Taxes on Motor Fuel
(2 years, 6 months ago)
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Tonia Antoniazzi (Gower) (Lab)
I beg to move,
That this House has considered e-petition 599089, relating to taxes on motor fuel.
It is a pleasure to serve under your chairship, Ms Elliott. I thank the petition creator, Michael Bromley, for taking the time to meet me last week to discuss his motivation for creating the petition. With more than 102,000 signatures, it obviously means a lot to a lot of people. I thank all those who signed the petition, especially the 152 people from Gower. I also thank the Petitions Committee for running an online survey of petitioners so that they could explain in more detail exactly why they had signed the petition. The survey had nearly 2,500 responses, and that overwhelming number of responses reflects the strength of feeling on the issue.
The petition calls for a 40% cut to fuel duty for the next two years, in order to go some way to combatting the spiralling cost of motor fuel. It states that
“The price of diesel and petrol is at an 8-year-high”,
and that the Government have
“the ability to sacrifice some revenue to appease the British public.”
Margaret Ferrier (Rutherglen and Hamilton West) (Ind)
If the Government are concerned that the fuel duty relief is not being passed down to the pumps, why is that not being addressed, and in the strongest terms? Does the hon. Member not agree that there must be consequences to ensure that the public are not ripped off at the pumps?
Tonia Antoniazzi
That is a big concern to people. When there was a fuel duty cut from the Government—of only 5p, but still—we did not even notice it. That is very concerning. I hope the Minister will address that issue.
When I spoke to Michael last week, the issues that he raised, and that were raised in response to the survey, were the same as those that my constituents raise with me week in, week out. Michael explained that as a single parent he could see the cost of filling up starting to mount, and that as a company owner he has had to make economies in the business as well. He is therefore clearly seeing this from two sides. Michael said that reducing the mileage of company cars and ultimately cutting the number of cars in the fleet was a big issue for his automotive business. We also spoke about the environmental angle. He said that he was really supportive of electric cars, but that there were still issues with the initial cost of electric cars and the lack of infrastructure to support a mass roll-out.
The AA has calculated that the cost of filling a typical 55-litre tank has risen during the year from £70.61 to £92.20 for petrol, and from £71.94 to £99.48 for diesel. There has been the most derisory of efforts to help drivers. For me, that is symptomatic of a Government who have no idea about the impact that the cost of living crisis is having on people across the country—rising home energy prices, food prices rocketing and the cost of fuel at a record high.
Jessica Morden (Newport East) (Lab)
May I add in the views of the domiciliary care workers whom I met recently in Newport East? Collectively, care workers drive more than 4 million miles a day to care for the vulnerable in our communities. They fear that they may have to leave the profession because the cost of fuel is making it difficult for them to get to work. Does my hon. Friend agree that that can only add to the recruitment crisis in care?
Tonia Antoniazzi
I thank my hon. Friend for making the point about care workers being on the road all the time. That cost has a huge impact on the quality of the care service, which we need to support, particularly at this time of year. So yes, that does contribute to the crisis. I hope to hear the Minister’s views on that as well. Ultimately, Michael would like the Government to grab this issue “by the scruff of the neck”, as he said. I am sure he will be listening very carefully to the Minister’s response.
For me, the most telling part has been the responses from the people who signed the petition. We heard about how the austerity agenda from 2010 was very hard for so many people; they allocated every month how much they were going to spend on fuel. Now, those prices are rocketing. Despite rising costs, many people have told us that they have to drive. They have to use their cars for their job or to access essential services. One man said:
“We live in an isolated village with a bus service that runs once a week, out of the village and back again. My wife is disabled, so the car we have is absolutely vital to us.”
As my hon. Friend the Member for Newport East (Jessica Morden) has mentioned, we heard from care workers who have to travel between clients as part of their work. One told the survey:
“I am a home carer for the elderly and vulnerable who live at home. We are paid little enough as it is, with petrol prices so high, and that comes out of our pockets, not the company that I work for. This means if I don’t have the money to put fuel in my car, I can’t go to work, and these vulnerable people do not get essential care.”
