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. 10
am
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.
Dr.
Nick Palmer (Broxtowe) (Lab): I have a couple of
questions. First, although the hon. Member for Dundee, East has allowed
for the possibility of fuel
prices falling back to a level originally envisaged,
he will be aware that current fuel prices are driven partly by the
limited supplies of fossil fuels in the world but also by considerable
political instability in countries such as Venezuela, Iraq, Iran and,
potentially, Russia, and it is at least possible, and some serious
analysts are suggesting, that there will be a substantial fall in fuel
prices at some point. We may think that unlikely, but the new clause
does not allow for any reaction at that point. It is still a ratchet:
if prices go up, the Government are forced in effect to reduce the
duty, but if prices go down, the beneficiaries simply pocket the
proceeds.
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.
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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