I beg to move,
That this House welcomes the 1p cut in fuel duty at the 2011 Budget, the abolition of the fuel tax escalator, the establishment of a fair fuel stabiliser and the Government’s acknowledgement that high petrol and diesel prices are a serious problem; notes that in the context of the Government’s efforts to tackle the deficit and put the public finances on a sustainable path, ensuring stable tax revenues is vital for sustainable growth; however, believes that high fuel prices are causing immense difficulties for small and medium-sized enterprises vital to economic recovery; further notes reports that some low-paid workers are paying a tenth of their income just to fill up the family car and that high fuel prices are particularly damaging for the road freight industry; considers that high rates of fuel duty may have led to lower tax revenues in recent years, after reports from leading motoring organisations suggested that fuel duty revenues were at least £1 billion lower in the first six months of 2011 compared with 2008; and calls on the Government to consider the effect that increased taxes on fuel will have on the economy, examine ways of working with industry to ensure that falls in oil prices are passed on to consumers, to take account of market competitiveness, and to consider the feasibility of a price stabilisation mechanism that would work alongside the fair fuel stabiliser to address fluctuations in the pump price.
I would not be here today without the 116 MPs from all parties who have signed the motion; the many other Members who have Government posts who would have liked to have signed it; the 110,000 people who signed our e-petition; The Sun newspaper’s “Keep it Down” campaign; the FairFuelUK group led by Quentin Willson, who is in the precincts of Westminster today and who has been one of the leading campaigners for lower petrol prices; and Peter Carroll supported by the Daily Express. I also want to thank the Backbench Business Committee and its excellent Chair, the hon. Member for North East Derbyshire (Natascha Engel). Above all, I want to thank my hon. Friend the Member for Cleethorpes (Martin Vickers) who has been instrumental in helping me to secure this debate and the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) who I am pleased will be summing up. I want to consider why fuel duty is the No. 1 issue in Britain. I also want to talk about the financial impact, the economic impact and, finally, the social impact.
With the agreement of FairFuelUK, today’s motion has been framed to unite the House and to win as much support as possible. As I said, that is reflected by the fact that 116 MPs from all parties have signed it so this has been successful. Last week, a poll in The Sun showed that 85% of people now believe that the duty rise in January should be cancelled. Other polls show that people are more concerned about petrol and diesel prices than anything else. We have the highest diesel price in Europe and one of the highest petrol prices. The Government’s figures show that sales of petrol and diesel have been falling since 2008 because fuel is becoming unaffordable.
Does my hon. Friend agree that another problem is the difference in price of the same brand at different garages? At one garage on a motorway, we could see £1.50 a litre and, locally, we might see £1.29 a litre. Surely that is also a big problem.
Absolutely. I welcome the fact that the Government are going to introduce pilots in some rural areas. I know that people will talk more about that today, but I thank my hon. Friend for his remarks.
In real terms, adjusted for inflation, motoring fuel has never been this expensive, apart from twice in history during historic crises of supply—Suez in 1956 and the OPEC strike in 1973. The current situation is being driven by higher taxes and we have to be realistic and truthful about who pays the lion’s share of fuel duty: it is ordinary families driving to work, mums taking their children to school, small businesses that cannot afford to drive vans or lorries, and non-motorists who depend on buses and who are also being crushed by rocketing food prices as the cost of road haulage goes through the roof.
The hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) mentioned restricted bus services. Can I tell him that in large parts of Cumbria and other rural areas, there simply are not any bus services and people have to use their cars?
I thank my hon. Friend for being so generous with his time. He mentioned small businesses. Coach companies in places such as Great Yarmouth are also affected. That affects the local economy because current prices make it difficult for them to have the money to invest further in their business and create more jobs and bus services for people locally.
My hon. Friend is exactly right. Later, I will show that transport firms are closing because of the high cost of petrol and diesel. His constituents are lucky to have him to represent them. As I said, small businesses have no choice but to use their vans and lorries, and non-motorists depend on buses and are being crushed by rocketing food prices.
Let me just carry on for a bit.
The jobless, who are struggling to get off benefits and out of the poverty trap, cannot afford to drive to work. Fuel duty is a tax on hard-working and vulnerable Britons. I accept that the Government need to raise revenue, but let us at least be honest about who pays this tax. When fuel duty was first introduced in the 1920s, it was a third of its current level in real terms. However, as ever, tax increases have had the engine of a Rolls-Royce but the brakes of a lawnmower. The fuel tax escalator was introduced in 1993. Labour then accelerated it to 6% above inflation, and it was finally halted in November 2000, when massive fuel protests brought the country to a standstill. That was when petrol was just 80p a litre.
Like everyone else, I welcome this debate. Does the hon. Gentleman accept that rural areas and the regions of this nation—places such as Northern Ireland—have the lowest salaries per worker but the highest fuel costs? That means fuel pricing has a disproportionate impact on people living in those parts of the United Kingdom. Importantly, Government taxation policy is encouraging fuel fraud, fuel laundering and fuel smuggling, meaning that the Exchequer is losing hundreds of millions of pounds each year.
Further to the point raised by the hon. Member for North Antrim (Ian Paisley), does the hon. Gentleman agree that this disproportionate taxation is absolutely unjustifiable for people in rural areas who have no choice but to drive, particularly those in poorer households and small businesses?
A lot of people want to speak, so I do not want to take too many interventions.
The coalition Government abolished the fuel escalator—we welcome that—and cut duty by 1p. They also introduced a semi-stabiliser, which means that duty will rise quicker than inflation only if oil prices are low for a sustained period. Thanks to this, motorists will pay £274 less on fuel duty during this Parliament than if the previous Government had been re-elected and stuck with their plans—but for most people filling up the family car, our prices are still the most expensive in Europe. Even bankrupt socialist nations such as Spain now have lower rates of fuel tax than Britain.
I am glad that the hon. Gentleman raises that. The majority of businesses that are suffering from fuel prices get their VAT refunded. Sadly, as I mentioned, the last Labour Government increased the fuel escalator by 6% ahead of inflation. When we cut fuel taxes in the last Budget, Labour Members voted against it.
Research has shown that residents in my constituency of Harlow are now paying £42 million in fuel taxes every single year. However, tax is not the only problem. There are suggestions that some of the big oil companies are behaving like a cartel, with a stranglehold over the market. Brian Madderson of the Retail Motor Industry Federation says that the small forecourts that he represents are now forced to buy fuel from the big players at a set wholesale price on a daily basis rather than on weekly or monthly terms. There is no competition from wholesalers on these terms. The Enterprise Act 2002 gives Ministers powers to ask for an independent market study, and that is what we need.
Another factor is that fuel prices are quick to rise but sluggish in coming down.
Devon has as many roads as the whole of Belgium. We have very low wages, and many rural people are affected by fuel prices, in particular. There is also the question of diesel for lorries. Everything that goes by lorry uses diesel, so what about reducing its price in the way that it has been in many other countries?
My hon. Friend will be pleased to know that I prefer Devon to Belgium. Of course, he is exactly right.
In the past four months, the price of oil has fallen by 8% but fuel prices have stayed static. Oil firms protest that they are forced to buy raw materials in dollars and that currency fluctuations have made price cuts impossible, but analysis shows that this is false. The cost of Brent crude has fallen by nearly 20% since April this year, and yet the dollar has just risen by 6%.
Let me carry on for a moment.
Big oil firms should not hide behind currency fluctuations. Statistics from the UK Petroleum Industry Association, which is funded by the major oil companies, show that in early 2010 the price of crude oil fell steadily, and yet retail fuel prices stayed high for months. Why was that? Ultimately, the only way to resolve this is through open-book accounting. If the big oil companies want to prove their innocence, why do not they volunteer to publish the financial data?
I want to turn to the financial impacts. Since 2008, our consumption of diesel and petrol has declined, and the Government forecast that it will continue to plummet next year.
My hon. Friend is being unfathomably but characteristically generous with his time. He says that consumption has gone down. Does he agree that consumption in rural areas has probably gone down as far as it is going to? Demand for petrol is so inelastic because people have only one way of getting to work, and that is by driving, even if they are on the minimum wage. This is now no longer an issue of environmental concern—it is about social justice.
I am pleased to say that I was also in the constituency of my hon. Friend for my holidays; it is such a wonderful part of the world. There is absolutely no doubt that fuel prices are threatening rural communities and preventing people from meeting and gathering together. Petrol is now so astronomically expensive that it is driving people off the roads and costing the Exchequer money.
I wanted to invite my hon. Friend to Stroud for his holidays, as well, if he has not already been. If he does come, he will see that we have a large number of road haulage firms that are very concerned about the price of diesel. Of course, they are having to pass that on to small and medium-sized firms, which, in turn, means difficulties for them. We need to understand that and give further strength to his case in this House.
My hon. Friend makes the point better than I have; I completely agree with him.
In the run-up to this debate, lots of people came to me and said, “We all want lower fuel duty, but how can we pay for it?” In fact, this is back to front. Evidence suggests that we are on the wrong side of the Laffer curve and that lower taxes might increase revenues. The Government’s own figures show that between January and June this year 1.7 billion fewer litres of petrol and diesel were sold compared with the first half of 2008. The AA has done its analysis and says that this equates to £1 billion in lost revenue for the Treasury. As the Chancellor said earlier this year, we must put fuel into the tank of the British economy, and cutting fuel tax is the way to do it. The economic impact of this is disastrous. The ex-Tesco boss, Sir Terry Leahy, told The Sun:
“I don’t think people fully appreciated what an oil shock we’ve had. Filling up the family car has gone up 70% in two years, causing what was a steady recovery to go sideways.”
As some of my hon. Friends have said, UK haulage companies are being driven out of business as they face higher taxes here than in nearby countries such as Ireland, with which we share a land border. To their credit, the Government have taken some action, and foreign lorry drivers are now charged up to £9 a day to use our roads. But still the insolvency firm SFP has said that three quarters of transport business failures in the last year have been caused by excessive fuel prices.
Fuel prices are adding to our dole queues. In 2006, when petrol was just 95p per litre, experts at the London School of Economics published research showing that unemployed workers who could not afford to drive or to commute to jobs stayed unemployed for longer. Since then, fuel prices have surged by 40%, despite the recession, and many workers have suffered from redundancy or wage freezes. The Government are working on a rural fuel duty rebate for remote outer islands such as the Outer Hebrides and elsewhere. This is welcome, but it will help only a tiny number of motorists.
I should like to add my comments to those of my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron). I want particularly to draw attention to the fact that young people in my constituency, which is very rural, are limited in their choice of education because there are no bus services to speak of, and they are sorely tested in trying to get to their schools and colleges if they choose to use a school outside their area. This was highlighted even more by the fact that they brought transport—
Order. This is far too long an intervention. We want to get through a lot of Members who wish to speak. Some people are trying to intervene who wanted to catch my eye early on, and I will put them further down the list if that carries on. I want to get as many people in as possible.
I will not give way again because of what Mr Deputy Speaker has just said. I apologise to my hon. Friend.
I will turn to the social impact. In Harlow, the cheapest unleaded petrol costs £1.33 per litre. Most Harlow motorists are therefore spending £1,700 a year just to fill their tanks. For most people, that is the equivalent of £2,200 of income before tax—a tenth of the average Harlow salary. I met a Harlow man called Mr Barry Metcalf a few weeks ago. He is self-employed and uses his own car to commute to West Ham for work. He spends nearly £60 a week on fuel and has seen a 35% increase in the past year or two. The Government define fuel poverty as spending a tenth of one’s income on heating bills. What about spending a tenth of one’s income just on driving to work?
Of that £1,700, about £1,000 is taxation. That is why fuel duty is like a second income tax. The Office for National Statistics confirmed yesterday that fuel duty is regressive and that the poorest are hit twice as hard as the richest. Fuel duty is not just about economics; it is an issue of social justice. That is especially true in rural communities, which are being destroyed by fuel prices.
In conclusion, there is a strong financial, economic and social case for cutting fuel taxes. That is why we urge the Government to scrap the planned 4p fuel duty increases that are scheduled for January and August 2012; to create a genuine price stabilisation mechanism that smoothes out fluctuations in the pump price; to pressurise the big oil companies to pass on cheaper oil to motorists; and to set up a commission to look at market competitiveness and radical ways of cutting fuel taxes in the long term. There is an ethical case too. We must show that tax cutting is a moral creed. We must show that this is a Government for the many, not for the few; a Government who cut taxes for millions of British people, not just for millionaires. I urge the Government to listen to the 116 MPs who have signed the motion; to the 110,000 people who have signed the FairFuelUK e-petition; and to the many millions of families, small businesses and pensioners who are struggling with fuel costs. I urge the House to support the motion.
