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An important distinction that could be made between housing costs and fuel costs is that tax makes up a large part of fuel costs-I do not know if the hon. Gentleman was going to make that point in his intervention. However, it is also fair to say that stamp duty land tax tends to exacerbate the cost for someone wanting to buy a house in a more expensive area. For example, in my county of Hertfordshire, the last time I looked, the stamp duty
payable in respect of the average house price was £2,300. In some areas, however, the average house price is below the stamp duty threshold. Stamp duty therefore exacerbates the situation. There are limited things that we can do in the tax system to address this inequity, if one sees it in those terms-one could do something to help first-time buyers, for example-but there is more scope for doing something with fuel duty.
Mr. Carmichael: The hon. Gentleman makes a legitimate point. I commend him for approaching the argument with seriousness and respect, which I hope will be emulated by the Minister. We accept that there are issues to do with housing, including its availability, so we provide support for the housing sector through councils and housing associations. Surely the same principle should apply to transport where there is no other choice.
Regarding whether cuts in prices would be passed on to consumers, the hon. Member for Caithness, Sutherland and Easter Ross has suggested an audit procedure, although that would involve a significant administrative burden. It would be interesting to hear what the Government have to say about that, although I sound a note of caution. More widely, the Government have mentioned the administrative difficulty, but I hope that the Minister will elaborate particularly on moving the duty point from petrol distribution networks and oil companies to individual petrol stations.
In conclusion, hon. Members have raised a legitimate problem and, in principle, we have no objection to using fuel duty as a way of addressing it. There are various points that we need to understand. There needs to be an assessment of how much such a measure would cost and precise understanding of exactly why there is such a disparity. We also need clarity about applicability. We have heard various views about whether a reduction in fuel duty should apply to islands or more widely. There are questions to consider, such as what we mean by remote and peripheral, and hon. Members have done some work on these points.
We need to ensure that the fuel duty reduction is passed on to motorists and we need to understand the full administrative impact of any such proposals. Those are reasonable, practical points that need to be addressed. They might have been addressed in the past, but we hope that the Minister will respond to them and say whether there is a practical way of addressing the concerns that have been so eloquently set out this morning.
The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry):
As ever, Sir Nicholas, it is a pleasure to serve under your chairmanship. I, too, congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael)
on securing this debate on an issue of great importance to him and his constituents. That has been borne out by the passion with which he and other hon. Members have spoken.
The Government recognise that fuel prices have risen in recent months, and we are sensitive to the impact of high fuel prices on people throughout the country, many of whom have few alternatives to driving. For people living in remote areas, including those in Scotland, road transport is particularly important.
My first point is that the principal driver behind the recent increases in fuel prices is not Government policy, but changes in the international oil market. Over the past two years, the price of a barrel of oil has varied between $42 and $132, and the price of fuel by more than 30 pence a litre. I understand the case that hon. Members have made today, and I, too, run the risk of raising the blood pressure of the hon. Member for Orkney and Shetland because I do not believe that it is appropriate or feasible to set a different fuel duty rate for rural areas. I will give three reasons.
First, it is important that the Government remain consistent with the principle of UK-wide taxation. Secondly, there would be many practical difficulties with pursuing a reduced fuel duty rate in reality. Thirdly, it is uncertain whether there would be any benefit at the pump. I will address those three matters, but I will not spend so much time on the first, as the other two are more pertinent to the debate.
It is a general principle of the UK tax system that excise duties are levied at the same rate for specific goods throughout the UK. We know that fuel duty is not popular with motorists, but it is important to support public finances, and thereby to protect stability, employment and growth.
Sarah McCarthy-Fry: I could enter into a debate with the hon. Gentleman on that, but I want to respond to the specific issues that are pertinent to the debate, including the practical difficulties. A reduced duty rate in rural areas would require a derogation under the EU energy products directive, so a definition of a remote area would have to be submitted to the EU Commission, and we could not forecast the outcome of that with certainty. Even without that barrier, it remains unclear how remote rural areas could be defined satisfactorily.
Mrs. McGuire: Does my hon. Friend accept that although hon. Members representing mainland rural communities may have accepted some of the difficulties that she has identified, there are self-contained, sea-distant communities within the United Kingdom where we could pilot a derogation on fuel duty?
Sarah McCarthy-Fry: We would still have to ask the EU Commission for that derogation, and some of the islands represented here today would not be included. I do not want something that is perceived to be unfairness across the country to become an unfairness between remote areas.
