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Taxation: Fuel Duty

Volume 751: debated on Wednesday 15 January 2014


Asked by

My Lords, the Government have taken substantial action to support motorists with the cost of living while reducing the budget deficit. As a result of this Government’s action, fuel duty will be frozen for the remainder of this Parliament, which will result in pump prices being 20p per litre lower than under previous government plans by 2015-16. The Government must exercise flexibility to target tax support where it is most needed. The Government will continue to review fuel duty in the context of all taxes and the public finances.

My Lords, I thank the Minister for that encouraging reply. Is he aware that in upland, moorland and less favoured areas, such as where I live in the Peak District, the ownership and use of a vehicle—let alone a four-wheel drive vehicle—is a necessity and not a luxury. That therefore causes those communities to have problems with fuel prices, which are a very significant component of their viability. Will Her Majesty’s Government make every possible effort in the future to assist those areas in terms of cost of fuel?

My Lords, the policy that we have already adopted will assist people in those areas, as it will everywhere else. We are looking at the scope for extension of the rural fuel rebate scheme, which gives an additional 5p rebate in the most sparsely populated areas. We hope to be able to make an announcement of that in the relatively near future.

My Lords, the Question on the Order Paper asked the Minister a simple question. Should not his answer have been no?

No, my Lords. The noble Lord knows better than anybody else that it would be foolish to set out at this point firm plans for individual taxes for the course of the next Parliament.

Has my noble friend noted that the price of petrol in the petrol stations varies up to 3p within a few miles, and sometimes more? Does he realise therefore that if people are able to pay the extra 3p rather than going to a cheaper place, that suggests what the economists call a bit of a consumer surplus since they are prepared to pay extra? What is the cost to the Exchequer of this reduction? First, I think that it was £400 million for this year but what will it be by the end of the Parliament? Secondly, is it really the best way of spending public money, given all the other demands on the Exchequer?

My Lords, the Government will have eased the burden on motorists by £22.5 billion over the Parliament to 2015-16. The kind of differential that my noble friend describes in a small area is a classic example of a competitive market operating. I am told, although I do not have one myself, that if you have a certain kind of sat-nav it will automatically tell you the price of petrol at petrol stations in your vicinity at the time, which is a very good way of facilitating the market working.

My Lords, the Minister will however recognise that the Chancellor, through his VAT increase, increased the price of fuel by 3p. Why do the Government not go further and introduce a price freeze on domestic fuels?

My Lords, it is true that the effect of the VAT increase ate into the benefit but the price is still 10p less than it would have been, even taking the VAT increase into account. I am not sure whether the noble Lord supports that policy but that is a very considerable net increase. As far as domestic energy prices are concerned, the noble Lord knows that his party’s proposed policy is nothing more than a gimmick.

Arising from the question asked by the noble Lord, Lord Marlesford, about what economists call consumer surplus, is the Minister in agreement with the official data of the ONS that hydrocarbon taxes are the most regressive taxes in the country? In other words, they show that the lowest-paid pay—I think—four times more on petrol, as a percentage of their income, than the top decile. There is therefore a distinct impact on poverty, as was implicit in the original Question.