I am sorry that my amendment was not selected by Mr Speaker, because I believe that the motion is wishy-washy. I will explain the reasons for that later. My amendment went into some of the details that need to be addressed to help hard-working families.
Like many Members, about four or five weeks ago I started to receive letters from constituents on this issue, mainly prompted by the FairFuelUK campaign. At the time I wrote back to my constituents to tell them that I could not support the campaign because it called for tax cuts without saying how they would be paid for. I have little time for campaigns by the Daily Mail, the Daily Express, FairFuelUK or the TaxPayers Alliance, which are extreme right-wing organisations that promote tax cuts at the expense of public services.
However, I have now changed my mind after speaking to some of my constituents. There is no doubt in my mind that high fuel prices are having a tremendous impact on many low-paid and middle-paid families in my constituency. It is clear that the Government have no idea about the impact that high fuel prices are having on many constituents around the country. It is also clear that they have no understanding of the impact that wage freezes, high inflation, tax increases and high unemployment are having on the general public and the economy. Many of my constituents will have no pay increase for two years. Prices go up in the shops virtually every week. Heating and petrol prices are a particular problem for many of my constituents, and many of them are struggling to stay afloat.
The second reason I support the campaign is the decision by the Liberal Democrats and the Tories to raise VAT to 20%, which has had a massive impact on the cost of living and on my community. It has made the situation worse. We have now had a flatlining economy for 18 months and unemployment is at a 17-year high. Those who believe that the motion will address those issues are sadly mistaken. What we need is a complete review of economic policy in this country, taking on board something like the Labour plan for jobs and growth. Unlike Labour, the Government parties have no policies for growth. Labour’s policies of providing 100,000 jobs for young people, bringing forward investment in major projects and schools, a temporary reversal of the VAT rise—
I am sticking to them, because the people promoting the motion believe that it will address their constituents’ problems. We have heard many Members talking about the impact that high fuel prices are having on their constituencies. I know that to be the case, but it is only part of the problem that people face on a daily basis. We need a review. At the last election the Tories promised to cut fuel costs and to stabilise them in the immediate future and the long term.
Many families depend on cars to get themselves to work and to deliver their children to school—
Speaking as somebody whose combined family mileage approaches 50,000 miles a year, and as a Member who represents a semi-rural constituency, I am acutely aware of the burden placed on local households by fuel prices. The cost of fuel does not just affect those who use cars; it affects everyone through food prices and prices on the high street, and it affects those who use public transport.
Some argue that if we want to move towards a more sustainable economy, high fuel prices will encourage a greener outlook. I do not disagree with that. However, when we are doing everything we can to improve our economic prospects, now is not the time to allow rising fuel prices to limit the mobility of our work force and hinder manufacturers and retailers through increased transport costs.
Does my hon. Friend agree that young people in particular feel the pressure of high fuel prices when they are trying to find their first job, which is often low paid? Does he also agree that the cost of insurance adds a burden to young people who have to get to and from employment?
My hon. Friend raises a very good point. The cost of car insurance is unbelievably high for young people. That is a particular problem when they are trying to get on the job ladder. We should certainly be doing everything we can to help young people.
The price of oil, as we have heard, is determined by commodity markets as well as by the sterling-dollar exchange rate. The only way to control pump prices is therefore through fuel duty. However, the country has incredibly little room for manoeuvre. I am convinced that helping economic growth through tax breaks works, especially when those tax breaks are targeted at specific areas such as fuel duty.
A cut in the price of fuel at the pump would reduce manufacturing and distribution costs, increase the mobility of our work force, increase household disposable income and lessen, overall, the headwind facing our economic recovery. Taking into account the work that we are trying to do in Kidderminster to promote advanced manufacturing and help boost the retail industry, I would welcome any reduction in costs, including fuel and transport costs. However, given where our economy is, any reduction in fuel revenue would have to be met by an increase in revenue elsewhere. Everything that the Government do has to be fiscally neutral. We simply do not have the resources available to cut fuel duty significantly without putting in jeopardy our low borrowing rates, which mean that we are in greater control of our own destiny than some of our European neighbours.
Although I support the efforts that the Government have already made in cutting 1p off the fuel duty in March and suspending the fuel duty escalator—a reduction of £1.9 billion in fuel duty—I urge them to see whether more can be done to help. The rising price of oil leads to increased profit for the oil companies from existing oilfields, as we have heard, and that extra profit gives the Government more opportunities to look again at tackling the high pump price of fuel, either through encouraging price reductions by the oil companies or through the tax system.
What has recently been causing a great deal of anguish among my constituents is that it costs more to run a car in Wyre Forest than in nearby Dudley. The average of 134.8p per litre of unleaded is about 6p higher than in Dudley, just 10 miles up the road. I have written to the petrol companies to see whether they can explain why they want my constituents to pay more for their petrol than people in nearby Dudley or Wolverhampton. Just one has taken the trouble to reply, to say that it has received my letter, but I have had no other replies, and certainly no explanation as yet.
It is right that we are debating the overall cost of fuel duty to our economy, and it is right that we are looking for ways of reducing that burden. However, I want the oil companies to explain why they see fit to charge my constituents in Wyre Forest more for their motoring. Can they justify subsidising more urban areas, not just in the black country but in the country as a whole, at the expense of our semi-rural and rural communities? Can they please let us all know when they intend to remove that rural surcharge on fuel?
It is a pleasure to follow the hon. Member for Wyre Forest (Mark Garnier). I congratulate the hon. Member for Harlow (Robert Halfon) on securing the debate, and I was one of those who signed the motion and helped him to do so. I believe that the motion is a little broad and weak in its application, but I understand the reason for that—securing this debate.
I wish to talk about two main issues to do with how fuel prices hit peripheral areas—not just isolated communities but other areas on the periphery. They suffer from a double whammy of high energy costs—particularly for those who are off the grid and have to pay for heating oil and liquefied petroleum gas—and having to pay more for their petrol.
Road journeys are a necessity in communities such as the one that I represent. We are not talking about Chelsea tractors or luxury vehicles; we are talking about the necessity of getting from A to B in rural and semi-rural areas, where alternatives do not exist. If the hon. Member for Harlow were to come to my constituency, along with the hon. Member for Crewe and Nantwich (Mr Timpson) and others, he would see the price differences as he moved west from Chester to Anglesey. Only yesterday, the difference was 7p per litre of petrol, and far more for diesel. We need to do something about that.
I welcome any reduction in fuel duty, for which I have campaigned for many years, but the March reduction was wiped out by the January VAT increase. That was a real problem for real motorists. I understand what the hon. Member for Harlow said about businesses reclaiming VAT, but ordinary motorists were unable to reclaim that extra 2.5 percentage points.
My hon. Friend knows that fuel prices go up when he travels westwards from the Chester area to his constituency. However, there are also people in urban areas who are trapped by fuel prices, such as the lady who came to see me at my last surgery, who has to travel to Liverpool for medical treatment and also has to travel regularly to Bolton to see her daughter, who is in a mental health hospital. Such people need support, and some of them live in urban areas. I am sure he would not want to exclude them.
Sure—and I was not making a rural versus urban argument, I was talking about peripheral areas, particularly those far from refineries. Indeed, I want to talk about British refineries. Quite often, crude oil from the North sea is actually refined in faraway countries and brought back here, which adds cost. We therefore need to improve our refinery capacity in this country, to keep prices down.
I welcome the fact that the escalator has been done away with. It was introduced in 1993, perhaps for good reasons: it was felt that people could move from private to public transport. However, in semi-rural areas that is just not possible. That is why motorists have been enraged by the rise in the escalator. It went up, I think, by 5% under the Conservatives and 6% under Labour.
The Government could deal with VAT now. We can talk about the effect that a semi-stabiliser would have on North sea oil and the prices at the pump, but the Government can take measures now to reduce VAT to help motorists today. When the previous Government lowered VAT from 17.5% to 15%, fuel prices came down, helping to stimulate the economy. [Interruption.] They did. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) is laughing, but he needs to compare the prices. Prices came down and businesses were able to trade more. Individuals could also use their cars more, and not just for work but for leisure. [Interruption.] The hon. Gentleman says from a sedentary position that fuel duty went up, but the calculation shows an overall saving to the motorist at the pump, and that is what we are talking about. We can argue the complicated and technical aspects, but at the end of the day people want lower prices at the pump.
Government Members may well be laughing too, but people in Chesterfield are not laughing, because they are paying through the nose. It is not just the general public who are affected by the current level of VAT. Small businesses up and down the country that are not VAT-registered and do not qualify to get their VAT back are paying huge amounts. We should not be laughing about this; we should be taking the point seriously.
I am grateful to my hon. Friend. The Government need to look again at changing the rate, because it worked. If we in this House are serious about stimulating the economy, we need to look at such mechanisms—which can be used now—because the economy is flatlining.
Areas such as mine are paying extra for energy and fuel, and we need to do something about it. We had a debate the other week about energy prices, and we agreed that we needed to investigate what is called the “rocket and feathers” effect—that means that when prices go up they shoot up quickly, but when they come down they come down slowly—for domestic energy users and retailers. As the hon. Member for Harlow said, we also need to look at that effect in relation to crude oil prices, which also escalate quickly but come down slowly. We need some sort of commission to examine that mechanism.
The three points that I wanted to make today are as follows. We need to look at the differentials between areas close to refineries and those on the periphery. I understand that a rebate is being considered for remote islands, but, as has already been said, that does not help the many motorists around the coastal areas of the United Kingdom who are paying considerably more. I heard one of my colleagues from Northern Ireland say that Northern Ireland has higher prices, but according to the website that compares prices, Bangor in north Wales pays 3p or 4p a litre more than Bangor in Northern Ireland. I say good luck to the people who live in Bangor in Northern Ireland, but my constituents are paying 7p a litre more, week in week out, to trade, to do business, to move people and goods across the area and to take young children to amenities and leisure facilities of a night.
It is time the Government did something. I will back them when they do the right thing. They can consider whether more could be done on refineries. We need to look at transport costs and VAT, and we need to help the people today.
I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on his campaign to secure today’s debate.
I represent a sparsely populated constituency where long drives for essential business are common, so I am well aware of the impact of high fuel prices on individuals and businesses. For example, the price of fuel on some of the larger islands in my constituency, such as Mull and Islay, is typically about 15p to 20p a litre higher than in a city centre supermarket, and on the smaller islands, such as Coll and Colonsay, the price is usually about 30p a litre higher. It should be stressed that this is not because of profiteering by the local filling stations. The reasons for the higher prices are low turnover, compared with all the fixed costs that a rural filling station has to pay, and the costs of the distribution network. The costs of fuel distribution in the highlands and islands are very high, and I hope that the Office of Fair Trading will investigate them.
I understand exactly what the hon. Gentleman is saying about Coll and Colonsay, but he will know that a newspaper on Coll and Colonsay costs the same as in the city centre. Should the Government not move towards more parity and equality between islands such as Coll and Colonsay—or, indeed, Na h-Eileanan an Iar—and city centres?
I agree with the hon. Gentleman, and I hope that he will give credit to the Government for what they are doing on fuel duty on islands. The high price of fuel obviously has a great impact on people’s living standards, and makes it difficult for anyone trying to run a business on an island or in a remote rural area.
My hon. Friend is making the important point, which has come out again and again in the debate, that people in remote rural areas in constituencies such as ours have no choice but to use a car. Does he agree that, in the long run, the Government will have to look at a system of variable road user pricing that is based on the choices available and that will enable essential users to pay a lower price?
I certainly agree with my hon. Friend.
There has always been an environmental argument for higher fuel prices, in order to persuade people to use public transport rather than a car. That argument works fine in a city with plenty of bus and train services, but it falls down completely in a rural area, and particularly in a remote rural area such as Argyll and Bute, where in places there is a bus service only on school days. That might be okay for getting schoolteachers to and from work, but it is no good for anyone who needs to be at work outside school hours. The advantage of road user pricing would be that more could be charged for driving on city roads, with a much lower price for driving on a remote rural road. The problem with fuel duty is that it is a blunt instrument, in that the same level of duty is charged in all parts of the country, irrespective of whether public transport alternatives exist or not.
