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Noble Lords: Hear, hear!

Lord Macdonald of Tradeston: My Lords, these events have made clear the vulnerability of modern distribution systems with their "just-in-time" deliveries. Therefore, we must act to make these finely tuned logistical systems more robust and better proofed against disruption.

For that reason, the Prime Minister has set up a task force to seek to ensure that such a situation does not recur. The task force is chaired by my right honourable

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friend the Home Secretary, with my right honourable friends the Secretary of State for Trade and Industry and the Chief Secretary to the Treasury, myself as Minister for Transport, the First Minister of Scotland and the First Secretary of the National Assembly for Wales, plus representatives of the oil industry, trade unions and the police.

In addition, government departments are consulting with the appropriate organisations on the effect of such disruption on the wider community and on measures that might better protect the distribution of goods and services. The Fuel Task Force has already agreed the broad principles of a memorandum of understanding between government, oil companies and police on the handling of any future threat to supplies. That will cover practical arrangements for co-ordination and co-operation required to protect essential services while respecting rights of workers under employment legislation and the right of peaceful protest. We shall ensure that the memorandum of understanding is placed in the Library of the House when it is published.

The task force has also agreed to continue to look at possible legislative changes in criminal law to strengthen the ability of the police to deal with public disorder, and additional civil powers to lay duties or obligations on oil companies similar to those on the gas, water and electricity utilities to maintain essential supplies.

Since the end of the protest I and my colleagues in government have been meeting groups involved with or affected by the protests, such as the Transport and General Workers' Union, which represents the majority of the tanker drivers caught at the centre of the dispute. The trade unions report that, contrary to the broadcast perception, their drivers felt intimidated during the recent protests. The oil companies and their haulage subcontractors confirm that concern, as does the Freight Transport Association, whose 11,000 corporate members dominate road haulage across the UK.

On behalf of the Government I thank the trade unions and the TUC, along with the CBI and those trade associations such as the FTA, for their efforts aimed at ending the recent protests. Involved as they are across every sector of industry and from farm gate to supermarket shelf, they were in no doubt about the extent of the damage in prospect if continuing blockades made drivers too fearful to risk taking out their hazardous loads of fuel.

The Freight Transport Association delegation of senior executives from major road haulage companies who met my right honourable friend the Deputy Prime Minister last week were most concerned that existing channels would be kept open to allow them to inform the Chancellor's consultation process leading through to the pre-Budget Statement this autumn and then to the Budget itself next spring. Of course, that will be done. The FTA has also asked my department to convene a meeting of the Road Haulage Forum (RHF) in the near future.

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As Minister for Transport in the DETR--the sponsoring department for the road haulage industry--I endorse that constructive approach. Last year the Road Haulage Forum addressed concerns about competitive pressure in the industry, and industry members welcomed the Chancellor's subsequent decision in this year's Budget to abolish the fuel duty escalator and to reduce selectively vehicle excise duty.

No doubt arguments advanced in the Road Haulage Forum also contributed to the Chancellor's decision to increase transport spending by 20 per cent per annum in the July spending review and to the commitment to the £180 billion of investment anticipated by the recent 10-year plan for transport. Other government decisions influenced by the needs of the haulage industry include the introduction of 44-tonne lorries and legislation in the Transport Bill now before your Lordships to impound trucks operating illegally.

Our willingness to listen is further evidenced by meetings held by Ministers at the DETR and at the Ministry of Agriculture last week with groups including companies and individuals in haulage, farming and related activities, some of whom were involved in recent protests, who wished to convey to us their concerns about the cost of fuel and its effect on the profitability of their businesses.

We listened last week, as we have listened for the past 18 months at seven full gatherings of the Road Haulage Forum and at the regular meetings of its various sub-groups. As my right honourable friend the Deputy Prime Minister said on Monday to groups who demand cheaper fuel:

    "We hear them loud and clear just as we also hear people when they say they want cleaner air and a better environment".

In addition, he said:

    "Of course there are real problems. Of course we will listen. Of course we do act. But we will deal with those problems through proper democratic representations in the budget process".

Subsequently, the Prime Minister on Tuesday said that he, too, understood the anger over high fuel prices and acknowledged that for hauliers and farmers, as well as for ordinary motorists, there can be real hardship. That would ensure that their needs were ranked with competing claims in the Budget-setting process.

The impact of more expensive fuel is, of course, provoking disruption across Europe. Last week European transport Ministers met in extraordinary session to discuss common solutions to shared problems. Problems of intense and, it is alleged, sometimes unfair competition in the haulage industry and pressures on profit margins from the rising cost of fuel in other sectors of the economy are common across Europe.

