Ms Eagle
I will not give way to the hon. Gentleman.
As we all know, VAT applies to petrol. The Library calculated that the Conservative Government’s 2.5% increase in VAT has added nearly 3p to the cost of a litre of petrol when people are least able to absorb that extra cost.
The Economic Secretary to the Treasury (Justine Greening)
Perhaps the hon. Lady will confirm and clarify her party’s position on—I think—fuel duty. I am not sure because on ITV’s “Daybreak” the shadow Chancellor said: “We’re saying today, as well as the duty thing, which I’ll think you’ll freeze”—I presume that he was not saying that explicitly to Christine Bleakley—“I think you should reverse the VAT rise.” Specifically on the “duty thing”, is the shadow Chancellor talking about freezing the 1p rise, the RIP rise—[Hon. Members: “RIP?”] Sorry, I mean the RPI plus one rise. Which is it? [Interruption.] I might have made a slip, but I was thinking about the Opposition and their policy.
Mr Speaker
Order. Before we continue, may I appeal to Members, including Ministers and other Front Benchers who are intervening, to do that economically? I remind the House that the Chair’s responsibility is to seek to protect the rights of Back-Bench Members who wish to speak. I put it to Front Benchers that Back Benchers will be not inconsiderably irritated if long speeches from the Front Bench stop them getting in.
The Economic Secretary to the Treasury (Justine Greening)
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“notes that the Government inherited the largest deficit in UK peacetime history and that the previous Government and current Opposition has no credible plan to deal with the deficit; further notes that this Government has already taken steps to support families and that those on low and middle incomes will benefit from April 2011 from a £1,000 increase in the income tax personal allowance, above-indexation increases in Child Tax Credit and that pensioners will receive new ‘triple-lock’ increases in the basic State Pension; further notes the significant impact on fuel prices in the UK of the dramatic increase in the world oil price to over $100 per barrel and the impact on households and business; notes that the previous Government increased fuel duty no less than four times between December 2008 and April 2010, proposed introducing a fuel escalator from 2011 and planned for a further series of six consecutive fuel duty rises up to 2014; nonetheless recognises the significant impact of high fuel prices on motorists, hauliers and businesses and that the Government is considering a fair fuel stabiliser that could support motorists and businesses when oil prices are high; and in addition notes that a reduction in VAT on fuel would be deemed illegal under EU law and that the Chancellor will update the House on this issue at the time of the Budget.”.
There we have it, from the party that came into government with fuel duty at 36.86p a litre and left it at 57.19p a litre—a whole load of moaning and insubstantial comments about what it cannot do to help motorists. The Government, unlike the Opposition, understand the seriousness of the issues that we are debating today. We know that the increase in the world’s oil price, as it feeds though to all other goods, is leaving many people out of pocket, and that families up and down the country are finding it hard to make ends meet. The Opposition clearly have no grasp of the issues at hand, as we have just heard; to them, it is just politics. They are simply not interested in how people on the ground actually feel about things, and they have no credible policies to back up their claims.
Andrew George
The Labour motion mentions
“securing the appropriate EU derogation”.
I hoped that the shadow Minister would give way to me, so that I could ask her what European derogation that is, and how many times in the past 13 years Labour attempted to seek it. Has the Economic Secretary seen anything in the records of the Treasury suggesting an answer to those questions?
Justine Greening
Officials are not aware that the last Government sought any derogation in relation to VAT on fuel at any point in the past 13 years. In fact, if the shadow Chancellor had gone off to Europe with his influencing strategy, which was clearly so unsuccessful when he was running for the leadership, I doubt that there would have been any prospect whatever of his making any progress. The Labour party seems to have about as much understanding today of the economic situation that it has left our country in as it did of the situation two years ago, when it ran this country into the deepest and longest recession in living memory.
Rehman Chishti
Will my hon. Friend confirm that the shadow Chancellor was wrong in law when he said that there should a reversal of the VAT rise on fuel? Under EU directive 112 of 2006, that cannot legally be done.
