise duty on hydrocarbon oil) there is inserted after subsection (1A)—
“(1AA) In every Budget Statement and pre-Budget Report the Chancellor of the Exchequer shall provide his forecast for the price of oil and set out anticipated yield from fuel duty and VAT on fuel for that price and for a range of prices up to 50 per cent. above his forecast.
(1AB) In the 2008 pre-Budget Report the Chancellor of the Exchequer shall bring forward a mechanism for—
(a) using additional revenue from VAT on fuel above forecast to offset fuel duty when the oil price rises above his forecast level;
(b) providing specific fuel duty reductions targeted at fuel sold in sparsely populated areas; and
(c) providing specific fuel duty reductions targeted at fuel sold to road haulage operators;
and the Chancellor of the Exchequer shall by order define “sparsely populated areas” and “road haulage operators” for the purposes of this subsection.
(1AC) Whenever international oil prices return to the level estimated by the forecast made in accordance with subsection (1AA), the offset described in subsection (1AB) (a) to (c) is suspended until the price rises again or the forecast price is amended by the next Budget or pre-Budget Report.”.’.
Stewart Hosie: Before I speak on new clause 4, it is worth noting the context within which the debate is taking place. When I proposed a similar measure on 6 July 2005, I said that, according to the AA, the price of unleaded petrol had risen to 86p a litre, up 6p in the previous six months. Fuel is now priced at anything from £1.10 to in excess of £1.30 a litre.
I said then that Brent crude had touched $60 a barrel, up from an average price across the piece of $50. In the run-up to the recent Budget, the price was an average of $83.60 a barrel, an increase from the $68 forecast in the pre-Budget report. In the quarter before this year’s Budget, the price of a barrel averaged $94. In four of the five working days up to the Budget, we saw record closing prices for North sea oil, and the Red Book forecast £56 billion of revenue in the next six years, which was up from the previous six-year forecast of £38 billion. Oil has gone from $60 a barrel in 2005 to an annual average, up to the Budget, of $83.60 via a last-quarter score of $94 a barrel. I checked the spot price a couple of days ago: it was $123.97—nearly $124 a barrel. It is in the context of massively rising oil prices and high price spikes for fuel at the pumps that I am proposing the new clause.
The impact on people is also worth noting. When we debated that similar proposal in 2006, the AA estimated that the monthly increase in the cost of fuel for a two-car household had risen by £13.18—a 6p rise on the litre. By April this year, the corresponding rise for a two-car household was £32.97 a month—nearly £33. The measure has been proposed in the knowledge that the Treasury, not content with the normal indexed rises, has proposed in the Budget an additional, above-indexation escalator from 2010.
The new clause would do three things: it would oblige the Chancellor to publish a forecast yield figure at every Budget and pre-Budget for fuel duty and associated VAT for a range of prices up to 50 per cent. above his anticipated yield, and to develop a mechanism by which to use the windfall on VAT gain to offset the duty; and allow the regulator to be removed when the price drops back to the baseline, or when the new yield forecast is made in subsequent Budget and pre-Budget statements. The latter proposal is important because I have been criticised in previous debates that the proposal was for a one-way escalator and that it would not afford the opportunity to return. The proposal makes it clear that the new yield forecast can be set to take in qualitative rises in prices and not simply spikes.
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The proposal is partly probing, but it may come back in another form at a later stage in the proceedings. I want to hear what the Government and the Opposition think of the three elements of proposed new subsection (1AB) to the Hydrocarbon Oils Duties Act 1979; namely, that an offset might be introduced universally, that one might be introduced to assist remote rural areas and, in particular, that one might be directed towards the haulage industry, which is of massive concern to me. That is probably why the Road Haulage Association is backing the new clause and calling on MPs from all parties to set aside political considerations and support that or a similar measure.
We will all have had representations from our constituents and from hauliers. We know, certainly in Scotland, that the cost of all goods is driven up as the cost of haulage increases. I know from my part of the country that the competitiveness of Scottish business has been reduced because of increased transportation costs. Even well known companies, such as Ramage, are going into administration, citing, among other things, the cost of fuel as a key factor. When a company such as that, which in parts of the country was as well known as Eddie Stobart—people would look out for those wagons—goes into administration citing fuel costs as a factor in that decision, something is seriously wrong.