Rising fuel prices are also impacting on people’s ability to visit and care for their own relatives. Where once people used their cars as a lifeline to visit friends and family, the cost of filling up has made them even more isolated, compounding the impact that we suffered during covid-19. Another comment read:
“I haven’t seen my mum in months because of how much it will cost me to drive to see her. Two years of lockdown and now it feels like another worse punishment…My children and grandchildren live 100 miles and 140 miles away, so I have had to restrict travelling to see them due to the cost of fuel. The two years of covid restrictions has affected my mental state, and not to be able to see my children and grandchildren has exasperated this condition.”
Many are having to make difficult sacrifices to get by. One person said:
“I work for the NHS and have two disabled children. It has been a nightmare, as I cannot afford to keep putting fuel in, but I need it, as they go to a special school a few miles away and I have to go to different hospitals for work. I go without food so that my kids have food and fuel, all because these prices keep rising.”
In many of these situations, there are no alternatives for people. Public transport links are often not good enough, and the Government’s lack of investment in local transport has made the public reliant on their own means of transport. I have been contacted by a community car scheme from Gorseinon in my constituency about fuel prices and the approved mileage allowance payment rates. Such schemes rely on volunteers who support those with mobility issues by taking them to appointments, often NHS appointments, instead of going by ambulance. The rise in petrol prices has affected those schemes’ ability to recruit and retain voluntary drivers, which will ultimately have a knock-on effect on the NHS. The volunteers also serve as companions to people who may be isolated and lonely. This lifeline, like many others across the country, is at risk if the Government do not act.
When the Chancellor set out a cut of 5p per litre in his spring statement, we did not think it would make much of a difference. It has not even scratched the surface. In fact, last week there were newspaper reports of this cut barely being passed on to the customer at the pumps, as my hon. Friend the Member for Newport East has spoken about. When we go to fill up, we quickly see price rises when oil prices go up, but we rarely see lower prices when the price of oil falls. Any evidence of profiteering by the petrol retailers must be looked at in full, and I welcome the Business Secretary’s call on retailers to make sure they pass on any cut in the oil price to customers.
We know that there is more the Government can do. We have seen examples from across Europe of Governments taking action to deal with the cost of fuel. In Poland, the Government cut VAT on fuel to 0%—something that UK Ministers said we could not do within the EU. Why are we not doing it now? Ireland’s Government announced a 20% cut in excise duty per litre of petrol and a 15% cut per litre of diesel. France introduced a 15 cents per litre discount on fuel prices on 1 April and has given €400 million in immediate aid allocated for hauliers. That money will be allocated to companies in the transportation sector based on the number of their vehicles and their tonnage. In Germany, the federal cabinet announced a relief package, according to which the energy tax on fuel is to be reduced to the minimum rate—a cut per litre of about 14 cents.
Spain introduced measures to cut fuel duty by 20 cents per litre and Belgium cut its fuel duty by 17.5 cents per litre. The Netherlands, Italy, Slovenia, Hungary, Croatia, Romania and Sweden have all introduced measures to cushion the blow to consumers of these higher prices.
The Labour party has made it very clear that we will introduce a windfall tax on oil and gas companies that are benefiting from this increase in prices. We have seen bumper profits from Shell and BP in the first quarter of this year, while prices have risen and risen for working people and pensioners, with no end in sight, and there is no sign of action from this Government either. The Tories are out of ideas and out of touch. They should bring in an emergency Budget urgently, with a one-off windfall tax to cut household bills and support businesses.
I know that the people who keep this country going—those who need to get to work, those with caring responsibilities, the people who deliver our parcels, and people who want to go out and enjoy themselves after two years of restrictions—will be fascinated by what the Minister tells us today. The 102,000 people who took the time to sign this petition, and Michael in Chorley, will be waiting to see if the Government are really willing to help with the cost of living crisis.
Patricia Gibson (North Ayrshire and Arran) (SNP)
This petition on taxing motor fuel is not just about motor fuel. Ultimately, it is about the whole cost of living crisis and what levers the UK Government can pull to address it, if they choose to do so.