Justine Greening
My hon. Friend is absolutely right. In fact, the EU directive on VAT states:
“Member States may apply either one or two reduced rates…The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III.”
That annex does not include road fuel, and other amending articles do not permit a reduced rate or exemption to be applied to transport fuel. That in is European Council directive 2006/112/EC of 28 November 2006 on the common system of value added tax, at article 98 and annex III.
Charlie Elphicke
In the light of what my hon. Friend has just said, is not the motion before the House a shamelessly opportunistic preying on the justly held fears of the British people about the cost of fuel?
Justine Greening
That is absolutely what it is, and it is something else as well—it is a smokescreen. The Labour party has no plan whatever to tackle the deficit, and this Opposition day debate is all about trying to divert attention from that. It had no plans when it was in government, and it has no plans now it is in opposition.
Sajid Javid
One of the most important components of the cost of living is the interest rate, which in turn determines mortgage rates. Does my hon. Friend agree that, because of the action this Government have taken, Britain today has a lower interest rate than countries in Europe that have far higher deficits? That is the very action that the shadow Minister sought to criticise.
Justine Greening
One of the problems is that the Labour party and the shadow Chancellor do not even accept that there is a structural deficit. My hon. Friend is absolutely right to point out that the steps we are taking to tackle the deficit and bring our public finances back under control and into a sustainable shape, so that we can fund public services affordably for the long term, will give us a much better chance of keeping interest rates and inflation low. That is critical to ensuring that we can support our economy more broadly.
John Mann (Bassetlaw) (Lab)
It would help the debate and the Economic Secretary’s own Back Benchers if she could tell us which party is responsible for the majority of the taxation on fuel today.
Justine Greening
I am sure the hon. Gentleman was quite happy trotting through the Aye Lobby when his party brought forward its 12 fuel duty rises and the Budget in which it announced a further six. His question is particularly disingenuous because at that time the Conservative party was campaigning against unreasonable and unfair rises in such things as road tax. The Labour party paid no attention and continued to hammer motorists again and again.
Justine Greening
Perhaps I will make a bit of progress, because I know that many Members want to take part in the debate.
Justine Greening
I shall answer the hon. Gentleman, who is hectoring from a sedentary position. When his party was in government, it knew all about raising taxes. In fact, it formed the ultimate tax-and-spend Government, who got us into such a situation that their final Chief Secretary wrote a note saying that there was no money left. I really do think that if the Labour party wants to be taken seriously on the economy, it must start living in the real world instead of the fantasy world that it currently finds itself in, particularly in relation to EU VAT directives.
Mr Speaker
Order. I apologise for interrupting the Minister. I said to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) a few minutes ago that he was making an excessive noise—[Interruption.] That was my best effort at the pronunciation of his important constituency. However, my remonstrance extends more widely. The debate has been notably scratchy, and it needs to calm down a bit from now on.
Justine Greening
Thank you, Mr Speaker.
The Government are taking steps to help the poorest and most vulnerable in our society. From April this year, we are raising the income tax personal threshold by £1,000, taking nearly 900,000 of the lowest-income workers in our country out of tax altogether.
Justine Greening
I shall make a bit more progress, because I want to talk about the Labour party’s so-called fuel duty proposals, which are of course VAT proposals.
We are increasing child tax credits above the rate of inflation, giving lower-earning families an extra £210 over the next two years. Of course, poorer families will still receive more in child credits than they received under the previous Government, and, as I said, lower earners will be better off as a result of this Government’s changes to the personal allowance.
Caroline Lucas
Will the Minister explain how it is compatible for a Government who claim to be the greenest ever to duck this opportunity to introduce a shift to green taxation—in other words, to keep the fuel duty escalator but to reduce other taxes accordingly?
Justine Greening
The hon. Lady’s point is about how to strike the balance between achieving environmental change and managing to raise revenues for the Exchequer to fund public services, which I am sure she agrees need the right level of funding. I think we have got the balance right in our approach to fuel duty and VAT on fuel. The challenge is that if we do not go ahead with the previous Government’s increases, we could fundamentally damage our ability to tackle the deficit. This Government are constrained purely because of the terrible financial situation that the previous Labour Government handed over to us.