I am sorry; I have used both my interventions.
To go back to the point made by the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), I was delighted when the Government announced their intention to pursue a pilot scheme whereby there will be a 5p a litre fuel duty discount for those on many of the country’s islands, including all those in my constituency. That reduction will go part of the way towards removing the price differential between fuel on the islands and fuel on the mainland. I hope that the scheme will be up and running soon, and I ask the Minister to give us an update at the end of the debate on how the negotiations are going in Europe. I am sure that the pilot scheme for the islands will be successful; if it is, I would like it to be extended to remote parts of the mainland. Operating a rural filling station is clearly not a profitable business these days. On the Kintyre peninsula, two of the five filling stations that the area had at the start of the year have closed.
There was a time when it could be argued that high fuel taxation was needed to discourage people from driving and polluting the environment, but market forces have already achieved that. The environmental argument for high fuel duty is not sustainable in the present circumstances. The high price is already discouraging people from driving, and they are making only journeys that are absolutely essential. Changing people’s behaviour is possible only when public transport alternatives are available, which is simply not the case in the highlands and islands.
I was also delighted when the Government abandoned Labour’s fuel duty escalator in the Budget, introducing the fuel duty stabiliser instead and bringing down the fuel duty because the price was so high. The Government have scheduled a fuel duty increase for January, because it was hoped at the time of the Budget that prices would have decreased by then. Prices show no sign of coming down, however, so I hope that the Government will listen to everyone who has signed the motion and spoken in the debate, and not proceed with the January fuel duty increase. The price of fuel adds to the price of everything in a rural area. The high cost is holding back economic recovery, so anything that the Government can do to bring the price down would be greatly welcomed in all rural parts of the country, and particularly in the highlands and islands.
I too want to thank the hon. Member for Harlow (Robert Halfon) for securing the debate today. Like many others in the House, I have received a multitude of e-mails supporting the FairFuelUK campaign. Expectations in my constituency and right across the country are very high indeed, and I think that some people are expecting fuel prices to fall at 7 o’clock this evening, on the back of this debate. That is not going to happen, however, and I have had to make my constituents aware that the wording of the motion will not provide a quick fix to the problems that they are facing.
Let me quickly raise one or two issues. Crude oil today is less than $115 a barrel; in 2008, oil was $147 a barrel. We have to ask about market speculation and what it is doing to the price of fuel and thus to our constituents. Like others who have spoken this afternoon, I represent a rural area, where people often have off-grid heating. That means they suffer more, not just from having to fill up their vehicles.
Do people in the hon. Gentleman’s constituency suffer as we do in South Derbyshire from fuel thefts, which are common in rural areas? This applies to heating oil in particular, but transport companies also have their stocks of oil stolen regularly, and yet the police do not seem to be able to trace them.
Dumfries and Galloway constabulary is first class at tracking and tracing thieves. The hon. Lady is absolutely right. We often face this situation when the value of the product rises and people try to steal heating oil and all the rest of it. People have to heat their homes, whether it be with heating oil or liquefied petroleum gas, and they also have to use their vehicles. In some locations, there is no other form of transport whatever. For some, there is a bus until 5 or 6 o’clock in the evening, which can be very difficult when people need to travel a distance to visit other family members or friends in hospital. A car is thus an absolute necessity for many households.
We are seeing price differentials and we are certainly seeing them with some supermarkets. I am not going to name the supermarkets on this occasion, as the last time I mentioned just the word “supermarkets”, two or three of them were quick to write to me to express their anger. Supermarkets drive the price in our local communities: prices tend to fix around what local supermarkets are bidding from their customers.
Here we are getting towards the back end of the year and we see another price differential between diesel and unleaded petrol. The difference has gone up from what it was in the late summer—about 2p or 3p a litre—to up to 6p, 7p or 8p a litre today. I recognise that lies partly with the refineries, but surely in this day and age more investment should be forthcoming so that the price differential does not create an even greater problem for those who have decided to drive diesel vehicles.
My hon. Friend is setting out the complexity of this issue. Does he agree that, given that complexity, the simplest way to relieve the pressure on families and businesses would be temporarily to reverse the rise in VAT?
My hon. Friend is exactly right, and I was about to come on to that point. That was the most significant single increase of the last 12 months. The increase in VAT drove up the price by some 3.2p a litre. We could give families that amount back if we took off the extra 2.5% on VAT. I ask the Economic Secretary to consider that measure temporarily. My other plea to her and her Treasury colleagues relates to future increases in the pipeline, as outlined in the Budget. I sincerely hope that she and her colleagues will listen to what we are saying this afternoon, as we do not want the proposed increases finding their way through. She should be bold, as the previous Government were bold. That Labour Government took some flak on duty increases, but there were 11 occasions over nine years when the Labour Government either froze, postponed or totally abandoned increases that were in the pipeline because the price of crude oil was rising.
I sincerely hope that some Department will speak to the oil companies about what we are witnessing. I come back to the speculation going on in the marketplace, which is hurting our constituents and hurting businesses, particularly small businesses. I realise that because those who are VAT-registered will get the VAT back, any reduction will not affect them, but others are being hurt very badly. Like other Members, perhaps, I know of people in remote areas who have discovered that travelling to work is becoming far too costly, and some of them are considering giving up work altogether.
I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on the persistence that enabled him to secure this important debate.
The issue that we are discussing does not affect only rural constituencies. I am very conscious that 75% of the constituents who have contacted me come from the more urban parts of the constituency. The truth is that everyone is affected by rising fuel prices. Nevertheless, a disproportionate burden has been placed on those who live in rural areas. In parts of my constituency, people have no choice but to use their cars. Those who live in remote rural villages travel, on average, 10,000 miles a year just to gain access to essential services. One constituent told me, “This is not about luxury. I leave home for work before the first bus arrives in the morning, and I return long after the last one has gone back to the depot.” He has no choice whatsoever.
However, it is not only those who use their cars for their own journeys who are affected. We should also consider those who act as volunteer drivers and support charities, an increasing number of whom tell me that they are finding it too expensive to continue to help the community in that way. We should be thinking about ways of supporting them. Although they welcome the increase in the Chancellor’s approved mileage allowance, they say it is becoming increasingly difficult for them to play their part in helping the local community and reducing the burden on the local councils that would otherwise foot the bill.
Absolutely. I hope that I shall have time to mention that at the end of my speech.
This is not just of concern to middle-income families who may be running two cars; it is a huge cost for low-income families who spend proportionally more of their incomes on fuel.
I am sure my hon. Friend agrees that some of those low-income families are trying to establish their own businesses, or are already running small businesses such as, in my constituency, landscape gardening businesses. Winter is coming, and those people will now have to deal with the increase in fuel prices as well.
That is indeed of real concern.
It is little wonder that so many of our constituents signed the e-petition—more than 110,000 members of the public called for the debate—and little wonder that the focus has been on the proportion of taxation in the current average price of £1.34 a litre.
I am not convinced that that would be legal.
This morning I met representatives of the Freight Transport Association. They told me that high fuel prices have had a crippling effect on the logistics industry, whose business viability is determined by the price of fuel. Even the smallest rise makes a massive difference to them. A 5p increase in fuel duty adds another £2,350 to the annual price of running an articulated lorry, and the 3p increase that is planned for January would mean that a fleet of 50 vehicles would have to recover £37,000 more per year.
I am sorry, but I do not think I have time to do so.
Profit margins for hauliers are incredibly tight, which makes haulage a very vulnerable business. In particular, fuel companies are not willing to extend credit terms, with the result that some payments are shrinking to as little as three days’ worth. As haulage firms are often not paid for work for up to 60 days, this is very much a hand-to-mouth industry, and companies can afford to think only as far as January. That hinders growth, investment and further recruitment.
There are about 100 Freight Transport Association members in my constituency, which is, of course, close to a deep-sea port. Fuel duty is lower on the continent, and £1,000-worth of diesel purchased on the continent can give over 200 extra miles to the driver. That has led to European businesses becoming more competitive than their UK counterparts, further heightening the pressure on domestic hauliers.
I acknowledge that we are facing a very difficult economic situation, and that we need to take robust steps to tackle the deficit, and I also know that the planned rises are less than the previous Government had intended. It is a relief to constituents that the Government delayed the scheduled tax rises and have introduced a fuel stabiliser but, like others supporting this motion, I want us to have a stabilisation mechanism under which duty rises and falls in response to fluctuations in the underlying price of oil.
As I am a member of the Environmental Audit Committee, it would be wrong of me not to mention the impact motorists and hauliers have on our nation’s carbon footprint, but fuel taxation is a blunt instrument and the reality is that people in rural areas are having to bear the additional cost as they often have to make the same essential journeys as before.
There are alternatives to petrol and diesel that are more environmentally friendly. One of them is biodiesel, produced from used cooking oil. Over the last year, 99 million litres of used cooking oil was collected from restaurants, food manufacturers and caterers. It is an entirely sustainable fuel derived from a waste product and devoid of some of the negative impacts traditionally associated with biofuels. Therefore, if taxation on fuel is partly about encouraging behavioural change, rather than just being about revenue raising, the Government should encourage the use of this fuel, rather than see it as another target for increasing duty. The removal of the 20p per litre duty differential on this type of fuel, which is an excellent source of green energy, sends entirely the wrong message.
Order. Before I call the next speaker, may I remind Members that when they rise to intervene they are addressing the House, not their colleague behind them, and they are to turn around and face the Speaker’s Chair? That will stop them saying “you”, because they will see that they are addressing me, and what they have to say has nothing to do with me. We will also be able to hear the interventions, which I have not been able to do thus far.
I welcome the opportunity to speak in this debate, and I join other Members in paying tribute to the FairFuelUK campaign and the thousands of businesses and individuals who have backed it. I also pay tribute to the hon. Member for Harlow (Robert Halfon) for securing a debate on this important matter.
There can be no doubt that for many months now high fuel prices have been hitting families and businesses hard. Indeed, the October AA monthly fuel price report highlighted that summer prices—those from April to mid-October—compared with those in 2010 were on average 17.5p per litre higher for petrol and 19.7p higher for diesel. These high price increases are an important element of the wider financial squeeze that so many middle and low-income families are currently experiencing.
New AA research published yesterday also underlined the fact that less well-off drivers have suffered more since the price of fuel peaked earlier this year. The research shows that those cutting back on car use and/or other spending rose dramatically among those living on lower incomes. That is a very worrying development. The constituents who have contacted me over the last few weeks are absolutely clear about what they want: lower fuel duty and lower fuel prices at the pumps.
On fuel duty, the Conservatives in opposition said that pump prices would be benchmarked and allowed only to move by 5p per litre in either direction, in response to the changing price of oil. The limited fair fuel stabiliser plan announced in the Budget does not equate to what the public might expect from a fuel duty stabiliser. Commenting after the Budget announcement, Edmund King, the president of the AA, said:
“In effect it is a stabiliser on an escalator rather than a stabiliser on prices. It does not reduce prices. All it does is to reduce increases in duty.”
That is not what consumers were expecting and, as the motion states, it is time for the Government to look again at a “price stabilisation mechanism”.
When the Government increased VAT to 20% in January, they contributed to a further increase in fuel prices. It was the wrong tax at the wrong time, and it has kept petrol prices high and hit economic growth. I support the call, along with my Labour colleagues, for a temporary VAT cut to 17.5%, which would immediately bring the cost of fuel down by about 3p a litre.
We must also be grateful to my hon. Friend the Member for Bassetlaw (John Mann) for the excellent research that he published earlier this year on the political responsibility for increases in fuel duty. His revealing figures show that Conservative Governments have presided over increases in duty and VAT that have actually cost motorists twice as much as increases made by Labour Administrations. His figures demonstrate clearly that Labour Members have always been on the side of the ordinary motorist and the business person, whereas the Conservatives have been content to use fuel duties as a punitive means of raising revenue.
My hon. Friend has not only laid out the case with tremendous vision, but he has used some research, which is very welcome. Does he not think that the many people from Chesterfield who wrote to me supporting the fair fuel debate will be surprised to see how meek the motion is? They were expecting a hell of a lot more from this debate than what is to be voted on.
