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Fuel Duty

Volume 478: debated on Thursday 10 July 2008

The Government understand the difficulties facing businesses and families as a result of record oil prices, which is why the Chancellor deferred the forecast 2p per litre fuel duty increase that was planned for April this year. Future duty increases will also be considered in the light of future economic conditions.

The Chancellor may understand motorists’ difficulties, but he is still about to clobber 9 million motorists with extra road duty and the Government are still taxing our fuel more expensively than anywhere else in Europe. With that in mind, what relief can the Government offer motorists who have no alternative but to use their cars?

The hon. Gentleman should also reflect on the fact that as oil duties rise, there will be more fuel efficient cars, which are cheaper to run as one gets more miles to the gallon. Given where oil prices are at the moment, they will concentrate motorists’ minds.

As the Government consider the pre-Budget statement and next year’s Budget, does my hon. Friend think that it would be better to use the tax system to reduce or to increase demand for oil?

As a country, we certainly have to reduce our reliance on fossil fuels, and on oil in particular, in the medium to long term. It is therefore important—and this was discussed at the G8—that advanced economies such as ours wean themselves off their reliance on finite energy sources. The car duties have a role to play in that; as Professor Julia King said in her report, we need to be able to shift to cleaner engines and engines that reduce our carbon footprint.

At the moment, there is a considerable mismatch between the actual cost per mile of running a car and the cost per mile as assessed by Her Majesty’s Revenue and Customs for tax purposes. That is bad enough for everybody, but it particularly impacts on volunteer car drivers such as those for the hospital car service. They cannot claim the real cost of providing their service and are therefore no longer able to provide it. Is it possible to give any guidance on that matter to HMRC?

We understand the extra pressures that high oil prices are placing on many families in the UK at the moment. It is important to understand that volunteer drivers can claim their costs back, but they have to keep records of the mileage that they have donated for voluntary purposes. If they do that, they will not owe any tax on it. The approved mileage allowance payment—AMAP—scheme is a simplification. If such drivers wish to claim the actual costs of the miles that they drive, they can do that.

While the Labour party offers nothing more than government by nods and winks about what may or may not happen to fuel duty in the autumn, the Conservatives have proposed a fair fuel duty regulator that will cut duty when pump prices are soaring and that will be funded by the windfall to the Treasury from higher oil prices. The Government’s response has been to claim that there is no windfall to the Treasury. Will the hon. Lady now acknowledge that the National Institute of Economic and Social Research—the only independent body to have done any proper research on the issue—has concluded that, after taking into account all economic effects, there is a net benefit to the Treasury of £1.4 billion for every $10 increase in the price of oil? Why will the Government not agree to that plan to share the windfall, helping consumers and stabilising the public finances at the same time?

The plan would destabilise the public finances because it seeks to distribute an oil windfall that does not exist. The leader of the hon. Gentleman’s party said, “To be fair to the Government, when the price of oil goes up, corporation tax profits tend to go down, so corporation tax goes down and they suffer in other ways.” There is no oil windfall tax for the hon. Gentleman to distribute. Actually, his so-called fuel stabiliser is merely a gamble with £3 billion of public expenditure. The Conservatives need to tell us what they would cut to deliver a cut in fuel duty that may not even make it through to prices at the pumps.