Noble Lords will note that protests have also taken place in countries with lower fuel duties than in the United Kingdom and have also included groups in the UK who pay little or no duty on certain fuels, such as farmers and fishermen. Further, noble Lords will no doubt be aware that, when taxation is looked at in the round, Britain is the least heavily taxed of all major European economies.

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The Extraordinary Transport Council discussed ways of ensuring that key routes were kept open for the international movement of goods and services during domestic disputes. It also resolved to set up a road haulage forum for Europe, emulating the initiative taken 18 months ago here in the UK--a decision that we, of course, endorsed.

I hope that recent events and the statements made this week by the Prime Minister, the Deputy Prime Minister and the Chancellor underline that this is a listening Government. The Chancellor also made clear that:

    "This national debate is too important to ever be decided by those who shout the loudest or push the hardest. The British way is that every voice must be heard".

I invite your Lordships' House to make it plain that no group should seek to derail democratic decision-making through disruption to essential services.

The Prime Minister also made clear this week that this Government are listening to people's anger over high fuel prices. But he also stressed that government must listen, too, to other priorities, such as extra funding for health services, schools, law and order, public transport and pensioners. This Government must and will govern in the interests of all the people.

My Lords, that concludes the Statement.

3.48 p.m.

Lord Brabazon of Tara: My Lords, I thank the Minister for making the Statement and, of course, emphasise that we on this side of the House do not support the kind of direct action that was taken.

Noble Lords: Oh!

Lord Brabazon of Tara: My Lords, we were glad that the protest finished when it did and we hope that there is not a repeat in 60 days' time, as threatened. However, that does not alter the fact that we have a great deal of sympathy for those who were involved in the protest: people who genuinely believe that their livelihoods are at stake because of the enormous increase in the cost of fuel duty and petrol.

I remind the House that we on this side have been calling for action on fuel duty for many months, if not years, and we voted against the increase in the last Budget. No doubt I shall be reminded that it was the Conservative government who introduced the fuel duty escalator in the first place. However, that was at a time when the price of crude oil was very much lower than it is now. The thing about escalators is that one gets off when one gets to the top.

Since this Government came into office, they have increased the average cost of unleaded petrol from 59p a litre to its current price of over 80p. Sixteen pence of the 26p increase in petrol has been due to increased taxation and fuel duty. Britain has the second cheapest pre-tax petrol in the European Union, behind only Germany. However, once tax is added on, Britain leaps to the top of the price league table and fuel is 23 per cent more expensive than the European Union

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average. Can we really be proud that we have the most expensive fuel in the whole of Europe, probably the most expensive in the world?

As I said, when we introduced the fuel tax escalator United Kingdom petrol was the third cheapest in Europe. The present Government increased the escalator to 6 per cent in June 1997. They held three Budgets in their first 21 months and increased petrol by at least 6 per cent above inflation each time, that is, three annual increases in less than two years. It does not stop there. In the 1999 Budget they increased diesel by 12 per cent, which had a devastating effect on hauliers.

Even in this year's Budget, although the Government stopped the fuel duty escalator, they put up the price of petrol by 3.3 per cent, which was allegedly what the rate of inflation was going to be in September 2000. I do not want to embarrass the Minister by mentioning pensions, but it was in the same Budget that a 1.1 per cent increase in the rate of inflation for increasing pensions resulted in the well-known figure of 75 pence, which does not now even buy a litre of petrol.

Under this Government the average motorist is paying around £350 more per year for petrol. In the spring of 1997 it cost £37 to fill a Ford Mondeo; now it costs £52. As I said, we have consistently opposed these fuel tax rises. We urged the Chancellor to end the annual increases in fuel duty two years before he finally claimed that he would stop the fuel tax escalator. We have pledged that we will cut fuel tax by at least 3p per litre when we return to office. That can easily be afforded.

Can the Minister say what is the current estimate for North Sea revenues? It was £4.3 billion at the time of the Budget, with oil at 22 dollars. What is it now with oil at around 30 dollars? It is estimated, according to National Audit Office figures, that the Treasury receives £330 million extra revenue a year for every one dollar rise in world oil prices due to higher VAT, petroleum revenue tax, North Sea royalties and corporation tax. So the time has come when we need to see a reduction in fuel duty.

These protests were not just about the price of fuel for hauliers and farmers. They were also about the extra regulations and red tape that the Government have piled on to small businesses. It is no wonder that the protestors had, according to the opinion polls, the support of some 90 per cent of the population.

