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Petrol and Diesel

Volume 545: debated on Wednesday 23 May 2012

It is unusual to have this many Members present for a 30-minute debate. If everyone wants to make an intervention, Mr Halfon will not be able to speak. The Economic Secretary will have 10 minutes to wind up, and I ask Members to keep interventions to a minimum because Mr Halfon probably has a 20-minute speech.

It is a pleasure to serve under your chairmanship, Madam Chairman, and I appreciate what you have said. I have cut my speech down to allow for more interventions. The number of people here shows just how important the issue is, and I thank Members from both sides of the House for coming along.

I want to start by knocking something on the head. I welcome, as I am sure everyone here does, the fact that in the past few weeks petrol prices have come down a few pence, but families in my constituency still spend more on petrol than on food. The price of petrol is at an historic, all-time high. In Harlow, it costs more than 140p a litre, and that hits the poor twice as hard as the rich. People say that the price has come down, but it is a bit like a burglar taking £100 out of your pocket and giving you £5 back.

Does the hon. Gentleman agree that when a few pence comes off the price of a litre and the foot comes off the neck of the economy and of hard-working families, it is the wrong time for the Government to put that foot back again and squeeze the life blood out of the economy?

I am grateful to the hon. Gentleman. He supported me in the debate last year in which we managed to get the Government to postpone the January tax rise, and he will see from my remarks that I do not disagree with him.

Sir Terry Leahy of Tesco has said:

“Filling up the family car has gone up 70% in two years, causing what was a steady recovery to go sideways.”

I and most fair-minded people recognise that the Government have made significant progress, abolishing the previous Government’s fuel duty escalator, scrapping the planned hikes in 2011 plus a 1p cut in duty, with a partial fuel stabiliser and the freeze in fuel duty that I mentioned, in January this year. I firmly believe that the Chancellor shows an understanding of the matter, and that the Government must get credit where they deserve it, but we face considerable problems.

The first problem is the planned tax rise in August, which I ask the Government to reconsider. Secondly, we need a serious inquiry into the lack of competitiveness in the oil market, and possibly even a windfall tax on oil firms, to cut prices. Thirdly, there is the problem of the banks speculating on the price of oil.

May I propose that my hon. Friend add a fourth suggestion to the list—that we consider a proper price stabilisation mechanism, rather than a fuel duty one? At the moment, the tax can go up, but it never comes down.

As so often, my hon. Friend has hit the nail on the head. We need a fair fuel stabiliser that looks at prices at the pump, so that when the international oil price goes up tax at the pump goes down. That really would be a fair fuel stabiliser.

I support my hon. Friend’s campaign. I represent the least densely populated constituency in England. In Northumberland, fuel is a key issue, as I am sure it is everywhere else. I suggest that there should be an Office of Fair Trading examination, much like those we have carried out so successfully in remote communities into other forms of heating and other oil.

I thank my hon. Friend for his remarks. That matter is an important part of my argument.

On the August rise, the Automobile Association says that a 3p rise in petrol prices will switch £1.8 million a day out of the economy and into petrol costs, draining money away from high streets. At the same time, a report by the respected Centre for Economics and Business Research shows that cutting duty by 2.5p would create 175,000 new jobs. The RAC Foundation and the Institute for Fiscal Studies—both very respected—show that revenues from motoring taxes are set to collapse by between £10 billion and £13 billion a year over the next decade, as people are driven off the roads by economising on fuel. That is why I urge the Government to think again.

I congratulate the hon. Gentleman on the very good campaign that he has carried out on this issue. We all appreciate it. With our fuel costs rising and it costing more to fill a car or heat a home than to buy groceries, does the hon. Gentleman feel that now is the time for a windfall tax on the oil companies that are making exorbitant profits?

Yes, and I thank the hon. Gentleman for his incredible support all through this argument. I recognise that there is no magic money tree, so to cut prices at the pump the Government need seriously to consider another windfall tax on the oil companies, not necessarily on North sea production but on the companies as a whole.