Filling up a commercial van costs £15 more now than it did last year. In January, I asked the Prime Minister about help for hauliers who are struggling with their fuel bills and he told me that the Government were looking at a discount for haulage firms. So far there has been little action on that. Does my hon. Friend agree that it is vital to support our truckers at this time?
No, I am going to carry on because I have taken some interventions and I do not have much time. I am coming to the conclusion of my speech. [Interruption.] We hear all the jeers from those on the Government Benches, but we must not forget that in 1993 it was a Conservative Government who introduced the fuel duty escalator. It is a Conservative fuel escalator, despite the protestations from Conservative Members. The families and businesses that have contacted all Members of this House on this issue need and expect action that will bring about a tangible reduction in the price of petrol and diesel, sooner rather than later. I hope that today’s debate will act as a stimulus for real change on this issue in the weeks and months ahead.
I join so many colleagues in congratulating my hon. Friend the Member for Harlow (Robert Halfon) on securing this fantastic debate. It is such a great example of how the Back-Bench system should operate. On that note, I will try to keep my speech as short as possible, limiting it to less than two minutes in order to let others speak.
I wish to make one very simple point on behalf of Cumbria: rural isolation is not just a question of sparse population; it is also about the terrible hollowing out of rural areas over the past 15 years. When I look out of my window at home, I see the disappearance of a school, a shop and a police station. In the past 15 years, we have lost 2,200 schools, 550 clinics and 150 police stations—that is across the nation, not across Cumbria.
My hon. Friend will also be aware that 600 filling stations are closing every year, making the distance that rural inhabitants must travel to fill up their car even more demanding.
I thank my hon. Friend for making that point. The loss of pumps is an incredibly important issue, as is the loss of all the other services that are going such as pubs and shops. Currently, my neighbour, who has Parkinson’s disease, has to travel for two and a half hours to see a neurologist in Newcastle, and our schoolchildren are travelling further and further. There are things we can do to deal effectively with these problems, including with broadband and smart metering. It is a real disgrace that we have not sorted out smart metering. There is much better technology available. However, I should like to make a small plea for an extension, as rapidly as possible, of the 5p rebate that is currently offered in the highlands and islands to other sparsely populated areas of Britain.
I appreciate that the hon. Gentleman is making a rural point and that there are all sorts of issues about bridges and roads and the amount that goes into them, certainly in Lancashire. However, on his point about unfairness, was it not a previous Tory Minister who said, “When it doesn’t fit, get on your bike and get somewhere else”?
The hon. Gentleman will be astonished to discover that I disagree very strongly with the idea that the solution to problems of rural isolation is to “get on one’s bike and move somewhere else.” Our rural communities are the lifeblood of this country. When we think about our rural areas, we think about this country. Farming communities and all the other forms of rural community have a value that goes well beyond their economic value. We would be terribly sorry to lose them.
My hon. Friend is a passionate advocate of all things rural. Does he agree that the disproportionate impact of the tax on rural economies effectively makes it a tax on rural areas? It is a tax on the rural big society and on the rebalanced economy. If we are not careful, it will trigger a serious tax revolt in our rural communities.
I would never be able to speak with such eloquence as my hon. Friend, who makes a wonderful point. In order to fulfil my commitment and in honour of my hon. Friend the Member for Harlow and the Backbench Business Committee, I shall now sit down after making my plea: “5p for Cumbria.”
I am grateful to be taking part in the debate and I congratulate the hon. Member for Harlow (Robert Halfon) and his colleagues on having secured it. I also congratulate the many individuals who signed the e-petition and those others who managed to persuade the Backbench Business Committee to have this debate today.
This issue is one of our constituents’ major concerns; indeed, surveys have put it right at the top of that particular poll. The fact that households in the United Kingdom pay on average £677 a year purely on fuel duty illustrates the extent to which this issue affects ordinary working people and those in the poorer sectors of society. The poorest 20% are generally paying twice as much of their income on fuel duty as the richest 20%, which cannot be right. It is clear that the impact is not just on poorer people but on those in rural areas, as has so eloquently been pointed out already, and there is also a disproportionate impact on younger people. We had a debate in the House not long ago about car insurance and it is clear that younger people face a big premium for car insurance. As a result, they are finding it very difficult to stay mobile, to get jobs and to stay in employment.
Yes; transport is a big issue for young people, because in order to get jobs, stay in employment, get around and socialise they need to be mobile. In rural areas and poorer areas it is difficult for people to sustain that at the current price of diesel and petrol.
We are urging people to get into work, but people who live in rural areas in Strangford and who travel to my right hon. Friend’s constituency of Belfast North will find that a two-hour round trip costs £10 a day. That is £50 a week or £250 a month, which is a large chunk out of anyone’s wage packet. Does my right hon. Friend agree that a reduction in the price of diesel and petrol would help the unemployed to get a job and would help the employed to stay in work?
I am grateful to my hon. Friend, who makes a good point and illustrates it with the facts. I will come on to the situation in Northern Ireland, but it is clear that a car is a necessity, not a luxury, for many people in his constituency, so he makes a valid point.
The fact is that Northern Ireland has the highest-cost fuel of any region in the United Kingdom. The Automobile Association’s October fuel price report showed that of the 12 regions of the UK, Northern Ireland was, on average, the most expensive for unleaded petrol, diesel and super-unleaded. On top of that, its energy prices more generally are among the highest in the United Kingdom. I mentioned car insurance; Northern Ireland’s car insurance premiums are by far the highest in the United Kingdom. They are, on average, 83% more expensive per person than in the rest of the United Kingdom. Earlier, someone mentioned a double whammy for their constituents; in Northern Ireland, we have a severe triple whammy when it comes to energy, fuel prices and car insurance. Those issues have to be addressed. Some will have to be addressed by the devolved Administration, and there are Ministers working on the issues, here and at home, but there are also issues that can be addressed only at the level of the Westminster Government.
I hope that this debate will contribute to focusing the Government’s mind on this serious problem. Some 83% of people in Northern Ireland go to work by car, van or minibus, compared with only 70% in the rest of the United Kingdom. That shows the rural nature of much of Northern Ireland, and the fact that we have an underdeveloped public transport network; for example, large parts of the west of the Province are not served by the railway network. Clearly, the car is therefore a necessity there, not a luxury.
The right hon. Gentleman and I normally talk about pig farming, but on this occasion, we can talk about the fact that in our very rural areas—particularly in my constituency of Devizes—the issue is the lack of competition among petrol stations and heating oil providers. None of us is on a grid; we are all reliant on heating oil. My area has similarities, in microcosm, with the right hon. Gentleman’s area.
Absolutely. We in Northern Ireland have a higher dependence on off-grid energy supplies than other places in the United Kingdom, but there are many similarities. We in Northern Ireland have a unique situation: we share a land border with the Irish Republic. As the per-litre price for petrol is, on average, 5p cheaper in the Irish Republic—15p a litre cheaper for diesel—we have the problem of fuel smuggling, which costs the Exchequer about £200 million to £300 million a year. One way to deal with that is for the Serious Organised Crime Agency and others to be tougher in tackling the problem, but there also needs to be an extension of the rural fuel pilots to Northern Ireland. That would not only reduce the cost of petrol and diesel and boost the economy, but increase the tax take for the Revenue. That has been clearly shown.
People in my constituency tell me all the time that they are appalled by massive oil company profits; BP had profits of £3.2 billion in the second quarter of this year. They want those profits passed on to people in difficulties. They are appalled by the difference in petrol prices across the Province. They cannot understand why supermarkets—I will mention supermarkets—in my constituency charge one price in one area and another elsewhere, simply because they can get away with it. People in my constituency want the planned fuel duty increases for next year to be scrapped to boost the economy, reduce costs and boost the tax take, which is only at 66% today, compared with 81% in 2001-02; that shows that the current policy of ramping up tax and fuel duty increases is not working for the Government. People in my constituency want the measure of inflation used to upgrade fuel prices changed from the retail prices index to the consumer prices index, which is used for everything else.
This is a vital debate that affects every household in the country. As an officer of the all-party group on fair fuel for motorists and hauliers, I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing the debate, and the Backbench Business Committee on recognising its importance, particularly as the call for a debate was supported by an e-petition—a valuable resource that the Government must be congratulated on introducing. This is not an anti-Government motion; I and other hon. Members who have signed it recognise the reality of the situation. Let us be honest: it is not the ideal time to suggest anything that will reduce the Government’s income streams. We accept that we are in a financial black hole, but I pay tribute to the Government’s handling of the nation’s finances.
Does my hon. Friend agree that something that would increase the amount in the nation’s coffers and would be good for the haulage industry is the introduction of a levy on foreign lorries, which do not pay any UK taxes? That is particularly galling for hauliers in my Kent constituency, who pass by them on our motorways, knowing that they have made no financial contribution to them at all.
I entirely agree with my hon. Friend. My constituency, which I shall come on to, is another centre for the road haulage industry. It, too, would welcome such a proposal.
Unemployment in my constituency is above the national average, and incomes are below the national average. Much of the available work is seasonal, and jobs can be many miles away. For many people, travel costs are compounded by the Humber bridge tolls, but that is a debate for another day. My constituency not only includes the premier resort on the east coast, also known as Cleethorpes, but the industrial and port complex on the Humber bank, including oil refineries, which are major employers. Indeed, they are good employers that provide the area with much of its wealth, but today I am speaking for my constituents, who are finding travel costs an increasing burden.
My constituency is a major centre for the road haulage industry, which, needless to say, suffers from the present levels of tax and duty on petrol and diesel. That, coupled with the fact that there are many small towns and villages in the vast, rural areas that are a feature of Lincolnshire, means that people do not live close to their place of work or to the essential services that they need to access. Walking and cycling are not realistic alternatives.
Motoring taxes are a greater burden for people living outside major conurbations. The Countryside Alliance has produced figures that show that people in rural areas spent £1.34 per week more in petrol at the beginning of this month than they did at the beginning of the year. They also draw attention to the fact that an-above average number of low-income groups in rural areas are car owners, and that accounts for a much greater proportion of their income. The people I represent think that paying 60% of the cost of a litre of petrol in tax and duty is too much—it is unfair. I have said before in the Chamber that it is a risky business for Governments to talk about fairness, because it is human nature for someone to regard as fair what is beneficial to them, but to regard something as unfair if it benefits someone else.
What people do regard as unfair is the fact that, based on the most recent figures available, £31 billion per annum is collected in tax and duty. Total annual expenditure by the Department for Transport is only £23 billion, so they regard that as unfair.
Does my hon. Friend agree that fairness is another reason people are animated by the debate, and support the motion? Too often under the previous Government, both with fuel duty and with council tax, people saw taxes go up year after year with no justification. It is the justification for the tax that is the source of the unfairness in this instance.
I entirely agree with my hon. Friend, who strengthens my case.
I was discussing fairness. In the two unitary authorities that cover northern Lincolnshire, it is estimated that constituents pay £167 million a year in motoring taxes, compared with the £95 million that is spent on roads infrastructure—again, that is clearly unfair.
I think that I am running out of time.
I said earlier that my constituency is a major centre for the road haulage industry. Most large commercial vehicles do about 8 miles per gallon. The planned increase due in January will add £15 a week to the running costs of a single vehicle, which will impact not only on individual businesses but on the supply chain. The Federation of Small Businesses has produced figures that detail the impact on businesses in that category.
I recognise, as I said earlier, that the Government must protect their income streams. There has been much talk in recent weeks about the 50p tax rate. That must be secondary to a reduction in car taxes. Very few people in my constituency can even dream of earning an income that would demand a 50p tax rate. I want to get rid of it as soon as possible, but now is not the time. Rural bus services have been reduced. The Government understand the impact on local people in northern constituencies in particular, and I urge them to act as soon as is practicable.
I begin by adding my congratulations to the hon. Member for Harlow (Robert Halfon) on securing today’s extremely important debate, which is long overdue. We have heard today of double whammies and triple whammies. I shall not go for quadruple or quintuple whammies, but simply point out that the price of fuel pervades every aspect of what we do.
Whether in a rural community or in a heavily urbanised community such as Stoke-on-Trent, everything happens because of the cost of fuel—constituents going to the local shop and travelling there by car or constituents going to work by bus are all affected by the costs of fuel. The goods in the shops will have got there by means of the haulage industry, and some of those goods will have come from the farming community that produced them. At some level, the cost of fuel will be a component of the cost of every item on the shelves.