I ask the Minister a couple of questions about the list of priority filling stations--those for essential services-- which he mentioned in his Statement. Is it true that the list was inaccurate at the time it was posted on the website and that some of the sites did not actually exist and had not been petrol stations for quite some time? I hope the noble Lord can give the House an assurance that the list is being brought up to date.

Secondly, are the emergency regulations to which the Minister referred still in force or would they have to be reintroduced if another emergency arose?

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As I said at the beginning, it is to be hoped that such a situation will not arise again, but it is now up to the Government to take action on fuel duty.

3.53 p.m.

Baroness Thomas of Walliswood: My Lords, we thank the Minister for a long, complicated and detailed Statement. I am sure he will forgive me if I do not respond to or ask a question on every point. Indeed, he will probably be thankful if I do not! It is certainly alarming that not just the United Kingdom but much of the developed world can be thrown into economic and political trauma by the actions of OPEC. Will the noble Lord tell us what the Government can do to prevent more of what might be called "economic terrorism"? Have the Government met with EU governments to discuss the prevention of any further disruption and to consider whether international action could be taken to prevent it? After all, it has all happened before.

The Minister referred to just-in-time deliveries as a special factor in our current vulnerability. But the vulnerability of the economy to a rapid rise in fuel prices was demonstrated in 1973 and the winter of discontent showed us the result of fuel shortages. Will the noble Lord tell us what national emergency plans were already in existence to deal with a fuel crisis? The Government were criticised for their slow response to the crisis and it is interesting that the Statement contains not a single date or day on which an action was taken. At what point was the civil contingency unit put on alert? On what date did the Government first make contact with the oil companies about the breakdown of supplies to the pumps?

The Government are also vulnerable to a charge of not advising the public on how to cope with the crisis. During a drought, government and others advise consumers about how to use less water. I am not aware that television, radio and the rest of the media were used by the Government to advise people how to use less fuel during the crisis by car sharing and driving at lower speeds. Why was that not done?

We on these Benches would be the last to wish to reduce the right of peaceful protest, but another cause for concern was the perceived inaction of the police faced with a need to keep the highways open and to ensure the free flow of goods. As the Minister said, tanker drivers did feel threatened. That is the evidence we have. Members of trade unions, it might be pointed out, are not allowed to behave as these protestors did. If I sat down with 20 friends and blocked Dorking High Street we would be removed. So I have some more questions of the Minister. What is the proper role of the police in these circumstances? Did that particular group of protestors get any special treatment? Did the Home Secretary issue advice to the police or were local forces left to exercise their own judgement?

I now turn to the part of the Statement in which the Minister was looking ahead. Will he explain why there may be a need to use legislation to increase the powers of the police to deal with public disorder? The Minister

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outlined a wide range of measures which the Government are now taking to cope with a possible recurrence of the protest. I welcome the comment made by the Chancellor that this national debate is too important ever to be decided by those who shout the loudest or push the hardest.

It is to be hoped that the measures being taken will result in there not being a recommencement of protests at the end of the so-called 60-day ultimatum issued by the protestors. That manner of dealing with what is real public policy is unacceptable. We on these Benches very much support the Government in their refusal to bow to this kind of protest.

Towards the end of the Statement, the Minister referred to those words of the Chancellor about balancing the claims of those demanding cheaper fuel and those demanding a cleaner environment. The problem is that the fuel duty escalator which has now been abandoned by the Government has never been an environmental tax. As the Chancellor made clear on several occasions during the crisis, fuel duty goes to the Treasury and funds general expenditure. It has not been spent on better public transport. It is not a different sort of taxation. It is simply an extra tax. It is no wonder that motorists resented it, particularly those in rural areas or those whose livelihoods were at stake.

Will the Minister tell us what plans he has to try to temper the wind to the shorn lamb in terms of ensuring, for example, that fuel prices are not additionally expensive in rural areas as they currently are? Will the Minister now tell us whether the Government will use the VAT windfall arising from higher oil prices to support better public transport?

4 p.m.

Lord Macdonald of Tradeston: My Lords, I am very grateful to the noble Lord, Lord Brabazon of Tara, for the Opposition's rejection of direct actions and of ultimatums by unelected groups. I am indeed grateful and should have been even more grateful had that been stated more loudly by the Benches opposite during the blockades.

The noble Lord made several points about our Budgets. I should point out to him that the last Budget was, indeed, the first for 11 years in which fuel duties were not raised above the rate of inflation. As I said earlier, not only did we abolish the fuel duty escalator but we took £1,800 off the vehicle excise duty on a 40-tonne, five-axle lorry in direct response to the concerns of the haulage industry. I should point out that since that Budget, only 2p out of the 19p rise in the price of petrol has been caused by fuel duty.

