Skip to main content

Heavy Fuel Oil Duty

Volume 414: debated on Wednesday 12 November 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what would be the cost to the Exchequer of removing the duty on hydro-carbon oil supplied to industry.

My Lords, I assume that my noble friend is referring to heavy fuel oil which is used almost exclusively by industry. The loss of revenue from abolishing the duty on this oil would be £220 million a year.

My Lords, while thanking my noble friend for that Answer, which correctly interprets what was in the forefront of my mind, will he confirm that the heavy fuel oil duty in this country is twice what it is in Germany, a hundred times what it is in France and a hundred and sixty times what it is in Italy? Would not the removal of this duty go some way, at any rate, towards making industry more competitive in export markets?

My Lords, while I am grateful to my noble friend for that information, I feel bound to say that percentage figures can, at times, be misleading. The present duty on heavy fuel oil in this country is approximately £8 per tonne. That is one of the highest, but not the highest in Europe. It represents less than 10 per cent, on the price of the oil and in relation to the costs of industry generally it represents less than 0·;2 per cent, of industry total costs.

My Lords, if there is a case for refusing to abolish the whole of the duty, is that not good reason for reducing the duty? Would it not have the beneficial effect of enabling those who pay less duty to employ more labour or even to use some of the surplus for the purpose of investment?

My Lords, the level of taxation is a matter for my right honourable friend the Chancellor of the Exchequer in his Budget, and I obviously cannot anticipate what decisions he might take in that connection. I can, however, assure the noble Lord that what he says will be duly noted.

My Lords, in giving the figure of £220 million did my noble friend make any offsetting allowance for the increased yield of corporation and income taxes which would result from the likely increased profitability of industry?

My Lords, it does not necessarily follow that if a tax is reduced the whole of the reduction in taxation appears in profits and that therefore contributes to corporation tax. A reduction in indirect taxation often results in a reduction in price and, indeed, the object in mind when people suggest that the fuel oil duty should be reduced, is to reduce the price of the product and therefore to make the product more competitive.

My Lords, does the noble Lord's reply to the noble Lord, Lord Shinwell, indicate a recognition on the Government's part that this tax is affecting adversely, and, in the view of many of us, unreasonably, the competitiveness of vital parts of British industry?

My Lords, my reply indicates no more than that, in accordance with long-standing tradition, Ministers do not anticipate any decisions by the Chancellor on budgetary matters. I can assure the noble Lord that any representations which have been made and any comments made in your Lordships' House will be brought to the attention of my right honourable friend the Chancellor of the Exchequer.

My Lords, when my noble friend brings this matter to the attention of his right honourable friend, will he also take into account that, according to a report in the Financial Times commenting on an EEC bulletin, we start from the position that fuel oil is £8 per tonne dearer in this country than it is in France, £11 per tonne more than in Germany and £12 per tonne more than in Italy? Those are the average prices given.

My Lords, I could not necessarily accept what my noble friend says about the prices of fuel oil. A study on this matter is being conducted by the CBI and my right honourable friend the Secretary of State for Industry looks forward with interest to receiving the results of that study.

My Lords, will the Minister confirm that the cost of £220 million for the extra tax on fuel oil is as nothing compared to the extra cost of interest rates borne by industry in this country as compared with our competitors?

My Lords, is the Minister aware how very much the House enjoys listening to him when he is explaining a really difficult question? His felicity of language, his knowledge and his skill are really a delight to the House, especially when he is not trying to blame everything on the previous Administration.

My Lords, I am most grateful to the noble Baroness for her kind remarks. I must admit that, in this particular instance, this tax was introduced in 1961 when we had a Conservative Government in power.