Does the hon. Gentleman agree that one group that is particularly vulnerable to the cost of fuel is the disabled? Those who are on Motability schemes, such as the constituent who contacted me, have no choice—they have to use their car and are therefore subject to the high cost of fuel.
I could not agree more. All our poorest communities, whether they are people with any form of disability requiring a mobility allowance or special vehicles, or the poorest communities trying their best to get to work in difficult circumstances, are the people most heavily affected. The point was made earlier about who is paying the tax. It is being paid by the poorest. Who is not paying the tax? The oil companies and the speculators, who are taking the opportunity of the Arab spring and in some cases the continuing troubles to speculate a little more in the belief that the price will go up, until that becomes self-fulfilling. We end up with petrol prices continually going up, irrespective almost of fuel taxes. We should have a thorough root-and-branch review of that.
In the few minutes available to me, I want to turn my attention predominantly to the impact on the haulage industry and the associated industry, the road rescue services. I place on record my thanks to the Road Rescue Recovery Association, the Scottish Vehicle Recovery Association, the Road Haulage Association and the Freight Transport Association for the campaigns that they have been running, alongside the FairFuelUK campaign, and the pressure that they have been bringing to bear to get the issue debated seriously on the Floor of the House.
Indeed. Every aspect of what we do is affected by the price of fuel, whether at the pumps, domestically, or at the heavy duty pumps that the haulage industry and other industries use. All sorts of other issues then come into play. For example, hauliers will be looking to ensure that their vehicles are running as efficiently as possible, yet on the European stage there is the possibility of a reduction in the height of trailers to 4 metres, which will have a negative impact on our haulage industry in the United Kingdom, exacerbate the problem of the price of fuel and increase the need for a cut in the fuel duty.
As has been said, a temporary VAT cut would be absolutely the right thing to do to secure an immediate impact for the domestic motorist, but something different is needed for the haulage industry in the longer term. A VAT cut would obviously have a wash-through effect, but we need a more serious change and a restructuring of the way the fuel costs of the industry and associated industries are met.
Other factors that impact on the haulage industry, such as London’s low emissions zone, also have a knock-on effect. I wish that Mayor Boris would respond to my letters and agree to meet to discuss the impact on the haulage and haulage recovery industries. It has a direct impact on fuel efficiency and keeping traffic moving on London’s streets if vehicles that should be on the streets helping to recover other vehicles and keep traffic flowing are prohibited from doing so. That will of course become a greater concern in the run-up to the Olympics.
Indeed, other aspects of the price of fuel will affect the membership organisations—I will not name them—that come out when their members break down by the side of the road, and those organisations’ costs are passed on to their members through the running costs of the yellow or orange vehicles that assist people at the roadside. That industry will also be hit by Green Flag’s terrible announcement that it is devastating the number of contractors who work for it. Some of them will unfortunately end up unemployed.
My hon. Friend makes her point well.
In the 20 seconds remaining, I wish to make two points. First, instead of cutting the top tax rate of 50p for high earners, we should be helping motorists. Secondly, we should be looking at ways of taxing the speculators and the people who are making a profit from the ordinary motorist and make them pay instead.
It is a privilege to follow a fellow Staffordshire MP in this important debate. I would like to join the long line of hon. Members who have congratulated my hon. Friend the Member for Harlow (Robert Halfon) on securing this hugely important debate. Few debates that have taken place in this House have prompted such a response from my constituents, and I have received numerous letters, telephone calls and e-mails asking me to take part. I congratulate the Backbench Business Committee, in particular, because this is a perfect example of the kind of issue that matters to our constituents and that we should be talking about in this House.
The Prime Minister said a little while ago that he wanted our country to be a nation that makes things. Well, my constituency of Burton makes things. I am proud to say that it is the home of British beer. We make diggers, car seats and produce many other things. I am proud of that and am doing my best to maintain it for the future, but those industries are being particularly badly hit by the massive hike in fuel prices in recent months. I think that this is the Economic Secretary’s first opportunity to reply to a debate in the House and I am pleased to welcome her to her new post and wish her luck. I hope that she will have some positive things to say, because businesses in my constituency are saying that fuel price rises are having a real impact on their competitiveness.
Does the hon. Gentleman agree that one of the industries that will be hardest hit by the increases in fuel duty is the bus industry? Does he agree that it will be hit not only by two increases in duty next year, but by the Government’s decision to cut 20% from the bus service operators grant? What impact does he think that will have on passengers?
That point will not be lost on the House.
Something else that will not be lost on the House is the fact that this coalition Government took the bold steps to reduce fuel duty, to bring in the fair fuel stabiliser and to look at what we can do to help rural businesses. That is hugely important.
I will not give way again; I have given way a few times.
I must tell the House what motorists and families in my constituency tell me about the high price of fuel and how it is impacting on them. They, like the constituents of many right hon. and hon. Members, are suffering because they have had pay freezes and, in some cases, pay cuts, because of inflation, and because they have had to cope with large rises in electricity and gas prices. So spiralling fuel prices are starting to impact on their quality of life, and on their ability to survive in these difficult times.
More than one constituent has told me recently that they have had to choose between doing regular maintenance on their vehicle and filling it up every month to get to and from work and to pick up the kids. We have to look at the impact, because our constituents have only so much to spend on motoring every month and every year, and, if we do not do something to help them soon, they will have to find savings elsewhere, and that could affect road safety.
I have given way a number of times; I will continue, if I may.
I represent Uttoxeter, a fine market town situated between Stoke and Derby. It has a race course, and it is a great place to live and to do business, but my constituents have to pay 6p a litre more for their fuel than motorists who live just a few miles down the road in Stoke and Derby, because—I believe—of the supermarkets’ power and their virtual monopoly on forecourts throughout the country.
I have already written to the Secretary of State for Business, Innovation and Skills, and he has advised me to write to the Office of Fair Trading to make an argument, but it is time we looked at how the supermarkets operate, because they have an anti-competitive effect on the market place and drive prices up. It will not be lost on colleagues that petrol companies quickly put up prices on the forecourt when there is an increase in the price of a barrel of oil, but are much slower to reduce them when the price of a barrel comes down. It is time that the supermarkets and the big petrol companies starting acting fairly towards our constituents, and I urge the Economic Secretary to do what she can to help.
I congratulate the hon. Member for Harlow (Robert Halfon) on securing this debate. It is important, and he will know that in the previous Parliament there were a number of debates on the subject and a number of attempts in Finance Bills to introduce a fuel duty regulator—precisely the price stabilisation mechanism that he describes in the motion today.
Going back over such debates from the previous Parliament is quite instructive, because it tells us why there is such anger among the general public. In the report of a debate in 2005 we read that the price of unleaded petrol had risen to 86p a litre, a rise of 6p in six months; by 15 May 2008 it had gone up to something over £1.10 a litre; and by the time of the Finance Bill debate in July 2008 it averaged £1.32 a litre.
The underlying price is more intriguing, however. In 2005 Brent crude had risen to $60 a barrel, up a massive $10 on the previous year. By the time of the debate on the 2007 pre-Budget report it had risen to around $84 a barrel. In the run-up to the 2008 Budget the price was $94 a barrel. As someone mentioned earlier, prices crashed through and spiked at around $140 a barrel. This week the price has stabilised at $114 a barrel, but the price at the pump has risen inexorably.
From 86p a litre in 2005, diesel prices in Dundee this week had risen as high as 140p a litre—£6.40 a gallon. In the constituency of the Chief Secretary to the Treasury diesel was nearly 145p a litre—£6.60 a gallon. In Kirkwall, in the constituency of the Liberal Deputy Chief Whip, the right hon. Member for Orkney and Shetland (Mr Carmichael), diesel is 152p a litre—£6.90 gallon—and in the constituency of my hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) it is almost £1.54 a litre. That is £7 a gallon, so it now costs £90 to fill up the tank of the average family saloon car. One can quickly see why people are so angry.
In our past debates, we heard about support outside Parliament from many organisations. The Road Haulage Association said:
“UK hauliers are struggling as never before to cope with continually rising fuel prices”.
Nothing has changed. The National Farmers Union and the Scottish Fishermen’s Federation said similar things. The Federation of Small Businesses said that it was
“behind the introduction of any mechanism which automatically uses extra tax revenues…to reduce prices at the pumps”.
And, my goodness, we need that now.
Indeed, they can. What that organisation said at the time was:
“Transport is…a vital component of the fishing industry and cost increases there have applied even greater pressure, felt more acutely by the more remote fishing areas of the North West and the Northern Isles.”
I was paraphrasing what it said, as we have a whole four minutes each to speak. The point is that the response to spiralling costs under Labour was a fuel duty escalator, not a fuel duty stabiliser. The Labour Government set their face against every attempt to introduce a price stabilisation mechanism and, most cynically of all, increased duty to compensate for the temporary reduction in VAT.
The coalition’s response was to introduce the “fair fuel stabiliser”. That is what they called it. However, instead of using the windfall they already had from the North sea, they engaged in a smash-and-grab raid of £2 billion extra, with an increase in the supplementary charge. Hon. Members will remember that that led EnCore Oil to suggest that no tax would be paid on undeveloped and undiscovered oil. Other organisations said that very large projects were no longer viable because of the surprise Budget move. Chevron warned that the measure had
“shaken investor confidence to the core.”
Everyone was singing from the same hymn sheet except the Chancellor, who said that he
“did not expect investment to be damaged.”—[Official Report, 3 May 2011; Vol. 527, c. 604.]
It has indeed. There were stark and powerful warnings from the sector at the time that went on for a considerable time, and forced some limited changes to the regime. In the cold light of day, this month, the Aberdeen and Grampian chamber of commerce, along with others, carried out a survey that revealed that:
“50% of operators say Chancellor’s tax hike harmed North Sea investment.”
That policy did little to help the haulier and the motorist, but it did a great deal to damage the oil and gas sector.
Of course, it is not just the oil and gas sector and the traditional users of haulage who have been damaged. This week I have been contacted by a building company—a static business, not a haulage business—in my constituency, which told me that over the past few years, fuel as a proportion of its overheads has rocketed to 20%. We are not just causing inflation for goods that are moved, we are not just putting the haulage sector under pressure, we are not just making it difficult for people even to afford to go to work: the increasing cost of fuel as a proportion of overheads is driving other sectors to the wall too. These are very difficult times indeed.
This is only a Back-Bench debate—I am delighted that we have secured it—but the strength of feeling is very clear. There is now a body of opinion saying that constant high price rises, and the spikes in the price at the pump, are damaging the entire economy. I hope that the Minister is listening carefully to what has been said, and that action will be taken quickly.
The high cost of fuel is impacting detrimentally on families, pensioners and businesses in my constituency, comprising as it does rural areas interspersed with market towns. I want to concentrate particularly on the small businesses in my constituency and the impact it is having on them.
In my constituency there are just a handful of large businesses, the largest of which employs just over 500 people, but there are 4,000 small businesses, which are therefore the engine of the local economy. For most of them, car travel and other vehicle travel is not an option but a necessity. As someone who has run a small business for 20 years, I know the reality behind the phrase “living on the margins”. That is a constant reality for many small businesses today. Because transport costs are a substantial component of their outgoings, fuel price rises have eroded those margins to almost unsustainable levels.
I share my hon. Friend’s concern about small businesses, and I recently found a statistic of which she may not be aware. Over the past year the UK’s 4.8 million small and medium-sized businesses have paid over £260 million more for fuel than they did only 12 months ago. Does she agree that sometimes the price of fuel becomes a step too far for small businesses?
I entirely agree. Small businesses are being forced into an impossible predicament. Do they transfer the increased costs to their customers, do they lose their customers, or do they sacrifice the making of any profit just to keep going, which is not sustainable in the long term?
We are talking about small businesses, which I too represent here today. In the Wirral there is the double whammy of not only increasing fuel prices but increasing toll prices. Marginal profit is completely wiped away when both of those are taken into account.
My hon. Friend makes a very good point.
Let me give the House some specific examples of small businesses in my constituency that are suffering in that way. Smallwood Storage Ltd is a transport and storage business in Sandbach employing nine people. This week it told me:
“We need a level playing field, the price of fuel has become too high as a percentage of our overheads and is out of proportion with the rates we charge. As a small business, we do not have the power of larger companies and are being squeezed from all sides.”