There is a wide variety of fuel prices throughout the UK, not just in Scotland. For example, the current UK average petrol price is around 111.8p a litre, and AA
figures show that in Scotland as a whole, both petrol and diesel prices were 0.7p a litre below that average in January. Even in the highlands and islands of Scotland, different fuel price trends are not confined to neatly definable geographical areas, and prices fluctuate continually. Even within rural areas, prices are neither straightforward nor static. Figures from the Petrolprices.com website show that in some highland areas, average fuel prices are currently at or just above the UK average, whereas in others, fuel prices are more than 10p a litre higher.
I recognise that in some of the most remote islands, prices may be significantly higher-for example, more than 123p a litre in Stornoway on the Isle of Lewis, Lerwick on Shetland and Brodick on Arran. However, in Portree on Skye, the price is 117p a litre, and in towns such as Invergarry in the highlands the price is 114.4p a litre.
Many hon. Members have spoken about competition, and mentioned the investigation by the Office of Fair Trading. Previous investigations concluded that those variations result from market conditions-for example, the cost of transporting fuel to those areas, and the fact that smaller populations mean fewer filling stations-rather than market failures. There may be a case for the OFT to investigate the matter again, but it is an independent body. With different price trends throughout the highlands, defining the boundaries of a low-duty area and setting the level of a duty reduction would be complicated.
The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) said that one option might be to use the eightfold urban-rural classification produced by the Scottish Government. That identifies areas with a population of fewer than 3,000 and more than a 60-minute drive from a settlement with a population of 10,000 as being "very remote", but that criterion produces a region with highly irregular borders, and includes not just parts of the highlands and islands, but small pockets of the lowlands in the south-west. Those lowland areas, in Ayrshire, and Dumfries and Galloway do not seem to experience significantly above-average fuel prices. In addition, the eightfold classification would exclude the towns of Lerwick on Shetland, Kirkwall on Orkney and Stornoway on Lewis, which are all considered to be too urban to fall into the "very remote" category.
Even if we could modify the definition to exclude the lowlands and include all the islands, there would be problems due to the wide variety of fuel prices in remote areas. Prices vary even within islands, so any fuel duty discount might end up reducing some prices to below the UK average, while leaving others significantly above. The very remote region also includes some areas that are close to places where fuel prices are currently close to, or even below, UK averages. For example, the borders of the "very remote" region pass within 5 miles of Fort William, where current prices are only 1.1p a litre above the UK average, and within 5 miles of Oban, where current prices are only 2.1p a litre above the average.
A lower duty rate could offer incentives for new filling stations to be set up just over the border of the remote areas, where they might be able to undercut rivals in towns just a few miles away. That would distort the local fuel market, and encourage people to drive out of town to a low-duty filling station to fill up.
The introduction of lower duty rates in some areas would also create difficulties in ensuring compliance, and tackling the risks of fraud that would inevitably arise from having different duty rates on the same product. Fuel duty is currently collected by Her Majesty's Revenue and Customs at the point of distribution-the oil refineries-with the cost being passed to retailers, and by retailers to consumers. Creating a reduced rate in remote areas might require HMRC to distinguish between fuels at the refinery, but that would risk creating significant potential for fraud, as has been the case with the red diesel used by farmers and in industrial processes.
To avoid those problems, it would be necessary to operate a system whereby retailers charged a lower rate, and were then refunded by HMRC on part of the duty. However, that would impose significant additional administrative costs, not only on HMRC, but on fuel sellers in the highlands and islands.
That brings me to my final point about the uncertainty of the impact on consumers of any reduced fuel duty rate. For small forecourts with stretched margins, there is a real risk that the administrative cost associated with a reduced duty rate could outweigh the benefits of the rate. In the light of that, there would be no guarantee that the benefits of any fuel duty reduction would be passed on to consumers, rather than simply being absorbed into fuel sellers' margins. It has been suggested that one way out of the problem would be for the Government to define the agreed margin that individual fuel retailers could employ each year, but that would clearly constitute a major intervention by the Government into the fuels market and would be contrary to the Government's general policy of allowing free markets to determine prices. It is also difficult to understand why fuel sellers would choose to enter into such agreements with the Government over their margins.