Not enough emphasis is put on my second point which, as my hon. Friend the Member for Hexham (Guy Opperman) says, is that we need competitiveness in the oil market. Not only the Government but businesses and the oil companies have a responsibility. There are four complaints. The first is that pump prices are always quick to rise, but that it feels as though a court order is needed to get them down. Evidence shows that from May to August 2011, oil prices fell by about 5.5%, adjusting for exchange rates, but petrol and diesel prices stayed high, falling by only 1.5%.

The second complaint—the debate comes in the wake of this—is about the OFT’s interim decision not to investigate the UK oil market, despite a dossier of evidence from Brian Madderson, who represents the UK’s independent forecourts, which shows that British motorists are being fleeced and that oil firms active in the UK are under formal investigation by the Federal Cartel Office in Germany as a result of similar complaints.

I shall give way to my hon. Friend the Member for Totnes (Dr Wollaston) and then to my hon. Friend the Member for Great Yarmouth (Brandon Lewis).

I congratulate my hon. Friend on an excellent campaign. Does he agree that my constituents who live in the most rural areas face an additional penalty in that they pay much higher prices, and that prices can be many pence higher in garages only a few miles apart?

My hon. Friend is exactly right, and I am grateful for her support. People in rural areas face fuel deserts, in essence, because of the uncompetitive nature of the oil industry. People have to travel further, particularly in rural areas, to deal with the cost of fuel.

I thank my hon. Friend for giving way so generously, in an excellent debate. Rural areas such as Norfolk are affected, but does he agree that it is not just about rural areas? Places that focus heavily on the tourism industry, such as Great Yarmouth and other coastal towns, are adversely affected if fewer people are able to afford to travel there, which has a knock-on effect on our economy.

I will give way to my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) and then I will carry on a bit more.

Does my hon. Friend agree that a hidden consequence of all this is to be found in the voluntary sector? People who do things such as meals on wheels and those who are voluntary carers—the pillars of our society—are beginning to wonder whether it is all worth while.

I am a passionate believer in the big society because it is about people power, social capital and helping social entrepreneurs, and the price of petrol and diesel stops people in their charitable work and harms communities. My hon. Friend makes a powerful point.

This month, Germany decided to initiate fuel price regulation and to limit price rises. Austria implemented similar measures last year, and the AA has noted their impact in keeping prices down.

I will in a minute. Because of where they are sitting, I am concerned that two of my colleagues, including my hon. Friend the Member for Tiverton and Honiton (Neil Parish), have joined the other side—I hope not. The Office of Fair Trading has not investigated the UK oil market since 1998, despite the fact that British petrol and diesel prices are among the highest in Europe, so we need a proper investigation.

My hon. Friend makes a great case for a reduction in petrol and diesel prices. Oil companies, I believe, take far too much. When crude oil prices go up, they immediately put up their prices, but when the crude prices come down they take for ever to bring their own down. We need a thorough investigation into the oil companies.

My hon. Friend is exactly right, which is why I am arguing that the Government should force the Office of Fair Trading to launch an investigation into the uncompetitive nature of oil companies.

The third issue is the problem of local variation in petrol prices, especially in rural areas and towns such as mine. In Harlow, fuel is always 4p to 5p more expensive than it is a couple of miles down the road. I have complained to the OFT. Its letter was a classic Sir Humphrey reply, giving a lot of sympathy and a whole load of reasons why nothing could be done.

I thank my hon. Friend for giving way, and I pay tribute to his work on this campaign. On local areas and price differences, does he not agree that any OFT investigation should consider the lack of filling stations? Owing to the huge reduction in their numbers over the past 15 or 20 years, there is a distinct lack of price competition in local areas.

My hon. Friend has read my mind; I was about to come to fuel deserts. Britain has gone from 20,000 forecourts in 1990 to 8,500 today, a drop of nearly 60%, turning huge areas of the UK into fuel deserts where motorists must drive to fill up. There are examples in Cornwall, where a hypermarket sold fuel at below cost price until all the other petrol stations went bust, after which its prices rose considerably.