Another local company, B Lakin Transport, a haulage businesses in Somerford employing 10 people, said:
“Increased fuel costs have knock-on effects on everything…as the price continues to creep up, customers will go elsewhere and even look to foreign drivers who can use cheaper fuel from the continent; avoiding the extortionate prices in Britain.”
“A driver from Luxembourg can fill up their petrol tank in Luxembourg at a fraction of the cost here. In October 2011, 1000 litres of unleaded fuel would cost £1130 in Luxembourg compared to £1350 in the United Kingdom—that’s a saving of £220 each time the tank is filled.”
Let us remember that haulage competitors from Luxembourg can fill their tanks there, drive to the UK and then return to Luxembourg without having to fill up here at all. B Lakin Transport tells me:
“Combine this with the exemption from road tax for foreign drivers, and we are clearly at a significant disadvantage to these foreign drivers from the outset.”
Does the hon. Lady agree that it is very important that we are honest with the British public in saying exactly what sort of cut we are looking for? I expect that the level that the Chancellor will look at will be a lot less than is being suggested here today.
Through the motion, we are asking the Government to explore a number of ways in which they could assist small businesses, such as the ones that I am describing, with this predicament.
I will cite another business in Cheshire. It is not a small business, but it is an interesting comparison, because it is not a haulage company. Roberts Bakery is a large family business that produces bread in Northwich, just outside my constituency. Just yesterday, it informed me that the increase in fuel prices since last year alone has added £10,000 a week, or £500,000 a year, to its delivery costs. That is a serious additional overhead for such a family company.
The price of fuel is hindering such businesses from playing their essential role in the economic recovery and job creation that we so desperately need in this country. It is effectively pricing UK businesses off the road, driving people out of work, preventing companies from taking on and holding on to contracts, and fuelling further economic difficulties.
I signed up to support the motion, and I applaud all the other Members who have done so. I ask the Government to consider as a matter of urgency the impact that high fuel duty rates are having on local economies such as the one in my constituency, and to take action to address the issue accordingly.
I congratulate the hon. Member for Harlow (Robert Halfon). I rise to speak on behalf of my constituents who have expressed to me their deeply held views about the rising cost of fuel.
People are angry in unprecedented numbers right across my constituency. The same is true throughout Britain. At my weekend surgeries there has been a steady flow of constituents who have not held back from telling me what causes the most hardship in their domestic finances. One of the dominant themes is rising petrol pump prices, which are a constant weekly battle for motorists.
I understand that my right hon. Friend has an Asda in his constituency. Asda has introduced a price of 128.9p per litre across the whole nation. Surely if the Government are to do anything, it should be to reintroduce universal prices for petrol. He is old enough, as I am, to remember when we had those.
I am grateful to my hon. Friend. I have a big constituency, which stretches from Cumbernauld right through to Chryston, Coatbridge and Bellshill. The prices at Asda, welcome as they are, do not deal with the problems elsewhere.
These are truly worrying times. We have sluggish growth, rising unemployment, falling confidence in the manufacturing sector and depressed business confidence, so this is no time for complacency from the Government.
By September 2011 the cost of petrol had increased by 17.7% in a year. Our constituents are now paying petrol prices that are the highest in all 27 countries of the European Union. The only country in the world that seems to beat us on motoring taxes is Turkey.
We are where we are.
What the Chancellor does on fuel duty increases next year could make or break many people’s ability to go about their everyday lives, whether they are looking after their family or running a business. Failure by the Government to take effective action would mean winding the clock back on travel and mobility to a time when the freedom of the road was the preserve of the middle class. That cannot be right or fair. It would be a retrograde step for my constituents and would place their finances in an intolerable position.
With 80% of the population living in a car-owning household, a car is now a necessity, not a luxury. Unlike here in London, where vast transport links provide the necessary infrastructure for people to live their lives effectively, in constituencies such as mine people use and rely on their cars daily. Lower-income families, elderly people and those living in rural areas will be the most adversely affected and hit by rising fuel prices. In September, the then Secretary of State for Transport suggested that the railways had become a rich man’s toy. If that is the case, how can the Government’s policy, which is allowing exorbitant fuel prices literally to drive people off the roads, be justified?
Despite the Government’s seemingly generous gesture of a 1p cut in fuel duty, the public will simply not be fooled. The simultaneous increase of 2.5 percentage points in petrol tax that accompanied the VAT rise from 17.5% to 20% in January makes a mockery of the Government’s proposal. Their meagre attempt to placate motorists will benefit only the Treasury.
The fuel duty stabiliser has not shielded drivers from pump price volatility. That is why I believe that the Government need to take real urgent action now to help ease the squeeze on struggling families and kick-start the economy by temporarily reversing the VAT increase.
I am sorry, but I will not.
I know that when times are tough, tax revenues are seen as vital to the Treasury. My constituents know that, too, because most of them have been through tough times. However, let us be clear that those revenues cannot be loaded on to the backs of the poorest and most vulnerable in our society. It is they who are suffering most from rising fuel prices, and it is for them that the House ought to speak tonight.
First, I add my congratulations to my hon. Friend the Member for Harlow (Robert Halfon), who is no longer in his place, not only on securing the debate but on the tenacious way he has pursued the issue relentlessly since his election last year.
I rise to support the motion and highlight the extra impact of fuel prices on High Peak. We have a large number of quarries, all of which produce the finest quality limestone in the country. That limestone has to be moved by road or rail, but predominantly by road. Quarries have to be where the stone is, so they cannot be moved around. I wish to tell the House a short tale about a constituent of mine, Mark Pearson, who operates his own wagon. He is a single operator who carries 17.5 tonnes of limestone with every load. In the past three years his fuel bill has increased from £1,600 a month to £3,200 a month. That huge increase in his overheads has to be borne by somebody, whether by Mark himself or the end users of the stone. Such overheads will restrict employment and business growth.
My hon. Friend makes an excellent point, as he always does.
High Peak businesses suffer from rurality. We are midway between Sheffield, Manchester and Derby. The distances from our businesses’ customers and their suppliers mean that bringing goods in or sending them out costs more. My big concern is that as increases in fuel costs are borne more and more by local businesses, they will eventually say, “Enough is enough” and move out of the countryside into urban areas, further exacerbating the difference between the rural and urban economies.
We must remember that families are affected too. Although I understand that this debate is predominantly about fuel costs, I have to mention the increased energy costs that families are having to bear at the moment. I venture to suggest that High Peak is probably the coldest constituency in England. We have had a cricket match snowed off in Buxton in June, so we feel the winters, which are deeper and longer. That puts a further burden on family budgets.
Other Members have made the point that increased car use is required in rural areas. The proportion of households without a car in London is 43%, while in metropolitan areas it is 31%. In rural areas, only 10% of households do not have a motor vehicle. The reason is—
No, I am going to move on, if the hon. Lady does not mind, because we are short of time. Also, I note what the former occupant of the Chair said about those making interventions not being called to speak, and I would not like to deprive the House of her speech later on.
When public transport links are not as good, a motor vehicle becomes a crucial part of family life. Someone spoke earlier about four-wheel drive vehicles. I understand the image they have as Chelsea tractors, but we should remember that sometimes four-wheel drive vehicles are vital in rural areas, as they are the only way that people can get about. As for public transport in my area, anyone who wanted to travel between the two major towns of Glossop and Buxton by bus would need to take a meandering route through New Mills, Whaley Bridge and Furness Vale. A car is the best way.
I believe that one day vehicle movements will perhaps fall slightly as communications improve, but broadband in rural areas is not as fast as it is in urban areas. That reduces people’s ability to work from home, which means that they have to travel to work, again putting more pressures on budgets. Cities and urban areas have faster broadband, better public transport and, more often than not, a better climate. In High Peak it is colder for longer, we have fewer public transport options and families and businesses need to travel further.
Given that I still have about one minute, I shall mention one further aspect. Local mountain rescue teams are staffed by volunteers who use vehicles, but also pay duty. I give hon. Members the image of a cold, snowy mountain in High Peak, with a sheep in one field and a human being in another, and a farmer going to save the sheep and a mountain rescue team going to rescue the human being. Which one pays less for fuel? The farmer will quite rightly use red diesel and pay no duty; the mountain rescue team, as a not-for-profit group of volunteers saving a human life, is faced with paying all the duty on that fuel. However, that is a debate for another day. I put my hon. Friend the Minister on notice that I keep putting in for a Westminster Hall debate on the issue. I hope that one day I may get lucky.
To sum up, rural areas face the challenges of using more fuel, and in High Peak we pay more.
I, too, welcome this debate, which gives Members the opportunity to discuss an issue that is close to our constituents’ pockets. Like many others, my constituency is a mixture of the urban and the rural, and everyone is feeling the pressure at the pumps. Today’s motion was necessary to create the opportunity for this debate, but sadly it omits some crucial aspects. I am disappointed that the amendment in the name of my hon. Friend the Member for St Helens North (Mr Watts) was not selected, because it would have filled the debate with all the pertinent issues that we need to discuss.
During the speech by the hon. Member for Harlow (Robert Halfon), his bipartisan mask slipped as he made certain political points about the motion. My constituents want to know how the Government plan to tackle the high cost of fuel now. They also want to hear the longer-term plan to enable the country to become less dependent on petrol and diesel. The hon. Gentleman purports to be a champion of the consumer’s cause, but although this debate partly covers the issue, important facts have been left out and the bigger story remains untold.
John Peel said:
“I never make stupid mistakes. Only very, very clever ones.”
I wonder whether the hon. Gentleman has indulged in John Peel’s rhetoric in the motion. It contains faint praise for the Government’s austerity programme, yet that programme is a significant part of the problem, rather than part of the solution, because it goes too far and too fast. Also, there is no mention whatever of the whopping 20p a gallon on the price of fuel following the latest VAT rise.
On that point, I was looking at the AA website this morning and comparing unleaded fuel prices in my region of the north between May 2006 and May 2010. Over that four-year period, the price increased by 24.2p, yet in just one year between May 2010 and May 2011, we have seen a 16p jump. That is two thirds of the increase that we saw under four years of a Labour Government.
That gives us the real picture. I shall say more about that in a moment.
My constituents know that the price of oil is linked to the complexities of production, of exchange rates and of international stability, and that interference in one or more of those factors can cause prices to spiral out of control. They lose comprehension, however, when they see little evidence of price reductions when those factors are reversed. I remember well that in 2008 the price of oil was $147 a barrel and the price of unleaded in my town was £1.15. Yesterday, the price of oil was $114 a barrel, and the price of petrol £1.35.
I have already taken a couple of interventions. If my hon. Friend does not mind, I want to allow a couple of other Members to get in.
We need some answers from the Minister to explain the phenomenon that I have just outlined, because the public just do not understand it. If this debate is to have any credibility, it also needs to address some other issues. I do not believe the hon. Member for Harlow’s simplistic proposal that reduced prices will bring in more income. If he believes that we need to reduce fuel duty, he must tell us where the resulting cuts would be made. Or would he advocate increasing other indirect taxation, or direct taxation, to fill the gap?
I thank the hon. Gentleman for giving way, and for signing the motion. As I mentioned earlier, the AA has proved that the Treasury is getting £1 billion less in revenue because of the high cost of petrol. People are unable to afford to drive their cars, and the Treasury is therefore losing money. If we cut taxes, more money will go into the Treasury.
That is the same explanation that the hon. Gentleman offered before, but I still do not understand it. I signed the motion because it was the only way of getting an opportunity to discuss this issue, which is important for our constituents. I would have preferred that the amendment tabled by my hon. Friend the Member for St Helens North—[Interruption.] Well, the hon. Member for Harlow is going to have to tell us how he proposes to fill the gap if fuel duty is cut. And if he believes that the gap does not need to be filled and that we should be taxed less, he will have to tell us what public services would suffer as a result.
A former Member of this House was once described as a vacuum surrounded by charisma. I think we all hope that, at the end of the day, this debate will not become a vacuum surrounded by synthetic anger.
I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on his passionate speech, on his many campaigns on this issue and on securing this debate, and I welcome the huge interest and support across the House for it. The price of fuel remains, week in, week out, one of the most important and pressing issues raised by people in Worcester. It is an issue on which I, like many other hon. Members, am determined to see real progress.