As for the recent gesture made by the Shadow Cabinet, I should say that when meeting protesters last week, the one thing which united them was their derision about the 3p offered by the Benches opposite on a day when Safeway, responding to the market, put up its fuel prices by 5p per litre.

The noble Lord mentioned the pension index calculation. I believe that that is based on a method of assessment which we inherited from the previous

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government; but I point out again to the House the dramatic increase in the price of crude oil from 10 dollars a barrel to 30 dollars a barrel at present.

Clearly Budget-setting processes cannot be based on the price of such a volatile commodity. But I point noble Lords opposite towards that budget-setting process as a way for us to advance our arguments in your Lordships' House and to ensure that all parties outside understand the nature of that democratic process.

On the question of the priority filling stations, no doubt when one is issuing orders directed at 3,200 stations across the country, there are inaccuracies. However, I was impressed by the way that the oil companies, the police and the local authorities worked together with the government offices. Our task force will be bringing all of those lists up to date in the process of co-ordination, co-operation and communication in which it is now engaged.

The emergency regulation orders still stand. As I said, it was not necessary to implement them. The actions during the events of the past two weeks were all carried out on a non-statutory basis.

I turn now to the remarks made by the noble Baroness, Lady Thomas of Walliswood. We have met other EU governments. It is well understood that this is a common problem. We had a meeting in Luxembourg at which a number of shared concerns were raised. Many countries were particularly worried about the very low profit margins in the haulage industry and about the competition that was coming in from eastern Europe and the exploitation of loopholes in Community legislation which allowed some countries to bring in east European drivers who were working for well below the rates prevalent in the rest of the EU.

Questions are raised in that regard as to how we can put in place better systems of communication--hotlines--which will ensure that British tourists and British lorry drivers do not suffer the kind of discrimination which was evident in some of the protests, particularly in France in recent times. I met bilaterally with the French Transport Minister to try to emphasise our concern about actions which needed to be taken if that situation arose again.

As for our national emergency plans, I believe that the calling together of the contingency committee and the other supporting organisation inside the Cabinet Office was carried out as expediently as was necessary. That action was taken on Monday, 13th September, to the best of my knowledge. We were in contact with the oil companies over that weekend.

As to why we did not use television and radio, we wanted to try to keep a proportionate response. We felt that what we were doing, in conjunction with the various authorities which were mentioned earlier, got the information over in a way that certainly informed the essential users.

There has been a suggestion of inaction by the police. The police had a very difficult role in balancing the needs of genuine peaceful protest with the need to keep the fuel moving. Ministers clearly expect that the

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law will be enforced but that was an operational matter. It was for chief officers to decide how best to deal with that.

There are a number of police powers and a range of offences under public order law which can be enforced where behaviour becomes intimidatory or disorderly. The police can also act to prevent obstruction of the highway.

The noble Baroness asked about any instructions which we gave to the police. We did not issue the police with any instructions on how to end the protests as we felt that that would infringe the operational responsibility of the police. My right honourable friend the Home Secretary made it very clear that he expected to see the law upheld vigorously. The police were in regular contact with the Home Office during the protests to keep Ministers informed.

As for fuel prices in rural areas, I understand the problems. I realise the complexities of those issues. But yet again, I believe that those are best addressed inside the Budget process.

The noble Baroness referred to the VAT windfall. Although there may be a windfall from petroleum revenue tax--with the volatility of the price, one will not know that until the end of the financial year--I must emphasise that, as the Chancellor has said, there is no VAT windfall because VAT is very largely recoverable by the businesses involved in this. Of course, in terms of the spending of disposable income, money that is not spent and "VATted" on fuel would be money spent and "VATted" on something else. So there is a displacement factor there.

4.8 p.m.

Lord Peston: My Lords, I congratulate my noble friend on providing a listening response to this matter. However, I urge him not to listen to people who talk economic nonsense. Where the world oil market is driving up the price of oil, I hope that he does not fall into the trap--I am sure that he will not--of assuming that one can use the tax system somehow to offset those market forces. That would be a serious error. One cannot possibly insulate those who use oil from the market forces which are at work.

I ask my noble friend to bear in mind that the French Government, acting apparently in panic, seem to have done precisely that. Certainly when I was in France last week, the French budget appeared to have been thrown totally into disarray by the open-ended commitment given by M. Jospin. Therefore, I ask my noble friend to reassure me that the Government will not listen to those who really do not wish to face reality. The fact is that when oil becomes expensive, those who use it must face up to the consequences. Much as the Government would like to help, they cannot possibly shield them from those powerful market forces.

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