From the Labour Benches, I, too, offer support to the hon. Gentleman’s campaign. Earlier, I went to a petrol price comparison site. Would it surprise the hon. Gentleman to know that although the situation is bad in Harlow, it is even worse in Oxford? He will enjoy the support of my constituents in winning his campaign.

I thank the right hon. Gentleman. The next time I get my many e-mails from Harlow residents, I will pass them on to him so he can help me to respond. I am grateful for his support. It shows the Minister that this is an all-party campaign, because the issue affects everybody.

As always, my hon. Friend makes a powerful case. The point about the price differential from area to area is particularly important in my constituency, where Immingham is a major centre for the haulage industry. Increased haulage prices trickle down into the economy generally. Does he agree that it is particularly important that any investigation take note of the impact on haulage businesses?

My hon. Friend is completely right. Before I answer that, I should say that although I have received a lot of credit for working on the fuel campaign in Parliament, he is deputy chair of FairFuelUK and has done an enormous amount of work to help me behind the scenes. I must give credit where it is due. Haulage firms all over the country are closing down. Transport firms are closing.

Southampton is in close proximity to Portsmouth ferry port. One big challenge faced by hauliers in the south-east is easy access to the continent and European lorry drivers coming over with much cheaper tanks of fuel.

Again, we need to consider that, as well as considering the charging of foreign lorries that come here. I recognise that the Government have made some progress, but those lorries must be charged a lot more. The playing field is not level. Why should our people suffer because foreign lorries have an unfair competitive advantage?

I thank my hon. Friend for giving way so generously every three or four words. We are all taking over his speech. I have two points. Does he agree that not only is fuel dear in rural areas, but rurality makes it far more necessary to have a car, so the impact of fuel prices is far greater there? Also, in High Peak we produce the finest limestone in the world, which is more often than not transported by road, meaning more costs.

My hon. Friend is completely right. My argument has always been that it is not whether people can afford to have a car—we have a great car economy—but whether they can afford not to.

I am grateful to my hon. Friend for securing this debate. We worry about the cost of petrol and diesel, particularly on the island, where prices are higher than everywhere but the most extreme places such as the Isles of Scilly, the Hebrides and the northern islands. Does my hon. Friend acknowledge the additional cost of transporting fuel to such places?

The Minister will have heard what my hon. Friend says. I am sure that the fact that so many people are here today making similar points will not be lost on the ears of a Minister who we know listens.

Before the hon. Gentleman moves off rurality, can I make the issue real? A 10p difference per litre is nearly 50p a gallon or £5 a tank. For someone commuting and filling their tank twice a week, that is hundreds of pounds a year. I hope that he will take the opportunity to reinforce to the Minister that for ordinary working families who are struggling in this austerity period, that extra few hundred pounds makes a huge difference.

I thank the hon. Gentleman for his remarks. As I will say in my conclusion, statistics show that motorists in my constituency on average earnings pay one tenth of their income just filling up the family car. The Government say that people face fuel poverty if they spend one tenth of their income on fuel. People are forced to use their cars, and in my constituency—and, I am sure, elsewhere—they are paying one tenth of their income to fill up the family car.

I will make a brief point about the banks; I am nearly done. Last year, western Governments tried to release oil to cut pump prices, but banks bought up at least £1.6 billion of it. There is evidence that a lot of it was stored in silos at sea rather than entering the market, keeping prices high. America is introducing tough new penalties for market manipulation. I urge the Government to do the same in Britain. If Governments around the world do the right thing and release oil stocks, we cannot allow banks to buy it up, keep it at sea and hurt the struggling motorist.

What is to be done? I am a realist. I do not believe in “Charge of the Light Brigade” politics; I much prefer the battle of Agincourt. I accept that we do not have a magic money tree, but the big oil companies are not struggling. In the first quarter of this year, Shell had profits of $7.6 billion, BP $5.9 billion and Exxon Mobil $9.4 billion. It is a similar story at Chevron and ConocoPhillips. At the end of 2011, those firms had $58 billion in cash reserves. In order to find the money to stop price rises and help hard-pressed motorists, the Government could consider a windfall tax to fund cheaper petrol at the pumps. A windfall tax was imposed before, but on North sea oil in particular. I am asking the Government to consider a windfall tax on oil companies in general.