I wholeheartedly support today’s motion and was proud to put my name to it as a long-term advocate of fuel price stabilisers. I want to put forward one more argument for action that has not been sufficiently covered in this debate and I want to raise a couple of further concerns, which I hope the Minister will be able to respond to in her reply.
As my hon. Friend the Member for Cleethorpes (Martin Vickers) set out and as the hon. Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) acknowledged, the Government have to pay attention to balancing the budget. The motion notes, however, that fuel duty revenues are lower now than they were in 2008 despite the fact that the level of taxation has increased since. In my view, that makes but understates the case for rethinking further increases. As I have argued in Westminster Hall debates, that case was admirably set out by the Office for Budget Responsibility when it first looked at, and then rejected, the idea of a fair fuel stabiliser. It concluded that although higher prices added to Government revenues in the short term, by increasing the take from fuel duty, their longer-term impact was to reduce Government revenue through the combination of discouraging usage and the wider negative impacts of high fuel costs on the economy. Although the OBR used this argument to reject the original plan for a stabiliser, I have said many times that the logic of its argument is that lower fuel duties could result in higher tax revenues, and I am happy to put that case again today.
We should look not only at the impact on fuel duty receipts themselves, substantial though they might be, but consider the effect of sky-high prices on business profits and thence corporation tax, their impact on the rate of inflation and thus the rate of increase in costs to Government in everything from wage inflation to benefit uprating. We should consider the depressing impact of high fuel costs on the whole economy and in particular on business and enterprise.
Does my hon. Friend agree that it is a central Conservative insight that we can lower the rate and up the take so that small companies in rural areas such as mine are able to do more work, earn more, pay more tax and keep the economy going?
I would like to make the point that a lot of freight companies are filling up on the continent. If we reduced the amount of duty, particularly on diesel, they would be encouraged to fill up in the UK, which would bring additional revenue to the Exchequer.
My hon. Friend brilliantly pre-empts my next point. I was going to say that most business users also use diesel, which, as my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) pointed out, is an important issue. One concern I particularly wanted to raise is the fact that diesel in this country is so much more expensive than anywhere else in Europe. I am told that this is not simply a matter of taxation as the rates of fuel duty are set equally for unleaded petrol and for diesel, but of refining capacity, which the hon. Member for Ynys Môn (Albert Owen), who is no longer in his place, also mentioned. Also relevant is the fact that North sea oil has traditionally been better suited for the production of unleaded petrol than for diesel. However, it does seem extraordinary that one can drive across most of Europe seeing prices for diesel consistently lower than those for unleaded, only to arrive in this country and find that there is a 7p differential in the other direction. In fact, we are one of the few countries that treats diesel and unleaded exactly the same for tax purposes, and many others, including France and Spain, tax diesel much less than we do.
Perhaps I should declare an interest at this point as the driver of a rather battered Y-registration diesel Golf with more than 150,000 miles on the clock, but my prime interest is that diesel tends to be the fuel of choice for business users and the freight and haulage industries. Its cost and the extent of taxation on it thus have a more direct impact on our economy and on prices in the shops than does unleaded petrol. Given the importance of diesel to business and the economy, will the Minister give special consideration to steps that could be taken to encourage the closure or reversal of that price differential, whether it be directly through fuel duty or indirectly through encouraging investment in refining capacity.
Like others, including my hon. Friend the Member for Wyre Forest (Mark Garnier), I am very concerned at the wide geographical price differentials within the UK. Although many have argued that this is a matter of rural sparsity and have put the case for a rural fuel derogation, which I accept, I want to put the case for urban centres such as Worcester that find themselves paying a higher price for fuel than their neighbours or competitors.
I was just coming on to that, but I am very much in favour of the free market and want to encourage competition.
A glance at petrolprices.com shows the average price for diesel in Worcester yesterday was 142p compared to 139p in Cheltenham or 140p in Birmingham—two cities that it sits between. For the lowest priced unleaded, however, the differential increases from that 2p or 3p to a staggering 5p, with Worcester drivers paying 134p compared to 129p in Birmingham or Cheltenham. My constituents regularly raise concerns about that. They fear that there is insufficient competition affecting prices in Worcester. I realise that it is not the Minister’s job to set prices everywhere in the country, but I would appreciate a reassurance from her that the Government are determined to see active competition between retailers, and are doing all they can to stimulate it.
Other Members have mentioned supermarkets. I have been led to believe by constituents that Tesco and Sainsbury have changed their policies, and that rather than trying to be the lowest-price retailers of petrol in any given area, they now aim to sell at the average price for the area. Their purpose may be to prevent accusations of predatory pricing, but this is a very counter-productive way of doing that. I hope that the arrival of a new Asda store in Worcester next year will increase competition in the area.
Like many other Members, I am worried about the fact that constituents who need their cars to travel to work, and businesses in my constituency that need to use road transport, are paying too much for their fuel, and that too much of that cost consists of tax. I welcome the steps that the Government have already taken to protect our economy from the previous Government’s planned increases, the fact that fuel is 6p cheaper now than it would have been otherwise, and the Chancellor’s declaration that he wants to
“put fuel into the tank of the British economy.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
I believe that it has never been more important to do so, and I commend the motion to the House.
I congratulate the hon. Member for Harlow (Robert Halfon) on securing the debate. I was pleased to sign the motion, and to support his application to the Backbench Business Committee.
I have seldom witnessed so much unanimity across the Chamber, and I think that that is a sign of the seriousness with which people out there view the fuel situation. For a long time, my party—along with our friends in the Scottish National party—has argued in favour of some form of stabiliser. We tabled amendments to Budget motions in 2005 and 2008, and received support from outside organisations including the Freight Transport Association, the Road Haulage Association, the Federation of Small Businesses, and farming unions such as the National Farmers Union and the Farmers’ Union of Wales. Along with our colleagues in the SNP, we held an Opposition day debate on this matter in February this year, before the 2011 Budget in March.
According to the FairFuelUK campaign, fuel accounts for over 40% of all business transport costs. It is clear that continuing rises in fuel costs as a direct result of fuel duty rises will increase the pressure on companies that are already struggling to stay afloat, or perhaps already going under.
I agree with the right hon. Gentleman about the effect of high fuel prices on businesses. One way in which businesses can deal with it is by upgrading their fleets so that their lorries become more fuel-efficient, but that will not be possible if the current proposal to phase out 100% capital allowances is implemented.
It is difficult enough to find a bank that will provide the money in the first place—when it rains, the banks want their umbrellas back—but I take the hon. Gentleman’s point.
Of course, it is not just businesses that are suffering. Families have been gravely hit by the rise in fuel prices, and, as has already been pointed out, fuel duty has a disproportionate impact on those who are least able to pay it.
Does the right hon. Gentleman agree that the difference between this and earlier fuel price rises is that the Government’s present policy is to impose a pay freeze, while also allowing inflation to run at 5%? Families are being hit by the treble whammy of higher prices, inflation, and the increased price of petrol and other fuels.
That is true. As we heard earlier from the hon. Member for Ynys Môn (Albert Owen) and others, families are being squeezed from all directions. According to figures issued yesterday by the Office for National Statistics, the poorest 20% of households pay proportionally twice as much in duty as the better off.
In rural areas such as my constituency, the cost of running a car is as important to people as their food budgets, because they cannot do without a motor vehicle. We have proposed the introduction of a fair fuel duty regulator that would prevent unexpected spikes affecting people at the pump through increased VAT, which is then pocketed by the Treasury. We suggested that an estimate be made of the fuel price over the coming six months, showing the amount of revenue that the Government would expect to receive, and that a cap be imposed if the price reaches an upper limit and VAT and fuel duty be frozen until the end of that period. The Government would, of course, receive their predicted amount, rather than a windfall from consumers who are already squeezed by the price hikes and unable to spend their income elsewhere.
Unfortunately, the then Labour Government in London stubbornly ignored the problems of rising fuel prices, and the motions in 2005 and 2008 addressing the issue were defeated. The Conservatives abstained in the vote on the 2008 Finance Bill, but decided only a few weeks later—in July 2008—that they would support a fuel duty stabiliser, a move that we welcomed at the time, believing that if they came to office they would introduce a mechanism similar to that we had been advocating. Sadly, when the matter was put to the vote in February this year, the voting pattern was reversed: the Conservatives and Liberal Democrats voted down our motion, while the Labour party abstained. This ever-changing position on a fuel duty stabiliser shows the political expediency of many politicians.
In March 2011 the UK Government cut fuel tax by 1p per litre and delayed some future rises, but the VAT increases have had a significant impact on prices. We voted against that move in summer 2010 and recommended a cut in June this year. The stabiliser model that we suggested is not the one that has been introduced by the UK Government, and it is clear that the problem has not yet been solved. Two further duty rises are scheduled for 2012, which could have dire consequences for business and motorists alike, especially given the ongoing economic difficulties, which are not likely to be solved in the near future.
We therefore need an effective and fair fuel duty stabiliser, and we must also look at pricing in rural areas. We must address the amount of VAT being levied, too. Most importantly however—and moving away from the impact of future fuel duty price rises—we also need to invest in renewable energy alternatives, to reduce our reliance on oil and other fossil fuels.
I heard the arguments about so-called Chelsea tractors. Where I live such vehicles are an absolute necessity—although they are often more downmarket than most Chelsea tractors. When I drive around the country, I have to do so because I cannot take public transport. In London and other conurbations, including Cardiff and Swansea, there is a choice. We need to make that choice viable. We urgently need to address this issue.
When Labour came to power in 1997, fuel duty stood at 36.8p per litre. When it left office in 2010, the price was more than 57p per litre—“a pain in the gas” as they say in the United States. I therefore welcome the early and decisive action taken by the Treasury in taking 1p off fuel duty, scrapping the duty escalator and delaying the 3p per litre rise. Many Members have today made a compelling case for why we now need the Treasury to go further, however.
I represent a large rural constituency in south Devon, and having a car in order to get to work or exercise choice in education is not a luxury; it is an absolute essential. My constituents spend a far greater proportion of their disposable income on fuel than those who live in cities.
A further 3p rise in January would not just hit householders, however; it would hit essential local businesses, too. Some 65% of all the UK’s groceries are delivered on retread tyres produced by a company in my constituency: Bandvulc tyres. It also exports to cities across Europe. It is a significant employer and wealth generator, but a 3p a litre rise in fuel duty would cost it an additional £24,000 a year, because it uses more than 500,000 litres of fuel a year. It is a family-run manufacturing business producing a sustainable product and creating local jobs. It wants to stay in Devon but knows that it would make economic sense to relocate part of its business to eastern Europe as a result of the fuel duty rise. There are similar examples among other businesses in my constituency.
Another very important sector in my constituency is tourism. I am talking about businesses such as Sharpham wines and cheeses, which attracts 7,500 tourists a year and employs up to 40 people. More importantly, it is in the top six wine producers in the UK and it is another wealth creator that exports across Europe. That business spoke of the ripple effects of a further rise in fuel duty, as did many others. A business that I visited last week, Palladium Building Supplies, told me of the knock-on effect to the entire building industry across south Devon that there would be if we go ahead with this rise.
My hon. Friend is making a powerful point about the effect on businesses. Does she accept that not only are these high fuel prices damaging businesses, but that, in turn, that is leading to less revenue to the Exchequer, because businesses are becoming less profitable?
I agree with the hon. Lady’s case, which has been made by others, that the Government need to take account of the impact of the high price of fuel and the hurt it is causing to families, individuals and businesses. She mentions an important short-term measure, but does she agree that in the medium and long-term it is also important that the Government take action to reduce our dependency on oil, the price of which is only likely to rise, and look towards investment in things such as electric cars and charging infrastructure across the country, so that we will be set for the rest of the 21st century?
My hon. Friend makes a good point. Indeed, one organic business in my constituency said that it would find a rise more acceptable if it could be seen directly as a green tax. Unfortunately, that is not the case. In my constituency, people will be badly hit by a double whammy, in that the bus service operators grant is set to be reduced by 20% next year. Just when they cannot afford to use their cars, people are being hit by a real threat to rural bus services, which are already at a critical level in south Devon. I hope that the Minister will set out what proportion of the rise will be set aside for green taxation purposes.
Does my hon. Friend agree that the points she is making show precisely why motorists need to see greater transparency in how fuel prices are determined? I am thinking, in particular, about the disparity between pump prices and the price of oil.