I recognise the difficulties facing people who live in remote areas, and are dependent on their cars, but the proposed fuel duty reduction would be contrary to the principles of the UK tax system and, more importantly, would be almost impossible to implement in practice. There would be almost no guarantee-
Mr. Andrew Pelling (Croydon, Central) (Ind): It is a special pleasure to serve under your chairmanship, Sir Nicholas. With your extended knowledge of this place, it is particularly appropriate for this debate to take place under your guidance. I am pleased to have secured the debate and grateful to colleagues who have come to contribute.
This debate could be seen as a curtain-raiser to the debate that will take place on the Wright report after the recess. The clear and helpful advice-perhaps even a stricture-given by the principal Clerk of the Reform of the House of Commons Committee, is that we should not pre-empt that debate. It is interesting to think about the history of this place, and that there is a clear rule against anticipation. That rule has obscure origins, and was there to protect other hon. Members. In the past, the organisation of the agenda of the business of the House was so chaotic that people would often try to pre-empt debates by tabling earlier Bills and motions. That rule against anticipation was reaffirmed by the Procedure Committee in 1907. I place that on the record in case people reading the debate in Hansard question why we were so careful not to mention the detail of the motions that will come before the House once we return from the recess.
Bob Spink (Castle Point) (Ind): The hon. Gentleman has proved himself to be an assiduous and good parliamentarian as well as a great constituency MP. He will know that our constituents are not interested in the arcane rules of this House; they want us to clean this place up and do it immediately. They are keen to learn not only about the input, and our expenses and salaries, but about what work we do for them. People are most concerned about the value for money that they get from their MPs. Will the hon. Gentleman be addressing that today?
Mr. Pelling: I very much hope so and I am grateful for my hon. Friend's kind comments. I was inspired by yesterday evening's contribution by the hon. Member for Bethnal Green and Bow (Mr. Galloway) to what was otherwise an ill-tempered, disorganised and unfortunate debate. He offers a radical agenda for this place, and as he rightly said yesterday evening, the public are looking for a substantial change in the way that this place works.
Mr. Galloway: I am grateful to the hon. Gentleman for giving way so early in his speech, and may I associate myself with the remarks that he made about your chairmanship, Sir Nicholas? I have served in Parliament alongside you for a long time, although you have served longer than I, and I think that you will not be in this House at least, after the election. That is a loss and it is a pleasure to appear-perhaps for the last time-under your chairmanship.
I am grateful to the hon. Member for Croydon, Central (Mr. Pelling) for securing this debate and for the ideas that we shared on the Back Benches yesterday evening. I wonder whether, through you, Sir Nicholas, I could ask the hon. Gentleman if, when he says, "this place", it has to be this place. I have come to the conclusion that this place is a museum and would be better officially turned into one. It would be a popular museum.
The Olympic village in east London has lots of residential accommodation that could accommodate Members. I think that we should take a look at moving east and cleansing these Augean stables by sealing them and making them a monument to what was good and what was bad about this place.
Mr. Pelling: I am pleased that you have done so, Sir Nicholas, and I would also have been pleased to concede time from my 15 minutes. I am grateful to the hon. Member for Bethnal Green and Bow, and I feel privileged that he has taken the opportunity to attend, as I know that he had other competing engagements this morning. I would like to strongly endorse what he has to say. I love this place; I have shown 2,000 constituents round the Palace of Westminster, and it is not a criticism of the Palace to say that I strongly agree with the hon. Gentleman's proposal.
If we were based at the ExCeL centre, which is only two and a half miles away from the Olympic village, that would have a transforming effect on our ability to set our own culture, hopefully in a reforming Parliament after the next election. It would provide useful tied accommodation for Members of Parliament which, I presume, would be a little cheaper, and would underwrite what might be an unused facility once the Olympics are over. It would be marvellous if we could go there for the start of the autumn Session of 2012. It would also stimulate the local economy.
Mr. Pelling: Before I give way to my leader, I would like to say that when I sat on the London Assembly, we had the luxury of being able to set our own culture and procedures. Moving would also have that effect.
Dr. Richard Taylor: I thank my hon. Friend for giving way. It is a real privilege to sit in a Chamber with three hon. Gentlemen who I can refer to as my hon. Friends, even if I have taken a great deal of licence and talked about other people from other parties as my hon. Friends, because I genuinely believe that they are. I want to suggest something that is a little more practicable. I would hate to move out of this place, as although it is a museum, it is great to show people around. It is a museum, but it has a function.
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