Fuel costs have spiralled so much in recent months that prices have been breaking records. Indeed, petrol prices have broken records on 26 separate days in 2022. Fuel duty has remained at around 50p a litre for the past 12 years, but consumers also pay 20% VAT on the total cost of their fuel at the petrol pump. That means that consumers pay tax—VAT—on fuel duty, so they currently pay over 80p in tax on every litre that they buy. As I say, they are paying a tax on the tax. That is before the costs of extraction, purchase, shipment and forecourt sales are added. The Treasury is raking in 20% of the total cost at the forecourt, with fuel price increases bringing in additional VAT, amounting to billions of pounds, all of which is helping to accelerate inflation. As the cost of fuel has risen, so has the VAT being raked in by the Treasury—vast additional revenue for the Chancellor.
There was an attempt at providing some relief for motorists and consumers when the Chancellor announced a 5p cut in fuel duty in his spring statement. However, as we all know, that measure was woefully inadequate. We know that, in theory, a duty cut benefits all drivers, but as we have heard, this cut is not always passed on to drivers. Indeed, the RAC has shown that that seemed to be the case after the spring statement. In any case, it is clear that even if the 5p cut in duty was passed on, it would simply be swallowed up by spiralling prices—as indeed it was—so its effect would never be truly and meaningfully felt by those it was intended to help.
A cut in VAT would be much more effective, because VAT is charged on the total cost of the petrol or diesel, so even if the price rises, the amount of VAT would be reduced. That would be a much more impactful measure to try to help motorists and consumers with spiralling costs.
The situation with inflation is now so serious that a very serious measure to ease inflationary pressures must be implemented. I contend that halving VAT on fuel until the cost of living crisis is under better control is now essential and overdue. The eye-watering cost of fuel does not just hurt motorists—although it certainly does that, as the cost of filling up the family car becomes more and more of a struggle. It also drives up the cost of every good and service that we buy. Every single item on our supermarket shelves has been delivered by haulage companies for at least part if not all of its journey to its destination. When their fuel costs rise, so too does the cost of those goods.
Like others, I have been urging the Chancellor for months to make a serious and meaningful cut to VAT on fuel in order to better control inflation across the economy, because fuel costs impact every area of our economy. Anyone can see that cutting VAT on fuel is good for everyone across the UK. It will ease pressure on the incomes of families as they try to maintain their family car, it will ease pressure on the cost of doing business, and it will keep the price of our groceries and other goods down. Everyone will benefit and inflationary pressures will ease. That will benefit the whole economy and will more than make up for the loss of VAT receipts to the Treasury from such a cut. This is a no-brainer: it is a win-win for the economy, consumers and business.
We are living through unprecedented times, and bold action and brave hearts are needed. The dithering and delay must end. Halving VAT on fuel will have an immediate and positive impact. I hope the Minister will tell us that she will be happy to go back to the Chancellor and his Cabinet colleagues and tell them to get on with this and cut VAT on fuel significantly, because it is long past time.
Justin Madders (Ellesmere Port and Neston) (Lab)
It is a pleasure to see you in the Chair, Ms Elliott. I thank my hon. Friend the Member for Gower (Tonia Antoniazzi) for her excellent introduction, which she delivered with panache, as always. I am sure she pleased the people who signed the petition by covering many of the issues they want to raise.
This is an important debate for my constituency. We have made vehicles in Ellesmere Port for more than 50 years, and we have one of the few remaining oil refineries in the country. Most importantly, people in my constituency overwhelmingly depend on private transport to get to work. Some 78% of people in Ellesmere Port and Neston use a private motor vehicle to get to work, which is about 15% above the national average. That is not just a reflection of our proud industrial heritage; it is probably more to do with the lack of a regular and affordable public transport service in the area.
Although fuel duty and VAT are the same at whatever pump in the country someone fills up at, their impact differs depending on where they live and what they do for a living. Shift workers are far less likely to be able to use public transport to get to work. To be honest, people with jobs that finish after about 6 pm in my constituency are lucky to find a bus to take them home. If a person has children they need to place in childcare or school on their way to work, or pick up them up from afterwards, they may well need a car. If they are in a job that requires a large amount of driving, that of course makes a huge difference to how much they have in their pocket at the end of the week. Taxi drivers are a particularly affected group, but as my hon. Friend the Member for Newport East (Jessica Morden) said, so are care workers. Of course, the Minister will have some reflections on that from her previous role.