Justine Greening
If I may I shall make a little progress, mindful of what Mr Speaker said about ensuring that hon. Members get a chance to have their say after the opening speeches.
One of the many things that this Government are doing to help people in Britain—it is the last one I will mention—is changing the state pension. The shadow Chancellor knows all about that, because he was chief economic adviser to the Chancellor who later became Prime Minister in the previous Government when he proposed increasing pensions by 75p. Many thought at the time that that was a real slap in the face for pensioners.
This Government have gone further than the previous one ever did. We have already introduced proposals to re-establish the earnings link, and introduced the triple-lock guarantee, so that each and every year the basic state pension will increase by the greater: earnings, prices or 2.5%. Of course, when things improve—when inflation comes back down below 2%, which is the Bank of England’s aim, and when the economy recovers from the years of Labour’s irresponsibility—those in retirement will still have higher pensions, poorer families will still receive more in tax credits, and lower earners will still be better off as a result of our changes to personal allowances. Those are real, credible, long-term policies that will stand the test of time, not half-baked initiatives conjured up over a weekend that do not last even the course of a single debate.
That brings me on quite nicely to the impact of the rising cost of fuels. Opposition Members know all about that, because as we have heard, the previous Government increased fuel duty four times in their last 16 months in office.
Robert Halfon
Is my hon. Friend aware that the previous Government planned six future fuel price increases, even though they knew the state of the economy?
Justine Greening
Absolutely. They left many tax bombshells, but perhaps that pre-planned tax increase was the tax road mine. There was a pre-planned additional per pence increase on fuel and a pre-planned year-on-year RPI increase—the so-called escalator. Ironically and utterly bizarrely, we are today debating a Labour motion that goes against the policy introduced by the previous Labour Government.
Richard Graham (Gloucester) (Con)
Given that I and several Conservative Members were not in the House for Labour’s last Budget, will the Minister confirm whether the hon. Member for Wallasey (Ms Eagle) and her colleagues on the Opposition Front Bench voted for the seven increases in fuel duty proposed by the Chancellor at that time?
Justine Greening
I do not know exactly how they voted, but the previous Labour Government consistently increased fuel duty on motorists, taking no account of whether that was affordable.
Mr Russell Brown
I thank the hon. Lady for giving way—at the end of the day, she is a fair person. She talks about the increases imposed by the previous Labour Government, but she must also recognise that on 11 occasions over a nine-year period, they saw fit to suspend or abandon any proposed increases simply because of the rising price of fuel. I sincerely hope that she and her colleagues remember that in the light of the motion.
Justine Greening
The hon. Gentleman is talking about postponements, because those fuel duty increases eventually came through. That is one reason why in their final months in office—from December 2008 to April 2010—the previous Government increased fuel duty no fewer than four times.
Over the weekend, the shadow Chancellor confidently proposed cutting VAT on fuel.
Sammy Wilson (East Antrim) (DUP)
The Minister quite rightly highlights in her amendment the previous Government’s fuel duty increases, but the motion recognises that people are feeling pain now, and holds out the hope that the Government will do something about fuel duty. Rather than talk about what the previous Government did, will she tell us what she intends to do to alleviate the hardship for people in places such as Northern Ireland?
Justine Greening
I shall not pre-empt next week’s Budget, but the hon. Gentleman knows that both parties in the coalition Government spoke in opposition about the effect of fuel duty on motorists. Conservatives spoke in opposition about how the oil price fed through into fuel prices at the pump, and Liberal Democrats talked about the impact of fuel prices on people living in remote rural areas. The coalition Government are now looking at how to tackle both those problems, but I cannot pre-empt the Budget.
Ms Angela Eagle
Will the Minister now admit that although before the election the Conservatives said they would reduce fuel by 10p a litre if petrol prices were high, they have actually increased fuel duty twice—once in October and once in January—since getting into power?