I do not want to take up too much more time, but it is important that the Government understand that this is not all someone else’s problem. Of the average £37,000 that it costs each year to provide fuel for a 44-tonne truck, the Government already take £25,000—of course, they take more when the price at the pump rises. Therefore, the Government cannot abdicate responsibility for some of the problems. They will be happy to force a typical 20-vehicle company to generate £30,000 a year more to pay for a 2p rise in duty. They are happy to take the VAT windfall when the price at the pump rises and they are happy to take the £56 billion that it has been forecast will come from higher oil prices over the next six years.
Fundamentally, the new clause says that it is time for the Government to put something back when prices not only bite a little but tip companies over the edge, put too much pressure on remote rural areas and force ordinary families to find hundreds of pounds extra a year simply to do the basics. I cannot put it any better than Geoff Dossetter, the Freight Transport Association’s director of external affairs. He was quoted in the Sunday Herald on 13 April as saying:
“It’s barking mad. We’ve already got the highest diesel taxes in Europe.”
With that, I will conclude. I want to hear not only what the Government have to say but what the other parties have to say, particularly on the possibility of the fuel tax regulator concept being introduced to offer at least some assistance to the road haulage industry.
To that extent, the measure seems slightly populist, because if there is a sustained rise in fuel prices, the terms of trade will have moved against Britain and there will be a collective problem for us all. If we attempt to protect only the people immediately affected—for instance, the road haulage industry—we are redistributing the impact of the oil price rise on to everyone else. In particular, I do not think that the hon. Gentleman’s proposal to protect rural areas will work. If garages in certain postcodes were subject to lower duty, there would be substantial fuel smuggling, as we see across the border between Northern Ireland and the Republic of Ireland. It is not possible, within one country or in a remotely open economy, to have selective duty in different areas.
Finally, let us consider the environmental impact of fuel duty. Many of my constituents, like those of the hon. Member for Dundee, East, are worried about the impact of rising fuel prices, but if our reaction to a real world problem with the supply of fossil fuels is always effectively to subsidise prices, in the long run we are avoiding dealing with climate change and the decline in fossil fuels. There is a tendency for all parties to talk the talk on these issues without walking the walk. We need to consider the impact of the crucial decision that is to be made on how world affairs affect the environment in Britain and accept that, sometimes, a change in behaviour is needed on the part of our consumers and our Government.
Stewart Hosie: I shall answer some of those points at the end. However, on the latter point, I have no problem at all with managed price rises to tackle climate change. I have said that before. It is not the managed increases to tackle a particular problem that are of concern, but price spiking, which is so serious and damaging, must be addressed, as must the excessive increases that happen quickly.
Dr. Palmer: I accept the hon. Gentleman’s point. However, if he refined his new clause to take account of circumstances in the unlikely event of a price dip, we would have a serious, rounded proposal to consider.
The new clause skirts around how we are going to tackle dwindling fossil fuels; it says, basically, that if there is a problem with rising world prices the Exchequer will help. In the long run, that will not be sufficient. Perhaps the Conservative spokesperson will confirm that the Conservatives are considering reintroducing the fuel price escalator. If that is done, the issue will arise even more acutely. I do not necessarily disagree with that, but it is controversial and needs serious discussion.
Justine Greening: I am conscious of what has already been said, so I will keep my comments brief. Obviously, we support the belated decision by the Chancellor to delay the 2p rise in fuel duty. We understand, from interested stakeholders, including the AA, that rising petrol and diesel prices have increased the total cost of running a small family car from 55p a mile to 58p a mile. As the hon. Member for Dundee, East said, that has an impact not just on families, but on people who use petrol to carry out their day-to-day business, including road hauliers.
We welcome the Chancellor’s drawing back from including his 2p duty rise in the Budget in April and his proposal to delay it until October. However, it was delayed not because of anything to do with road hauliers or families who cannot afford to pay more fuel duty, but mainly for self-interested political reasons.
Nevertheless, we welcome the deferral in itself and that is why we will support the clause. I understand that the hon. Gentleman has introduced a new clause to look at how we can perhaps have a more sensitive rate of tax on fuel, one that takes into account the ups and downs of oil prices, and that is something that we should consider.
Angela Eagle: Is the hon. Lady saying that it is the Opposition’s policy to introduce a fuel duty regulator?
Justine Greening: I think that I had only said about 15 words before the Minister jumped up to intervene on me.
We are not saying that, actually. The point raised by the hon. Member for Dundee, East was that there is clearly an issue that the Government themselves have recognised, which is why they have had to delay the fuel duty rise. Fuel, by necessity, fluctuates in price in line with the oil price. That can mean that, at the same time as fuel prices are rising and fuel duty is rising, VAT on fuel is also rising. Therefore, there is clearly a double impact of the Treasury when fuel and oil prices go up.