We must remember that motorists are not a lobby group. They are mums driving to school, children on buses and pensioners hit by inflation. When the cost of road haulage rises, the price of everything else rises too.

I thank my hon. Friend for giving me this opportunity. To declare an interest, I should say that I am a qualified transport manager and have run a considerable haulage fleet. One major anomaly in the haulage industry is that we compete against foreign competition, but diesel is priced considerably higher than petrol in the UK, whereas on the continent it is considerably cheaper. Perhaps we could explain that anomaly. It is extremely important in my constituency, because more than one third of private sector jobs there are in distribution or are distribution-related. As we have no railway stations in my constituency, a vehicle is not a luxury; it is essential.

I agree entirely. We must look at the price of diesel too, because it has risen hugely. Prices are much higher. People often quote unleaded petrol prices but forget to quote those for diesel.

As we have agreed, petrol prices are crushing businesses and families and creating a poverty trap, and evidence from the London School of Economics and elsewhere shows that they are adding to Britain’s dole queues. As I have said, I believe that the issue is not whether people can afford a car, but whether they can afford not to. I urge the Minister to reconsider the August tax rise, launch a tough investigation into the oil market through the OFT and elsewhere and consider a windfall tax to cut prices at the pumps.

Before I end, I should say that we are here today not just because of MPs representing their constituencies but because of the work of FairFuelUK, which has done much to bring the issue to the public’s attention, especially through The Sun newspaper’s “Keep It Down” campaign, which has done an enormous amount to highlight it. Both The Sun and FairFuelUK have campaigned tirelessly.

We face a petrol crisis in our tax system, our oil companies and our banks. Everyone seems to benefit except hard-pressed motorists in Harlow and the millions of hard-working people throughout our country who have no choice but to drive their cars.

I sincerely congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing this debate. We are all aware of the passion with which he and other Members who have spoken campaign. So many have contributed to this discussion that I will struggle to name them all, but I shall endeavour to address the breadth of the debate.

I shall start by saying, as my hon. Friend did, that even though average pump prices have fallen by about 6.5p over the past month, there is little doubt that the price of petrol and diesel remains a very difficult issue and a concern to many families and businesses throughout the country.

Since we came to office, the Government have listened to those motorists and the many others who are concerned about high pump prices. Motoring is an essential part of everyday life for many households and businesses. Fuel costs affect us all in various ways, and the Government recognise that the rising price of motoring fuel is a significant part of day-to-day spending.

I will give a little historical context by noting that in 2009 the previous Government introduced a fuel duty escalator, which was a time bomb that involved planning for seven fuel duty increases. That could have resulted in average pump prices being a whole 10p per litre higher than they are at present. The previous Government would then have introduced further above-inflation increases in 2013 and 2014. None of those planned increases were subject to either oil price or pump price movements, unlike the fair fuel stabiliser that we have introduced.

We know that high oil prices are causing real difficulties in ensuring that motoring remains affordable. It is important to remember that pump prices are affected both by world oil prices and by duty rates, as I know all Members present will understand. It is important that a responsible Government are able to consider their actions and take them in that context. Although the Government cannot control world oil prices, they can control duty rates, which is what this Government have done. We have acted by providing £4.5 billion-worth of relief on the burden for motorists between 2011 and 2013. Indeed, VAT and fuel duty last rose in January 2011.

The Minister is right to say that the Government cannot control oil prices, but they can stop the European Commission attempting to frustrate the development of the Canadian oil sands, which has the potential to offer billions of barrels of oil to the US market, which will help bring prices down.

My hon. Friend is right to highlight the complexity of the global market and its relevance to this debate. I suspect that there is a much broader debate to be had about where we might look for energy security and breadth of supply in the future, but he is right to raise that point.

On the impact of what the Government have been able to do, duty at the pump has been frozen for 16 months and pump prices are now 10p lower thanks to this Government’s actions. To put that into pounds, as other hon. Members have endeavoured to do in their contributions, a typical Ford Focus driver will be £144 better off as a result of those actions, and a haulier will benefit by £4,400 on average.