Justine Greening
Listening to the Opposition is stunning. The outgoing Chief Secretary’s message to the incoming Government was that there was no money left. Worse than that, the previous Government had pre-planned increases, which were due to come in now, as the hon. Lady just pointed out. The bottom line is that it is outrageous for the Labour party to cry crocodile tears about tax increases that it had planned—it is disingenuous in the extreme, and shows that it has no credibility and no leadership on the issues that matter to people, such as motoring, which we are debating today. The audacity of the motion is stunning.
Let me turn—as I was about to—to the Opposition’s proposal to cut VAT on fuel. [Interruption.] The shadow Chancellor is hectoring from a sedentary position, and I think the reason is that he is worried that we are about to talk about his policy—a policy that unravelled within hours of his announcing it. He has come late to the debate on motoring. Obviously he spent many years being driven around in a Government car that the taxpayer paid for. I understand that it was reported in the papers that he used to use it for journeys of just 100 yards. Perhaps he was not aware at that point of how much it cost people to fill up their cars, but perhaps he knows now, and perhaps that is why he has suddenly realised that this is an issue, as we did in opposition. He has come to this debate late, but his policy-making suggestions are, to put it bluntly, illegal under EU law.
It is quite an achievement to make a proposal along those lines. As I said to my hon. Friend the Member for Gillingham and Rainham (Rehman Chishti) , the shadow Chancellor is quite wrong to say that we can reverse the VAT rise on fuel, because doing so would be illegal under the EU VAT directive. However, if the right hon. Gentleman thinks that the UK operates under a different VAT directive, perhaps he would like to intervene on me right now. [Interruption.] I think we have established that there is only one EU VAT directive, and his proposal is illegal under that directive. The other big flaw in his argument—[Interruption.] Does he want to intervene?
Ed Balls
When we have only one reduced rate, but Italy, France and Poland have three reduced rates, and when the French President secured a VAT rate cut for French restaurants, is the hon. Lady really saying that she is going to hide behind European law and fail to stand up for the British motorist? Is that really what she is saying?
Justine Greening
There is only one party failing to stand up for the British motorist, and it is the Labour party. Let me outline precisely why France was able to get a reduced VAT rate on—
Justine Greening
There is no point the right hon. Gentleman asking a question and then getting excited about the fact that I might answer it.
Justine Greening
If the right hon. Gentleman just calms down for a second, I will answer him; if he then wants to intervene on me, he can do so. However, if he is that desperate to get in on this debate, perhaps he should have opened it instead of his hon. Friend the Member for Wallasey (Ms Eagle).
The right hon. Gentleman is right to point out that across Europe different products have different VAT rates. Some are exempt from VAT, some have a zero rate, some have a reduced rate and some have a standard rate. Indeed, he should be well aware of that because he was an economic adviser at the Treasury the last time the negotiations that he referred to started. In fact, they took six years. He mentioned President Sarkozy’s determination to secure a reduced VAT rate for restaurants, which is indeed what he did. However, in that renegotiation of the rules governing which products would be in which categories and which would no longer have standard VAT rates, I am not aware of the UK Government at any stage pressing for anything other than the standard rate to apply to road fuel. Perhaps the right hon. Gentleman can confirm that: yes or no?
Ed Balls
At no point did we apply for a special reduced VAT rate for road fuel, and the reason was that we never raised VAT on fuel. The people who have raised VAT are this Government. Can the Minister confirm that it is entirely in her gift and that of the Chancellor, who is not here, and the Chief Secretary, who has not turned up either, to apply for a derogation to reverse their mistaken increase in VAT? They have not done so and will not, but they could if they wanted to stand up for the British motorist.
Justine Greening
I do not think the right hon. Gentleman even believes that himself. The bottom line is that he wants—[Interruption.] The shadow Chief Secretary says that we need to take action now, but he wants us to embark on a process that took six to seven years the last time it happened. How is that taking action now?