I am just recognising that the hon. Member for Dundee, East pointed out the impact of all these price rises and he was making a suggestion to deal with them. I must say that it is not one that I agree with. None the less, he was making a suggestion that we should look carefully to see if there are ways to handle this situation more effectively than the way we have at the moment, whereby the Government have proposed a 2p rise in fuel duty and then, at the last moment, they have had to say that they want to delay its introduction. I do not think that that is good for families, but it is certainly not good for businesses.
Dr. Palmer: Will the hon. Lady rule out the possibility of reintroducing a fuel price escalator?
Justine Greening: At the moment, we think that all these issues need to be kept under review. The difficulty is that we have dramatically escalating oil prices; as has been said, just six months ago they were at a much lower level. In fact, the range of estimates that experts have for what the price of a barrel of oil may be in the next six months is, I understand, between £80 and £150, even up to £160.
Clive Efford (Eltham) (Lab): In talking about the fuel duty escalator and rising petrol prices, the principle that the hon. Lady is discussing is that the increase in price is desirable because it alters behaviour and reduces the use of fossil fuels, and therefore it has a positive impact on the environment. That is the green taxes that her party has talked about.
Now we are getting to the nitty-gritty of the debate, because this is where we have to take decisions about whether to support policies that will change behaviour. Is it the basic approach of the Conservatives that the cost of petrol has to go up to change behaviour, whether that rise is as a result of the market or the use of the fuel duty escalator? Is that the Conservative position?
Justine Greening: The hon. Gentleman is asking a question that is not really appropriate, in the sense that he is asking if the cost of petrol has to go up to change behaviour. Well, we have just had a debate on biofuels, which is totally unrelated to the cost of petrol but is related to changing behaviour.
I must say that, if the hon. Gentleman and his party want to have a good debate about environmental taxes, one that the public can participate in, perhaps they can follow the polls that we have had recently and call an election, to give people the chance to elect their Prime Minister and have a choice on that matter.
Clive Efford: Does the hon. Lady think that she will have a policy by the time of an election?
Justine Greening: At the moment, the hon. Gentleman is talking about our policies, but I have noticed quite a lot of our policies sneaking into this Government’s agenda in recent months, so it is no wonder that he is so concerned to try to get even more policies out of us.
Clive Efford: I am in danger of testing your tolerance, Sir Nicholas, by pursuing this debate.
The reason for the similarities in policy at this time is that the Government are dominating the debate. [ Interruption. ] Impersonation is the best form of flattery, believe me. Attempts by the Conservative party to come up with green policies have been exposed as a sham because they are not prepared to take a principled position on what is needed to challenge people’s behaviour. They talk about a basket of green taxes that will change people’s behaviour, but when it comes to it, they do not have a principled position.
The Chairman: Order. Justine Greening has the floor.
10.15 am
Justine Greening: Thank you, Sir Nicholas. I was thinking of intervening on the hon. Gentleman at one point, but I shall move on. [ Interruption. ] Well, we are discussing a clause that introduces a complete change of Government policy, so I do not think that Opposition Members need to take any lectures about who is dominating the debate. In fact, the clause backtracks on the rise in fuel duty. What I am saying—and the Government should welcome this—is that my party supports the decision to delay the fuel duty rise until October.
Mr. Browne: May I make a contribution, Sir Nicholas?
The Chairman: I was going to suggest that the Minister reply, but the hon. Gentleman is persistent.
Mr. Browne: I shall not speak at great length, but as the Conservative and Labour parties have agreed that their policies have morphed into one, it seems reasonable that the Committee should hear an alternative view. In fact, if anyone is seeking an explanation as to why Labour has the worst poll ratings in living memory, it may be because it is adopting too many Conservative policies. That is clearly a way to go down the tubes very quickly. It is not entirely relevant to the matter before us, but only one party gained seats in each of the past three general elections, and I had the good fortune to be a spokesman for that party.
The Chairman: Order. We are debating a clause in the Finance Bill. We are not on the hustings in Crewe and Nantwich. Please direct your remarks to the clause, Mr. Browne.
Mr. Browne: Thank you, Sir Nicholas. I am sure that it is a relief to everyone that we have an excuse—being in this Committee—for not being on the hustings for the Crewe by-election.
