The fall in the oil price clearly means that certain sectors such as the North sea face real pressure, which the Chief Secretary and I are determined to help them with, but overall this is a good thing for the United Kingdom and for British families. Today’s GDP figures confirm that the recovery is on track, and our plan is protecting Britain from the economic storm with the fastest growth of any major economy in 2014. However, the international climate is getting worse, and with 100 days to go to the election, now is not the time to abandon the plan and return Britain to economic chaos.
Inflation is at 0.5% and wages are growing at three times that rate. If the oil price is fully passed on—and we have put pressure on the petrol and utility companies to do so—British families will on average be £750 better off. If we had accepted the ludicrous price freeze proposed by the Opposition we would have locked in those high oil prices and people would not see the benefit in their utility bills.
The good folk of Brigg and Goole have noticed that the price of a gallon of petrol has fallen significantly and they welcome that. Many of my residents, however, are off the grid and their heating oil bills have not necessarily fallen as they should have. What steps can the Chancellor take to put pressure on heating oil companies to make sure that the cost of heating also falls for those residents off the grid, in line with oil prices?
My hon. Friend has been a champion for his constituents and for all the 1.5 million people who are off the grid and rely on heating oil to warm their homes. That price has fallen by 20%, so people are seeing the benefit of the falling oil price, but we continue to put pressure on the heating oil companies, and we have met them in the Treasury to continue to reinforce the argument that those prices must be passed on and must continue to be passed on.
The oil industry has told us that the softening in the oil price has highlighted the underlying problem in the North sea, which is the high cost of doing business there, driven by an up to 81% tax on production. Instead of waiting till the Budget, will the Chancellor take urgent action on investment allowances and on a cut to the supplementary charge?
The Chief Secretary and I certainly recognise the pressure on the North sea producers. We want to make sure that we continue to extract the maximum amount of oil from the North sea basin. That is why we cut oil taxes at the autumn statement, published a consultation on the investment allowance and made it clear that further action may be required at the Budget.
May I draw it to the House’s attention that what the hon. Gentleman calls the softening of the oil price would have done disastrous damage to the finances of an independent Scotland? The Scottish National party’s projections for its oil revenue were out by almost threefold. It is a reminder of the strengths of the United Kingdom that we can bear pressures such as a falling—or, indeed, a rising—oil price across the entire UK.
Industry and economic experts say that thousands of jobs in the North sea oil sector are at risk, yet both the UK and the Scottish Governments seem to be passing the buck, rather than taking the urgent action that is needed. Will the Chancellor give a commitment to bring forward tax measures immediately to support the industry, as we have called for, rather than delaying for another seven weeks until the Budget?
As I said, we have already cut the supplementary charge. I announced that in the autumn statement and it came into effect at the beginning of this year. We have launched a consultation on an investment allowance. We regularly meet the industry; we met industry representatives last week. They think the Budget is the appropriate time to make further announcements, if there are further announcements, on the North sea oil and gas tax regime, but the hon. Lady and the industry have my assurance that we will do everything we can to support the North sea oil and gas industry during this difficult time. Of course it is impacted by the fall in the oil price. We want to make sure that we get the maximum amount of oil out of the North sea and that the record investment that we have seen over the past year is sustained.
Given the financial short-termism of the previous Government, I welcome the Chancellor’s comments about a shale gas fund. When he is Chancellor after the next general election, will he consider expanding the concept to create a North sea sovereign wealth fund for the benefit of the country as a whole?
Of course, our challenge is to eliminate the deficit and to get our debt falling. Sovereign wealth funds are built up by countries that run consistent budget surpluses, which is exactly what we need to do in the United Kingdom. In particular, I would like to see some of the revenues from the shale gas industry used to support local communities. That would be a boost to communities across the country, especially in the north of England.
Although the Government cannot control the world oil price, they can do things such as drive down the costs in the industry. If the oil price remains low and perhaps drops further to the level where it costs more to take the oil out of the North sea, that is bad not just for the economy of Aberdeen and north-east Scotland, but for the economy of the UK.
I agree with the hon. Lady and I know that she is deeply involved in these issues as the Member of Parliament for Aberdeen South and chairs the all-party committee on these issues. We have to work out how we protect the industry as best we can from a rapid fall in the world oil price, and we must make sure that the brilliant skills, jobs and investment in north-east Scotland continue. That is why we anticipated the challenge by launching the consultation in the autumn statement and making immediate cuts to the tax regime. We have to take further steps over the coming year because we are determined that this brilliant industry will have a brilliant future.
Will the Chancellor confirm that when the oil price halves, as we have just seen, that is likely to be extremely good news for the British economy? Will he also confirm that this fall in the oil price is particularly good news for the 70% of car owners who need cars to get to work? The House will realise that no Chancellor will want to commit himself now, but will he at least agree that there is now great merit in a period of stability in fuel duty?
My hon. Friend is right. As I said at the beginning, the fall in the oil price, for all the challenges it poses in the North sea, is good for the British economy and good for British families. It is being felt at the pump, where petrol is now cheaper than when this Government came into office. One of the reasons why is that we abolished Labour’s fuel duty escalator. As a result, petrol is 20p per litre less than it would have been had we stuck with the shadow Chancellor’s disastrous tax plans. We have to make sure that motorists feel the full benefit of the falling oil price. As I say, it was a good move to abolish that disastrous escalator.