Nor should we forget about the impact that fuel has on other costs that we as taxpayers have to meet, including police cars, ambulances and school transport. There are literally millions of miles travelled every day that end up paid for by the taxpayer. The cost is quite often met by local councils, which do not have a say in the amount of fuel duty raised in the first place. As the hon. Member for North Ayrshire and Arran (Patricia Gibson) rightly pointed out, fuel costs also play into wider inflationary pressures, particularly on food and other services that are delivered.
What someone does, and where they live, can make a huge difference to the impact of fuel duty, and I am afraid that that extends to some inexplicable variations in the price at the pump up and down the country. It might only be a couple of pence most of the time, but that can quickly add up, and I wonder why the average price is a couple of pence more around Ellesmere Port than it is in various other parts of the country, given that we are on the doorstep of a refinery.
On a related point—this is something my hon. Friend the Member for Gower mentioned earlier—the RAC Foundation has said that the 5p cut in fuel duty, which was introduced by the Chancellor in March, led to an average fuel price reduction of 3.3p per litre for unleaded and 2.6p per litre for diesel. In their defence, the representative bodies for the retailers claim that their members passed on the cut in full, but that prices were rising at the time. It might not be right to lay the blame entirely at the door of the retailers, but it is very difficult to get the level of transparency we need.
Peter Grant (Glenrothes) (SNP)
Does the hon. Gentleman recognise that the other issue is that retailers often have no choice as to which distributor or wholesaler they go to? If the wholesaler does not take any of the 5p duty cut off the wholesale price of fuel, the retailer is given a double whammy: they cannot cut the price, but they get flak from drivers who expect to see 5p coming off a litre of fuel.
Justin Madders
The hon. Member is right, and it goes to my point about needing greater transparency. It can often be difficult to know exactly where the 5p has disappeared to, but I think it beyond contention that our constituents are not seeing the full benefit of the fuel duty cuts. The key question that we need to ask is how these measures will help to put cash back into people’s pockets. The reason this debate is so important at the moment is because we have the biggest squeeze on living standards in a generation, and the steps that the Government have taken so far are woefully inadequate.
The rise in prices across the world is obviously largely out of our hands, so it is inevitable that people will look at what the Government can change to ensure that there is some respite for people, and that help reaches those who need it most. We have already discussed the windfall tax at length in this place, so I will not repeat the arguments on that, but it is the fairest and most effective way to get help to those who need it most in a fairly quick manner. As we have seen already, although reducing the cost of fuel can help, there is a risk that such a reduction might not be passed on in full, and that it will benefit only those who have a car in the first place. In the context of wildly fluctuating oil prices, those savings may not be felt by people at all.
On fluctuating oil prices—or, to be more accurate, increasing oil prices—we should remind ourselves that higher prices at the pump mean that the Government have an increased income from VAT. Research has indicated that because of the rising oil price this year, the Government’s VAT receipts on pump sales have gone up by an average of 7p per litre for petrol and 9p per litre for diesel, which is far more than the 5p per litre that has been taken off. Fuel duty cuts might be a sleight of hand that creates a good headline and the illusion that the Government are taking decisive action, but it could be that those cuts are being made up for by increased revenue elsewhere—revenue that comes out of the pockets of the same people who are meant to benefit from the cut in the first place.
This debate cannot really happen in isolation and away from the influence of the Treasury, and we must be realistic and acknowledge that it will always be the primary driver of these decisions, given the huge amount of revenue that fuel duty brings in. Sooner or later, however, the debate must move on from whether we take off 2p here or add 2p there, because if we are to meet our net zero targets and move away from reliance on fossil fuels, we must also move away from reliance on taxing those fuels that we currently tax. At the heart of this is a complicated dilemma about moving to a similar fuel duty system for electric vehicles, which may disincentivise people to change. If instead we decide to tax people by the mile—I know that has been suggested in some quarters—that may disproportionately impact some communities, as well as removing one of the major reasons for investing in an electric vehicle in the first place.
There is also the question of whether the infrastructure is in place to make reliance on electric vehicles realistic. I certainly see that in my area there is a long way to go in order to get a comprehensive charging structure in place. We know that many properties—some say at least one third, and possibly even higher—are not, and never will be, suitable for home charging. With the differential VAT rate for charging at home and at a filling station, that is a major inequality that needs addressing. I would suggest that it needs addressing now, before the tax taken from it becomes so high that it becomes impossible for us to wean ourselves off that too.