I am keen to speak specifically on the subject, because the claims made for postponing the 2p per litre duty are exaggerated. If somebody has a 50-litre car, for example, the saving from the postponement would be £1 every time they filled up. The saving to a motorist who drives enough to fill up such a car a couple of times a month would be £12, so we should not make too many extravagant claims about the financial benefits to consumers of delaying the rise.
There is, however, a wider point. When such proposals are postponed, politicians are quick, as the hon. Member for Broxtowe said, to talk the talk, but they are rather less quick to walk the walk. I direct these comments to all parties but particularly to the Conservative party: the party leader having photo opportunities with Zac Goldsmith or other people of that sort is not a substitute for proper policy. My concern is that we cannot have a serious conversation, and certainly not a general election, until the Conservative party makes some serious proposals on road haulage, duty on petrol, and environmental policy, full stop.
Mr. Bone rose—
The Chairman: Order. I am afraid that the hon. Member for Taunton is going far too wide. Again, his speech appears to be a political one rather than one on a Government Finance Bill. Opposition policy may be peripheral to discussion of the clause, but we are not debating it. It is the clause in this Government Bill to which we should direct our attention. I believe that Mr. Bone is seeking to intervene.
Mr. Bone: The hon. Member for Taunton misses the point. When a Government prepare their Budget, they plan what they expect to receive in VAT on the current or predicted future prices of oil. If those oil prices go up enormously, there is a big windfall gain for the Government. That is what this refers to. It is not part of the plan of environmental taxes; it is a windfall gain and the clause seeks to deal with that. What do the Liberal Democrats believe should happen when the Government get a huge windfall from an increase in oil prices?
Mr. Browne: That is an entirely fair point. I would only answer in more general terms by saying that one of the main reasons that there is a lack of public confidence—
Mr. Todd: Will the hon. Gentleman give way?
Mr. Browne: Wait a second. I sympathise with you, Sir Nicholas, in trying to do your job and manage our proceedings.
I shall first deal with the intervention by the hon. Member for Wellingborough. One of the main reasons why there is public concern about environmental taxation is that there is a suspicion—justified, in my view—that the primary motivation is raising revenue, rather than trying to benefit the environment. I am keen that environmental taxes should be offset by reductions in taxation elsewhere. That means people will be disincentivised to use their cars, for example, but I hope that as a result they will be incentivised to do other things, including working harder.
Mr. Todd: Perhaps the hon. Gentleman might find helpful a little thought on the interaction between VAT and the price of fuel because he has been challenged on that point. Consumers have a finite amount of money to spend. If VAT has been increased sharply through an increase in the price of fuel, logic therefore says that they will spend less on other items in household expenditure that would otherwise attract VAT to the Government. The net effect may well be neutral.
Mr. Browne: I take the hon. Gentleman’s point. [ Interruption .] Well, he was not making a political point; he was making a consumer point. That would obviously depend on consumer patterns. The point has extra validity, because VAT has gone up so much in my adult lifetime. However, that is another matter, which is not directly related to our conversation.
I will finish by making this observation which is specifically and directly relevant. People are naturally concerned about petrol taxes: people who need their cars for work have a professional concern, and most leisure motorists would rather pay less than more. Very few people come up to politicians and say, “Please can I pay more for a service, please will you raise the taxes?” However, some people come to politicians and express an interest in our offering leadership. [ Interruption .]
The Chairman: Order. One speaker at a time.
Mr. Browne: As a politician, I offer leadership not just followership in attempts to try to reduce carbon emissions and help the environment. I make that observation in passing, because it is relevant to our deliberations. There will be a short-term benefit for politicians who try to follow public opinion but who are derelict in the leadership that they offer on environmental issues. There ought to be a reward for those who take a responsible attitude, and if we want a planet which is as enjoyable for future generations as it is for us today, we cannot continue backing off every time we see an adverse opinion poll on environmental issues.
Angela Eagle: We have had a fascinating debate. I thank the hon. Member for Dundee, East for introducing this particular part of the Finance Bill. We have just heard the hon. Member for Taunton say that the role of politicians is not to listen to the people whom they represent but to lead them against the opinion polls. The hon. Member for Putney supported the hon. Gentleman’s new clause, but then said she did not support the introduction of a fuel regulator, which is what he was discussing.
The Chairman: I regret I have to bring the debate to an end at this critical point. All papers will be secure in the Committee Room, which will be locked.
It being twenty-five minutes past Ten o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.
Adjourned till this day at One o’clock.
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