Motoring Fuel Costs
(13 years, 5 months ago)
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Robert Halfon (Harlow) (Con)
It is a privilege to speak under your chairmanship, Mrs Brooke. I am grateful to Mr Speaker for allowing this debate, and I want to congratulate FairFuelUK on its campaign for British motorists and for all the British businesses that have to buy petrol or diesel.
Let us get one thing straight: cars, vans and lorries are the lifeblood of British industry. More than 34 million vehicles are licensed in this country, which is one for every two people. That is why the current cost of petrol and diesel is one of the biggest brakes on economic growth and is crucifying many families who are struggling to keep their heads above water. That is especially true in my constituency of Harlow, where high costs are hurting many small businesses. I want to look at the current situation, the record profits of energy companies and what is to be done. As The Sun newspaper said in its editorial last Saturday:
“It’s welcome news that Parliament is to investigate why petrol prices remain sky-high even as the cost of oil plummets.
While they’re at it, they can look at why gas customers face 19 per cent rises from a firm with annual profits of more than £1 billion.
Consumers are being fleeced from all sides when buying essentials.
It's time our MPs stood up for us.”
I am here, with my colleagues, to stand up for motorists.
Mr Marcus Jones (Nuneaton) (Con)
Does my hon. Friend agree that there is huge frustration throughout the country about how, when the price of oil falls, the prices at the pumps seem to reduce very slowly and perhaps not to the same level, but when the price of oil increases, the petrol and diesel prices at the fuel filling stations seem to go up within minutes?
Robert Halfon
As ever, my hon. Friend has hit the nail on the head. I will set out in my remarks what is happening and what we should do about it.
Let us look at the numbers. In my constituency of Harlow, there are 33,000 households and 37,000 cars and vans. According to the Royal Automobile Club, which has done excellent work on the fair fuel campaign, we drive 9,000 miles a year. At 32 miles per gallon, an ordinary Harlow motorist is using 281 gallons or 1,277 litres every year. The cheapest unleaded petrol in Harlow that someone can buy is £1.33 a litre but in most cases Harlow motorists are spending £1,700 a year just to fill their tank. For most people, £2,200 of income before tax goes on that. That is a tenth of the average Harlow salary.
Caroline Nokes (Romsey and Southampton North) (Con)
I congratulate my hon. Friend on securing this debate. He has quoted some interesting statistics, such as the average driver in Harlow travelling 9,000 miles a year, but in rural constituencies such as Romsey and Southampton North the statistics are more frightening, because the average motorist is travelling 10,000 miles a year simply to access essential services. Does he agree that the problem is particularly distinct and severe in rural areas?
Robert Halfon
I very much agree that rural people are also being crushed by the price of fuel. I am glad that my hon. Friend is here today to represent her constituency and the many rural residents who are suffering so much.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Coming from an area where fuel is more than £1.50 a litre at all our fuel stations in the Hebrides, and regularly so, I am grateful that the hon. Gentleman has secured this debate. Does he agree that the Office of Fair Trading has to show more teeth in looking at the distribution of fuel? As noted, when the oil price goes up, the price at the pump increases quickly, but when falling, it does not happen at the pump at all. The OFT must start investigating the trade for fairness.
Robert Halfon
I agree that that should happen. I also have another proposal, which I will set out later. I congratulate the hon. Gentleman on his work on fuel prices in a debate in the main Chamber some months ago.
Anne Marie Morris (Newton Abbot) (Con)
My hon. Friend is being very generous in giving way.
Although the focus has very much been on the individual motorist, we have spoken a little about small business. If we combine the issues of rural businesses and micro-businesses, they are the ones that are badly hit. That is where we need the economy to grow. As for the range of prices, my hon. Friend talked about an average of £1.36 a litre, but in fact it is between £1.30 and £1.51, mostly in rural areas.
Robert Halfon
My hon. Friend is right. I will set out in a minute what the Federation of Small Businesses says about how the fuel price is crushing business and economic growth.