I fully support that, because in south Devon those on the lowest incomes will be hardest hit. They will be spending yet more of their disposable income on fuel or they will be waiting at the side of a road for a bus service that can no longer afford to operate.
I will keep my remarks brief and the reason for that makes me rise to my feet with a rather heavy heart. The reason is that I want to hear more Government Members speak, because they are playing us off the park today; their damning analysis of the Government’s lack of strategy for economic growth far exceeds the efforts of those of us on the Opposition Benches. It is almost incredible listening to them. We would not believe that they are in government; it is as if somebody else did this.
I would not go as far as to say that I rise to bury the motion, but I certainly do not rise to praise it. [Interruption.] These are the benefits of a classical, if comprehensive, education, which some Government Members may have had. I rise because many of my constituents have been in touch with me in support of this campaign. I have to say that I have gone back to them trying to dampen down their expectations. What we actually have before us reminds me of when my children have done something really bad and they are working up to telling me. They say, “Mummy, I love you. Mummy, your hair looks really nice today. Mummy, I have been really good” and that seems to be the approach of the motion. It is almost simpering in the way in which it cosies up to the Government, praising them for action which it then goes on to identify has clearly failed in its objectives. These are objectives that my constituents want. I have been back to my constituents and pointed out the strong language of this motion, which acknowledges the problem, “notes” there is a wee bit of a problem and “further notes” the problem. It says that all this will be considered and, best of all, says that all this is being done in the name of “sustainable growth”. I presume that means keeping it low, with no growth at all, because that is what the Government are delivering.
I shall not give way at this point because I am keen to make progress and allow others to contribute.
My constituency is largely rural and my constituents rely heavily on their cars not just to get to the shops but to engage in the big society—to take their daughters to Brownies and their sons to Scouts, or their sons to Brownies and their daughters to Scouts. They go out to reach the cheaper petrol at Asda up at Dunbar. That is the reality of living in East Lothian. My constituents suffer a double whammy and I find it really hard to listen to the hon. Member for Dundee East (Stewart Hosie) going on about what this Government have not done, because another Government could do something to make things easier for my constituents to get around East Lothian—the Scottish National party Government in Holyrood could re-regulate the buses.
No I will not. The hon. Gentleman should sit down and listen to what I am going to say before being so eager to get to his feet. He should let me finish this point.
The Scottish Government could have re-regulated the buses so that we could have a service in East Lothian that meets the needs of my constituents, instead of meeting the party election funding of the SNP Government. They have not taken advantage of that option, so in East Lothian we have the double whammy of rising prices at the pumps and a poor local bus service that is being further cut by an SNP council.
As my hon. Friend’s neighbour in Midlothian, and given that 56% of our people travel to work in Edinburgh every day, may I say that bus availability is a really big issue? The re-regulation of bus services is key, but the only people who can do that are that lot over there on the SNP Benches.
That is not the only choice. I want a UK Government who do the best for all the people in the UK—not just those in the Western Isles, Glasgow and Edinburgh, but those in Liverpool and London too. I note that the hon. Gentleman did not say why his party in Holyrood did not support a private Member’s Bill to re-regulate the buses. He should stop whingeing about what he cannot do and start doing something with the powers he has.
No; the last interruption was not very satisfactory—I am not taking another risk.
I find myself in a familiar situation. I spoke in a similar debate not very long ago about a haulage company in East Lothian that was about to go bust because of fuel prices. I remember an hon. Member from somewhere on the Government Benches saying something about claiming back VAT. Unfortunately, I did not realise at that time that the company was not even registered for VAT, so that was not an option. The company has gone out of business and those jobs have gone. Others in East Lothian are trying to find work but the reality is that those jobs as a rule are not in the county—they are in Edinburgh. Given the poor local provision of public transport, they are forced to take to their cars. That is a real problem for making work pay for my constituents. If the Government are serious about getting people back to work they have to enable rural communities.
I am sorry that the hon. Member for Penrith and The Border (Rory Stewart) is not here. His contribution was not so much a speech as a postcard from some rural fantasy that he sent to the House. He spoke about how important this debate and this motion are, but I remember the last time there was a debate on this issue in which the will of the House was unanimously expressed—
I welcome this debate, and I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing it. I also welcome some of the very good actions that the Government have taken to date, most notably the suspension of the fuel duty escalator, the cut in fuel duty, and the rural rebate that is being considered, which we hope will be piloted in the Isles of Scilly, not far from my constituency. I agree with the many Members who have said today that fuel tax is a regressive tax that tends to hit the poorest, and rural areas, hardest.
I find interesting the discovery by Government Members, including the hon. Gentleman, that taxes on spending are regressive. When that argument was about the increase in VAT, it seemed to be ignored, so has he changed his mind on VAT, too?
The issue of VAT has been covered widely by others. I would just say that I think all Government Members regret the fact that the Labour party made such a pig’s ear of running the economy that we had a £150 billion black hole in our finances.
I would like to focus on a separate but linked fact: fuel tax has a disproportionate impact on areas that are geographically peripheral. I come from Cornwall, and there is no doubt that fuel tax is a regressive tax that hits Cornish businesses far harder than businesses in the main population centres.
I am grateful to my hon. Friend for giving way, because the issue is particularly important in my constituency too. High fuel prices act as an anti-regional-development policy. Not only are they a cost on business, but they discourage business from locating in certain places. They work very much against the thread of Government policy in other areas.
I completely agree. That will be the main thrust of what I say. I was in business in Cornwall; indeed, on many occasions, I drove a lorry that took our excellent Cornish strawberries to Birmingham. The reality is that Cornwall is 300 miles away from London, and 260 miles away from Birmingham. We have to drive the best part of 100 miles just to get to the seat of my hon. Friend the Member for Totnes (Dr Wollaston). Let us look at how that translates into tax. A typical 16-tonne lorry doing a round trip to London would incur, in total, tax of £220, just on that one trip. Let us compare that with a lorry driving from Birmingham to London: the tax taken for that would be only £80. A similar operation in Cornwall has to pay three times more tax. That is unfair, and it is felt acutely by businesses in the primary sector, particularly in areas such as fishing and farming, in which Cornwall has a comparative advantage.
If we are serious about developing a regional policy, we have to help the most peripheral regions to develop industries and jobs in the sectors in which they have a comparative advantage. The irony is that places such as Cornwall have EU grants to help develop businesses in the areas where we have strengths, which include food processing, farming, and green energy. The regional growth fund has a similar purpose. We are undermining those efforts by having a regressive tax through high fuel duties. The impact is to compound the single most important disadvantage that the regions have, which is their distance from the market. As I say, that is particularly noticeable in Cornwall. Our climate gives us a comparative advantage; we grow potatoes early, and can grow cauliflowers in winter—bulky commodities that cost a lot to transport. Of course, with our marine resources, we have fishing, too.
I want to finish with a suggestion on how we might go forward. Alongside the rural rebate, which is due to be piloted, we should consider, perhaps as a strand of regional policy, some kind of rebate for businesses in peripheral regions such as Cornwall. It should not be beyond the wit of man to devise such a scheme. To be eligible, a business would have to be located in a county such as Cornwall. The rebate would be available only on fuel supplies delivered to an address in the area. As for how we would give the rebate, we have heard that most businesses that run a transport fleet would be VAT-registered, so it would be possible to have some kind of fuel duty rebate that runs alongside the VAT return. I know that none of these things is easy; it would take some work to develop the detail of such a policy, but it would be an interesting idea to look at. It could be a very powerful regional policy. In the meantime, I commend the motion to the House, because it is important that there be cross-party consensus on how to deal with the issue.
More than 100,000 people have added their names to an e-petition, and they and many millions more want to know whether the Government are prepared to listen to them and take the necessary action to ease the burden on hard-working families and businesses and, indeed, on our struggling economy. Out of that desire for action, and to support people in my constituency, I added my name to the amendment tabled by my hon. Friend the Member for St Helens North (Mr Watts) that called on the Government to reverse their VAT increase and, in doing so,
“cut 3p off a litre of petrol”.
I do indeed, because the general public are simply not interested in any more words, any more knockabout, or any more “he said, she said”. They have signed up in their thousands for action to reduce the cost of fuel and its impact on families and businesses. Study after study shows that transport is integral to an individual’s ability to access employment opportunities and to take part in social and cultural activities. For many people, access to transport is the difference between social exclusion and social inclusion. I could give examples from my West Lancashire constituency that illustrate that the cost of fuel has a significant impact on people, whether they live in urban or rural areas.
The sixties town of Skelmersdale was designed with the car as king. There is no railway station or pavement system to allow people to walk across town, and public transport services are limited. That means that residents rely on their car to get to work and to get around. In many cases, workers are forced to use taxis to travel to work, and if fuel costs increase, residents in those hard-pressed areas must decide whether travelling to work is financially viable.
Fine: my answer remains the same.
There are many rural communities in West Lancashire, and in those areas, public transport is almost non-existent. The main services in villages have closed down, so people have to travel to the main towns to shop, to go to the doctors or to go to work. They rely on their car to get about or, in the case of some older people, on the kindness of a friend to give them a lift. Yet again, if people cannot run their car because of costs, that has a negative effect on all aspects of their life. I am concerned about the impact on both the young and older people in rural communities, as they may become ever more isolated, making them more vulnerable. How do pensioners on a fixed income that has been stretched to the limit find the extra money to cope with further fuel increases?
Some people argue that a reduction in fuel duty and thus fuel prices would mean an increase in the number of journeys and carbon emissions. I absolutely understand that argument, which reflects the fact that there is a difficult balance between our desire to tackle climate change and enabling people to go about their daily business, go to work, support their family, and run their company. Simply pricing people out of their car is not a real solution, especially in areas such as West Lancashire, where there is no real alternative in place.
It strikes me that with a flatlining economy, rising unemployment and businesses unwilling to invest because of the current uncertainty, now is exactly the time for flexibility and common sense. People like those living in West Lancashire—hard-working families and local businesses employing people—are looking to the Government to help them out just a little. They want help to ease that burden, and it is probably the least they are owed, after broken promises to introduce a fuel duty stabiliser, a failure to scrap the planned fuel duty increase and a decision to increase VAT. It is time for social justice and fairness. It is time for the Government to listen and to act. People want them to do it, and to do it now.
I begin by thanking my hon. Friend the Member for Harlow (Robert Halfon) for working so hard with colleagues and with the public to secure this vital debate, which affects not only drivers, but every citizen in this country. Virtually everything we consume is carried by road, so when the cost of fuel increases, we all feel the extra burden. When we do our weekly shop, when we pop down the local pub for a swift half or when we buy virtually anything else, we notice that the cost has increased. That is why, in my response to the Chancellor’s last Budget, I said in the House that my constituents would have breathed a sigh of relief when the Chancellor scrapped the duty escalator increase programmed into the Budget by the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling).
The hon. Gentleman makes a valid point that family budgets are under pressure. The subject of the debate is important to my constituents—I received about 60 letters. Does he agree, though, that the increase in VAT to 20% is hitting family budgets and adding £450 to the average family’s tax bill?
I thank the hon. Gentleman for his comment. Like many Opposition Members, he is presenting a confused view of things. His party did not vote against the VAT increase. One minute the Opposition seem to want a VAT reduction only on fuel, which would be difficult to achieve because of the situation with the EU. In fact, as has been pointed out, it would be illegal. The next minute the Opposition want a full VAT cut, which I find strange. It is yet another uncosted policy to add to the other five points in the five-point plan. Perhaps we should call it the six-point plan for bankruptcy that the Labour party is advocating.
I remind the House that in the last Budget the Chancellor also cut 1p off the price of a litre of fuel. Although that is a small cut, it was welcomed by many. Thus at the last Budget the Chancellor saved the motorist from an impending increase of about 26p a gallon. That move showed that my right hon. Friend the Chancellor had listened to the people of the country and the FairFuelUK and other campaigns that have lobbied MPs and the Government in a reasoned, fair and pragmatic fashion. My right hon. Friend was probably wise to listen, because we all know now that certain surveys tell us that 85% of the public think the cost of fuel is hurting people and businesses.
I sincerely thank the Chancellor for taking that course of action. I hope that after today’s debate the Minister will pass on to the Chancellor the comments made by Members, and that he will think very hard, as he did before, and try to mitigate or not put through the increases in fuel duty programmed in for 2012.