I understand why the August duty increase is one of the main points that has been raised. I am well aware of the burden caused by the rise in the international oil price and the concern it creates for businesses and families. This is, after all, a time of real uncertainty and instability from which no country can be immune. Britain has been comparatively stable in recent weeks. Only yesterday, the International Monetary Fund said that our approach is right and that we have earned Britain credibility again in our economy. Families and businesses benefit from that earned credibility, through lower interest rates.

Calls for the August increase to be scrapped raise an important question, because we would need to consider how to replace the £1.5 billion it would cost. That money would need to come from higher taxes or lower spending elsewhere.

The Centre for Economics and Business Research report that has been cited today has a couple of weaknesses. Its analysis is not straightforward. For example, it makes no mention of the relationship between oil prices and pump prices. It does not recognise the range of factors that go into pump prices. As such, its proposed fuel duty cuts could be totally offset by increased oil prices, which means that there may not be any reallocation of spending elsewhere in the economy. It is important to place that point about this frequently cited report on the record. We really need to consider the volatility of global oil prices. Any Government action would have to be taken against that backdrop. It is not certain that cutting fuel duty would have a positive effect on families or businesses.

Instead, the Government have taken action to help in areas in which we can be sure of a positive impact: supporting businesses through cuts in corporation tax and helping families through increases in the personal allowance threshold, which means pounds back in the pocket.

On the CEBR report, the Minister is right that there are multiple inputs into the pump price, but surely she is not saying that that is a reason for doing nothing.

The hon. Gentleman will have heard me explain over the past few minutes that the Government have done something and that there are many other ways in which this Government need to consider what they do through the economy.

On the recent Royal Automobile Club report, which has also been raised today and in which my hon. Friend the Member for Harlow is interested, the Government announced in the Budget that they will consider whether vehicle excise duty should be reformed to support the sustainability of public finances and to reflect the improvements in vehicle fuel efficiency. The Government will, of course, seek the views of motoring groups before taking any decisions.

My hon. Friend also asked questions about the competitiveness of the oil market. As I think he knows, the Office of Fair Trading is undertaking research on pump prices on the Scottish islands, which are no doubt of interest to the hon. Member for Dundee East (Stewart Hosie). That work will help inform what further action, if any, may be appropriate elsewhere in the UK.

Several Members have asked whether other island and mainland areas could be included in the rural fuel rebate pilot scheme. It is a pilot scheme and nothing beyond its boundaries has been ruled in or out, but I have listened to what Members have had to say.

I want to put it on the record that the pilot scheme seems to be working well. Indeed, I hope that it will be rolled out further and be made a permanent scheme in the future.

I note the hon. Gentleman’s views and am grateful for his support.

Members have also raised the issue of banks speculating on the price of oil and potential market manipulation affecting oil price. The UK, along with other European Union members, is currently negotiating revised market manipulation rules for commodity markets, which the UK welcomes.

In conclusion, we have recognised the impact that high pump prices are having on motorists, families and businesses. The previous Government, I am sad to say, had no credible plan to deal with the debts that they created and no creditable plan to support motorists. We have listened and responded during our time in office to date. We have cut fuel duty and scrapped their fuel duty escalator. We have ensured that there will be just one inflation-only increase in fuel duty this year. We will have kept fuel duty frozen for 16 months and we will continue to support motorists with our fair fuel stabiliser. The Government have a fair and credible plan to support motorists.

I shall end on this final point. We seek to support motorists in their daily role not only as drivers—I have outlined a few ways in which we have endeavoured to do that—but, in the words of my hon. Friend the Member for Harlow, as mums, pensioners and all the other daily roles that they have to undertake. We as a Government and as responsible parliamentarians need to consider the breadth of daily roles undertaken by the public, whether they be workers benefiting from the personal allowance, mortgage holders benefiting from the low interest rates that we have earned in this country, or, crucially, taxpayers who know that we must deal with our debts and spend public money wisely.

Question put and agreed to.

Sitting adjourned.