In total, my town is spending at least £63 million a year on petrol, of which about £40 million is tax. That does not even include gas and electricity bills, which are spiralling out of control. The budget of my local council is only £13.5 million a year. Imagine if people could keep even a fraction of that money in their pockets, to spend on the local economy, rather than giving it away to big oil companies, foreign countries and, dare I say it, the Treasury. However, I welcome what the Chancellor has done so far. When he refused to implement Labour’s petrol tax of 4p in April, and cut duty by 1p, he saved Harlow motorists at least £2.5 million every year, putting fuel into the tank of the British economy when we need it most.
Rory Stewart (Penrith and The Border) (Con)
I thank my hon. Friend for giving way and for securing this debate.
On the subject of the Chancellor’s initiatives, does my hon. Friend also support the decision to have rural fuel pilots, and acknowledge that constituencies such as my own of Penrith and The Border, where we have nearly twice the distance to travel to GPs, post offices and job centres, need to be recognised in a different way? The Chancellor is to be congratulated on the steps he has already taken on rural fuel, and he should extend them.
Robert Halfon
I very much welcome that initiative. I will say later that I believe a commission ought to be set up to look at all kinds of ways of reducing the price of petrol for motorists—that is one of them.
David Simpson
The position in Northern Ireland is somewhat different from that in Harlow, because we have a land border. Currently, the Government are losing £280 million to £300 million a year on fuel smuggling and laundering of fuel. We are currently looking at the whole issue of corporation tax in Northern Ireland but, if duty on fuel were reduced or even if the suggested pilot scheme were in Northern Ireland, it would save the Government an absolute fortune, and would help the motorist and commercial enterprises in the long term.
Robert Halfon
As so often in Westminster Hall, as I said last week, I find myself agreeing with the hon. Gentleman. That might form part of the commission’s inquiry. At the end of July, I plan to go in a truck to Europe, to see how truckers there manage to get all their fuel cheaply, while English truckers are paying far more. The hon. Gentleman makes an important point.
Returning to my constituency, we are a town held to ransom by petrol prices. Motorists are robbed of a tenth of their salary just to fill their petrol tank. Fuel poverty is defined as spending more than a tenth of income to stay warm. That is all about domestic homes, but what about spending a tenth of income just to drive to work, which is what motorists are doing? The issue is also one for welfare reform. I welcome the Government making great strides with universal credit, lower taxes for lower earners and the Work programme. Yet all those benefits could be wiped out by the rising cost of fuel. Every 1p increase in the pump price will cost the average Harlow motorist £13 a year. For someone on a low income, perhaps commuting from Harlow to Basildon, the actual cost would be much higher. Inflation soon adds up, and we must not let petrol prices become part of the poverty trap and deter people from getting off benefits and into work.
Nor should we forget rural constituencies. My hon. Friend the Member for Hexham (Guy Opperman), who cannot be here because of his recent operation, has campaigned for many years against the fuel poverty suffered by his constituents. He wrote to me yesterday:
“fuel is a necessity in a constituency of 1,000 square miles, not a luxury.”
Throughout the country we see the same tragedy.
Naomi Long (Belfast East) (Alliance)
I congratulate the hon. Gentleman on securing the debate. He mentioned specifically job creation and its importance in welfare reform. In a survey earlier this year, one of the issues the FSB picked up was that companies faced with rising fuel bills would stop creating jobs and might also look at laying people off. That has huge implications, in particular in Northern Ireland, where we have a higher proportion of small to medium-sized enterprises, as well as heavier reliance on fuel because all our freight, for example, is road-based.
Robert Halfon
I welcome the remarks of the hon. Lady. I am about to come on to the FSB, but she is so right in what she says. I am glad that there is so much consensus in the Chamber among all parties.
Andrew Percy (Brigg and Goole) (Con)
I thank my hon. Friend for giving way. He is being very generous. The hon. Lady’s point about the Federation of Small Businesses is important, but we must not underestimate—my hon. Friend is not doing so—the impact of fuel prices on workers. My constituency has a low-wage economy in a large rural area, and an announcement was made today that the Humber bridge tolls will rise to £3 for each crossing. That will conspire to put people off looking for work, because they cannot afford to get to work.
Robert Halfon
That is my whole point. High fuel prices have become part of the poverty trap, and are a disincentive for people to get back into work, despite the Government’s excellent programmes, including the Work programme. I thank my hon. Friend for raising the matter.