Let me tell the House on which items the rate was changed. Here are a few of the products and services to which a reduced VAT rate is now applied in other countries:
“minor repairing of bicycles, shoes and leather goods, clothing and household linen”.
Window cleaning was also one, and hairdressing was another. The Government at that time—a Government of whom the right hon. Member for Morley and Outwood (Ed Balls) was part—did not seek to add road fuel to that list. He says that that was because the previous Government never raised VAT on fuel. That is not strictly true, of course: they reduced it, but then put it back up again, as we have heard. The other reason was that, year on year—and, in the final stages, month on month—they were consistently raising fuel duty, so they had no need to use VAT as a tool. They were getting plenty of additional tax from the motorist.
Mr Aidan Burley (Cannock Chase) (Con)
The last Government might not have increased VAT, but they certainly increased fuel duty. When Labour came to power in ’97, duty on unleaded petrol was 36p a litre; when the last Government left office in 2010, it had risen to 57.9p a litre. Does my hon. Friend think that Labour Members should take some responsibility for increasing fuel duty by more than 20%?
Justine Greening
Of course they should, but as so often they never do, unfortunately.
Justine Greening
I will give way one more time, but then I really must make some progress so that other Members can have their say.
Justine Greening
And a huge fiscal deficit and debt to boot, so we will take no lectures from the Labour party. Perhaps the hon. Gentleman can discuss with the shadow Chancellor how he thinks the huge deficit that his party left our country—it costs us £120 million a day to service our debt interest—should be addressed. The elephant in the room, which we have not talked about so far today because it is not in the Opposition’s motion, is how they would tackle the deficit. The answer is that they would not tackle it, which is why it is so lucky that Labour is not in government at the moment.
Justine Greening
I will not give way to any more Opposition Members, and I will tell the House exactly why. This is not the first time that there has been an opportunity to debate fuel duty rises: last month a Conservative MP had a debate in Westminster Hall. The reason the Opposition have now gone quiet is that they probably did not know that that debate was due to take place, but if they did, it is even more disgraceful. How many Opposition Members turned up to participate in that debate and represent their constituents?
Justine Greening
Absolutely none, so all this is nothing more than political opportunism in advance of the Budget, and it is incredibly poor quality opportunism too, because the Opposition have made a proposal that is impossible to implement and is utterly flawed in every respect.
Justine Greening
No, sorry.
The other reason why the Opposition’s proposal is flawed is that they say in their motion that they would pay for the proposal with receipts from the bank levy. The first thing to say about that is that we introduced a bank levy—something that Labour never managed to do—but, secondly, we brought forward the rate at which it would fully kick in early, because the banks were doing better and therefore could afford it. The money is a one-off additional revenue stream that we are getting a year earlier, but the Opposition are so economically illiterate that they want to use it to fund a long-term, permanent tax reduction on fuel. Looking at their faces, I do not think they necessarily realise that yet, so as well as their proposal being illegal, their figures do not add up.
To finalise my comments, it is only this Government who are serious about helping British motorists. We tasked the Office for Budget Responsibility with investigating the impact of oil price fluctuations on the economy and we are actively considering proposals for a fair fuel stabiliser.
Justine Greening
No, I will not.
Motorists deserve better than a VAT proposal on fuel that everyone knows is completely unrealistic and unworkable. It is disingenuous of the Opposition to suggest it, and it is unaffordable, given the economic mess that we inherited. They want a derogation that would be unsuccessful and take six to seven years to implement. We are talking about taking action to tackle the cost of living now. That is the choice facing the House today. At the end of the day, we all know that this motion is just a smokescreen, and that the Opposition have no plans whatever to tackle the deficit. Yet again, they have missed a chance to be credible on the economy. Yet again, they have failed to show any leadership on their solutions to the big problems facing Britain today. I sincerely hope that the House will vote against their motion, because it is one of the lowest-quality and most disingenuous motions that we have debated on the Floor of the House recently.