Long-term stats from the Department of Energy and Climate Change show that in 1970 we used 25 million tonnes of petroleum in the transport sector. That has risen year on year, and doubled to 50 million tonnes today. But despite the UK being a net exporter of petroleum products, and despite the fall in the international oil price, our petrol prices are still sky high. In January this year, members of the Federation of Small Businesses said that if petrol prices continue to rise, 62% will be forced to increase their prices, risking inflation; one in 10 may have to lay off staff; 26% will be forced to freeze wages; 36% will have to reduce investment in new products and services; and 78% will see
“their overall profitability in jeopardy”.
Taxation is only part of the problem, and another major concern is transparency. As the AA, RAC, and FairFuelUK have said, if the 2p drop in the market cost of petrol had been passed on to motorists earlier this year by energy companies, it would have wiped out most of the impact of the 2.5p VAT rise. In May, I wrote to the chief executives of Shell, BP, Total, and ExxonMobil asking for price transparency so that we can see why prices are not falling. So far, only Total and BP have replied, but their replies essentially said, “Nothing to see here.”
In 2009, before the disaster in the gulf of Mexico, BP boasted profits of £8.7 billion. This year, Shell has reported first quarter profits up 40%, making its global profits nearly £2 million every hour.
Susan Elan Jones (Clwyd South) (Lab)
I thank the hon. Gentleman for giving way again, and for securing this debate. I particularly support the points made about rural constituencies. Does he favour statutory obligations on those companies to be transparent and to pass on their profits to consumers?
Robert Halfon
I do not want to unveil all my secrets at once, and if the hon. Lady waits a bit, I will give her my proposal.
Total’s profit rose 34% year on year, and ExxonMobil saw a 69% profit jump to $10.5 billion. We must acknowledge that some companies make a good return for pension funds, but a balance must be struck. I remember the fuel protests in 2000, when we were seriously concerned about the threat of petrol at 80p a litre. According to PetrolPrices.com, the excellent price comparison website, the most expensive unleaded fuel in the UK is now £1.51 a litre.
I accept that 64% of the petrol price is taxation, and I welcome the Chancellor’s steps to slash some of the planned taxes, but the big oil companies must play their part. Why are prices so different at petrol stations, and why are they raking in such astronomical profits when small businesses are being forced into bankruptcy by fuel costs?
Mr Russell Brown (Dumfries and Galloway) (Lab)
The hon. Gentleman rightly mentioned the oil companies. Did he witness the same thing as I did in my constituency eight or 10 weeks ago when some of the major supermarkets embarked on a price reduction of 5p a litre if customers spent a specific amount on goods, and at the same time raised the price of fuel by 4p or 5p a litre, which in turn forced the independents to put up their prices? The situation was contrived by some supermarkets.
Robert Halfon
The hon. Gentleman makes an important point, and that is why I am arguing for transparency. If supermarkets reduce prices, they must do so properly. We cannot have situations such as the one he describes. We often bash bankers, but oil barons are far worse, because they enjoy a semi-monopoly in the UK market, and most motorists have no alternative but to buy their products. We need transparency above all. Oil prices are falling, and we must ensure that the big companies cut their prices at the pump.
The green movement makes a case for expensive petrol, but modern vehicles have lower carbon emissions. Cars account for only 13% of our man-made carbon emissions. My argument—some hon. Members may say that it is controversial—is that environmentalism sometimes becomes a luxury for the rich, with no substantive answers, other than regressive taxes on energy. It is all too easy, in the cause of saving the planet, for the wealthy to insist that the poorest families should pay more in petrol taxes, and gas and electricity bills.
The impact of high fuel prices is particularly severe on road freight companies, and they are a major employer in Harlow. Road freight carries nearly 97% of everything we eat, wear or build with. High and rising fuel costs force the road freight companies to try to pass on the extra cost, and that stokes inflation. If they fail to pass on the increased costs, they go bust.
The road freight companies face a further cruel impact that the UK green lobby must consider. Fuel duty levels on the continent are about 24p a litre lower than in the UK, so hundreds of thousands of foreign lorries pour into the south-east of the UK and undercut UK hauliers. Foreign trucks pay no road tax here, and I welcome the Government’s plans to introduce a £9 a day charge, although I believe that it should be a lot higher. Those trucks pay no fuel tax in the UK as their tanks are big enough to last all week and all their fuel is bought abroad. They pay no employment taxes. They simply come into the UK, drive our UK freight companies out of business, and pay nothing to the Exchequer.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the hon. Gentleman give way?
Robert Halfon
I must make progress, but I will give way to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) as he has not spoken.
Jonathan Edwards
I congratulate the hon. Gentleman on securing the debate. He is making some important points about green taxation. I agree with such taxation, but does he agree that it should be linked to clear environmental criteria, and that if it is not it will lose public confidence, which would be a crisis for the Exchequer and for environmental policy?
Robert Halfon
Of course there should be environmental criteria, but people too often have their heads in the clouds and do not realise that low petrol prices would make a huge difference to ordinary people who must use their vans to drive to work, drive their trucks to do their job, drive their minicabs, or drive their kids to school.
What is to be done? I believe in competition and choice. First, when a market is cornered by vested interests and semi-cartels, such as big oil companies, it is right for the Government to establish conditions for a fairer market. We need a fuel rebate so that when the oil price falls, big companies face a choice: either they cut prices, or the Government will impose a windfall tax on profits, and use the money to cut petrol prices anyway. That would be the solution to the great British petrol rip-off. Instead of the oil companies having us over an oil barrel, it would make them honest, and stop them profiteering at the expense of small businesses and families on the breadline.
Secondly, we must commit to no more petrol tax rises in this Parliament. The Government are pro-business and pro-growth, and have already given a commitment to scrap the fuel duty escalator, which was pushing up prices above inflation. The Chancellor has delayed inflationary rises by a year for the next two years, but will the Government go further, and consider abolishing even the inflationary rises?
Thirdly, we must establish a commission to look at radical ideas, and other ways for the Government to raise revenue, and to address the unfairness of UK fuel duty being so out of line with the rest of Europe. We must consider more toll roads in exchange for significant cuts in fuel duty, and how a fuel price stabiliser could work.
In conclusion, we need fair fuel reform with a fair fuel rebate to push prices down, no new taxes during this Parliament, and a commission to look at radical ideas to get petrol taxes down to the European average in the longer term. The 37,000 motorists in Harlow and the 34 million vehicle owners in the UK are being fleeced. For the sake of future growth and jobs in our economy, we urgently need reform.
The Economic Secretary to the Treasury (Justine Greening)
It is a pleasure to serve under your chairmanship, Mrs Brooke, and I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing this important debate—Harlow is a place I know well as I used to work there many years ago. He is one of a number of MPs who represent their constituents well by talking to the Government and Ministers about the concerning cost of fuel, and about how that is impacting on the ability of businesses across Britain to employ people, and on families and household finances.
In the short amount of time available, I would like to say why the Government agree that the cost of fuel is a concern, and mention some of the actions that we have taken to try to address that. I will then say a little about some of the things that we think need to happen during the rest of this Parliament.
Mr MacNeil
Does the Minister, or her Department, have any suspicion that high oil prices are the revenge of oil companies for the £2 billion that the Chancellor raised in the Budget through the North sea tax, which also threatens perhaps 15,000 jobs? Oil companies are losing money to the Government in one way, and are penalising consumers and people up and down the country.
Justine Greening
The hon. Gentleman raises an interesting point, but the price of oil is a spot price driven by commodity markets. We are talking about a part of the industry that is different from the area in which we chose to raise tax. We are working with industry to ensure that we mitigate any risk of a lessening of investment in the North sea as a result of that tax. As my hon. Friend the Member for Harlow pointed out, we needed to strike a balance to take into account the overall effect of high oil prices as they fed through into the broader economy in petrol prices and energy prices more generally.
The hon. Gentleman will be aware of the report from the Office for Budget Responsibility. It showed clearly that, although the Exchequer has some growing tax receipts, the dampening effect of the rest of the economy is also significant. We felt that although there was an overall impact on the economy, one sector—the oil companies—was doing much better from a high oil price. It seemed fair and sensible to look at how we could balance some of the value that was being generated by the high oil price, and to create a fairer split between oil companies and those motorists and businesses that bear the brunt of the prices at the pump. We are working hard with industry to mitigate the impact of our policy on investment—the impact was analysed as being small by industry observers such as Wood Mackenzie. This is an important debate, and the Government recognise that motoring is an essential part of life for households and businesses. Fuel costs affect us all, and as the price of petrol continues to rise, those costs have become an evermore significant part of everyday life for people and companies. We were keen to look at what could be done.