Barbara Keeley (Worsley and Eccles South) (Lab)
I thank my hon. Friend for giving way, as the Minister did not. The Minister talked about living in the real world, but I am sure that we on the Opposition Benches know more about that than she does. I am sure that my hon. Friend’s constituents will be struggling with the £450 a year increase—
Justine Greening
On a point of order, Mr Deputy Speaker. The hon. Lady has just made an accusation about what I do or do not know about living in the real world. That goes beyond what I think is a personal comment. She has no understanding of what I do or do not understand. I can assure her that I get on the District line every day to come into work and I know exactly what is going on in the real world. I only wish that the Opposition did.
Mr Deputy Speaker (Mr Nigel Evans)
That is a point for the debate, not a point for the Chair.
Fiona O’Donnell
I am sure that all my constituents will feel so much better after hearing that intervention. They do not want to hear the hon. Gentleman’s political point scoring and opportunism; they want to hear what the Government are going to do for hard-working families, for pensioners and for those with disabilities in my constituency.
I have had e-mails from people who have lost their jobs. People living in East Lothian need to be able to keep their cars on the road in order to access the services that will help them get back into work, to turn up for job interviews and to get out there to find and keep a job. I have also had e-mails from people who have been struggling throughout the past few years. I am going to admit that, for those on fixed incomes, times have been difficult, but the message is now clear that, under this Government, they are getting tougher.
I am also going to be unusually generous and congratulate the Tory party on a splendid result in the general election in East Lothian, where it moved up to second place. The Scottish National party—I see that its Members have now deserted us—moved down to fourth. Before the Tories get too excited, however, I should point out that that result involved a 0% swing from Labour. Many of the people who have contacted me voted for the Tories at the election, and I am representing them today without fear or favour. They want to know when the Government are going to deliver for them. If the Government will not listen to me or to those on our Front Bench, I urge them to listen to my constituents.
I know that the first questions that my constituents would want me to ask today are, “Where is the Chief Secretary to the Treasury?” and “Where is the Chancellor of the Exchequer?” They will be insulted that the Chancellor and the Chief Secretary have not had the guts to turn up and take part in this debate and to answer my constituents’ questions. I have something of interest to tell the House. I went to the same school as the Chief Secretary to the Treasury. The right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) also went to that school, and he has remarked to me, “That’s now one of us from each of the political parties.” I am particularly disappointed that the Chief Secretary to the Treasury, who represents a rural constituency, does not see the impact that the increase in fuel prices is having.
I try hard not to be judgmental about the Conservatives, and I try hard not to make the kind of comments that the Minister finds so harsh. But when they talk about the tough choices that they face in government, I have no sympathy for them. I am sick and tired of hearing them talk about that. Being in government and having a chance to reach out to families in East Lothian is not what is tough in life; what is tough for people is working out how they are going to fill up their car at the Co-op in Tranent next weekend in order to keep their family on the road. That is what is tough.
Mr Speaker rightly criticised the hon. Member for Burnley (Gordon Birtwistle) for bringing an electronic device into the Chamber. I presume that the hon. Gentleman has been running around for the past half hour trying to find a printer somewhere on the estate. I have gone to the trouble of printing off a couple of the representations that I have received from my constituents, and I should like to read them out to the House. One comes from Alec Flynn in Tranent, who says of the fuel price rise:
“We are a small family road haulage business…and we would like your support to fight the price the government plan to put on in the budget”.
I want the Minister to address Alec Flynn’s concerns, and to stop moaning about tough choices.
Justine Greening
Many hauliers can recover VAT, and I do not think that the Opposition’s proposal on VAT would provide the help that she is seeking to provide for them.
Fiona O'Donnell
Perhaps I have some responsibility here. I have not formally congratulated the Government on winning the general election, so perhaps it is my fault that they have not grasped the fact that they are now in government. They are in a position to change their minds, to lower the VAT rate on fuel and to make a difference to Mr Flynn and to ensure that the people he employs continue to have jobs. I suspect that Mr Flynn will remain disappointed, however. We were certainly not planning to increase VAT or to make life even more difficult for people.