The previous Government left us facing the introduction of a fuel escalator from the 2009 Budget that would have involved seven fuel duty increases. I realise that in this half-hour debate, only a Government Minister gets the chance to respond to the Member who secured it, but I am disappointed that a shadow Minister is not present to listen to some of the concerns raised. One of our biggest challenges concerned how to deal with the proposed above-inflation increase in fuel duty. That increase could have resulted in average prices at the pump being 6p per litre higher than they are currently. We would have seen above-inflation rises in 2012, 2013 and 2014. When we took office, no plan was in place to support motorists, and within the huge financial constraints in which we found ourselves, and with little room for manoeuvre, we had to see what we could do to address such an important issue.
Mr Russell Brown
I am sure that my colleagues will read Hansard tomorrow to see exactly what has been said. The Government inherited potential increases in fuel duty and the Chancellor has done the right thing by removing the fuel duty escalator, just as the previous Labour Government did. We also froze proposed increases in fuel duty on 11 occasions because of the increase in the price of crude oil.
Justine Greening
What was missing, however, was any kind of long-term plan for how to deal with changes in the price of oil feeding through to the pump. We wanted to look at how a stabiliser mechanism would work, which we felt would be in the interests of households, companies and the overall economy.
Mr Robin Walker (Worcester) (Con)
I have been listening carefully to the Minister and, like other hon. Members, I am grateful for the actions that the Government have already taken. One issue that has been raised by Back Benchers from all parties concerns differential pricing around the country. There are sharp differentials—a difference of about 5p between petrol prices in Worcester and those 20 miles away in Cheltenham. Will the Minister comment on how the Government could address that issue and increase transparency, as my hon. Friend the Member for Harlow (Robert Halfon) has urged?
Justine Greening
My hon. Friend is right to raise that point. In a sense, the most extreme examples of that problem are the reason why we are bringing in a pilot scheme for the rural fuel rebate. We are making progress on that.
Mr MacNeil
When might we see that welcome rural fuel rebate and rural fuel derogation? We have been calling for such a measure for years, and although we welcome the progress made, we would like to have a date fairly soon.
Justine Greening
I say, “Me too” to that. We are working with the European Commission, and once we have clearance, we will get on with the pilots as soon as possible. We are keen to make progress on the issue, and I assure the hon. Gentleman that we are working and making our case in Europe. We must get agreement from the Commission, and unanimous agreement from European Finance Ministers. Once we have that agreement, we will be pushing on with the pilot schemes.
Andrew Percy
If we left the European Union, we would not need that permission—that is a debate for another day. I have some concerns about the rural fuel derogation applying in some areas but not in others. Rural areas such as my constituency have a low-wage economy. We have poor bus services and high toll-bridge costs—I know the Minister is committed to doing something about that, which is pleasing. A rebate should not apply to one rural area but not to others; we should be careful about doing that.
Justine Greening
We need to help families across the board. That is one reason why raising the personal tax allowance was critical—in any other Budget that measure would have got a huge amount of attention, but perhaps because of the other things we did, it got less consideration. The provision will benefit the lowest paid workers, and this year’s rise in allowance, together with that of next year as announced in the Budget, will take 1.1 million people out of paying income tax altogether. We are right to have a targeted package to help motorists, and we know how important that is. We are also right to make progress on our commitment to increase the personal allowance. Such a measure will help many of those who feel the pinch most when the cost of living goes up.
Anna Soubry (Broxtowe) (Con)
I am meeting hauliers next week and I speak on behalf of many people. Does the Minister have a message of hope for all motorists and hauliers in particular?
Justine Greening
We scrapped the fuel tax escalator and we understand how motoring impacts on the broader economy. Prior to the Budget, I was keen to meet groups such as FairFuelUK and motoring stakeholders. I assure my hon. Friend that I will continue to do what I can to stay close to the industry, and I will work with my hon. Friends in the Department for Transport to look at an overall approach that will support our economy as well as supporting hauliers, motorists and businesses.