Those are debates for the future, however, and we now need more effective and rapid ways of putting more money into the pockets of those who need it the most. As I have said, the best proposal I have heard so far is the windfall tax, and with this being a debate on the cost of living crisis, it is very disappointing that not one Government Back Bencher has come to speak about this issue. It shows, I am afraid, just how out of touch the Conservative party is.
Peter Grant (Glenrothes) (SNP)
I am pleased to begin summing up this debate. Like the hon. Member for Ellesmere Port and Neston (Justin Madders), the most striking thing about it is that out of around 350 Conservative Members of Parliament, not a single one wants to come and defend the Government’s woeful lack of action on this element of the biggest cost of living crisis that most of us have ever seen—hopefully it is bigger than any that most of us will see again.
I recognise, the SNP recognises, and the Scottish Government certainly recognise, the need to move away from our dependence on fossil fuels. The Scottish Government’s record on the promotion of renewable energy stands up to comparison with anyone else in the world. It is a record that I am proud to have played my own tiny part in, as a former council leader. The simple fact remains, however, that for the foreseeable future we will still depend on petrol or diesel-powered vehicles for a lot of our everyday travel, public transport, and the delivery of goods on which our economy and communities depend. We cannot simply say that the way to deal with crippling increases in the prices of diesel and petrol is to stop using our cars, buses or trains that rely on diesel or other fossil fuels.
There is a massive contradiction here, in that Scotland remains one of the world’s largest producers of oil and gas—we are one of the most fuel-rich countries in the world. How can it be that a supplier country gets poorer when the price of the commodity goes up? Somebody, somewhere, is ripping Scotland off, and I have a pretty good idea as to who that might be.
How can it be, as the hon. Member for Ellesmere Port and Neston asked earlier, that his constituency, which is beside a major oil refinery, has to pay more for fuel than, for example, parts of London? The hon. Member should try looking at the price in the places where fuel is actually produced, and sometimes at the places where it comes ashore, because people in a lot of the more remote parts of Scotland get a double, or even triple, whammy. They have higher fuel prices to begin with, which is ridiculous when they are closer to where the fuel is produced than any of the rest of us, and because they are in sparsely populated areas, they must travel longer distances to get to school, work or a doctor’s appointment. Things that in a city such as Glasgow, London or Edinburgh can be done by walking half a mile, can be a two-hour journey in some parts of the highlands of Scotland. Although the roads might be in a decent condition, they are certainly not designed for fast, constant-speed travel, so fuel consumption per mile on those roads is vastly greater than on roads in more densely populated areas.
That might be why it is noticeable how many dark colours there are towards the north end of the map on the page of the petition. My constituency is uncharacteristically dark—the last time I checked, Glenrothes and central Fife had 224 signatories. My constituents do not tend to get all that excited about Parliament’s online petitions, so that number is quite high. I guarantee that I have had at least that number of emails—probably more—about the fuel-price crisis, and the general cost of living crisis in just the last few weeks, never mind in the months that the petition has been live.
It is important to emphasise that a massive increase in the price of fuel means a massive increase in the price of everything else. Almost everything that we buy in the shops was delivered in vehicles that rely on fossil fuels. Although I welcome the much greater use of electric vehicles by some distribution companies and hauliers, and the attempts by some to introduce hydrogen fuels, the vast majority still rely on diesel to get food to supermarkets. If hauliers cannot afford fuel costs, prices on supermarket shelves will go up even more than before.
Helen Morgan (North Shropshire) (LD)
Does the hon. Gentleman agree that some hauliers are unable to pass increased fuel costs on to supermarkets, which have so much purchasing power, and are at risk of going out of business as a result? That puts our supply chain under pressure and threatens jobs in areas where hauliers are large employers.
Peter Grant
The hon. Lady is absolutely correct. Of course, if hauliers manage to pass those price rises on to supermarkets, the supermarkets get together and pass them on to the customers, which adds even further to inflation. The general answer to that point is that the United Kingdom’s food-distribution system is broken beyond repair. This is not the debate in which to discuss that, but the last few years have made it clear that that system is not fit for purpose and needs to be changed radically and quickly.
The Government’s response to the petition contains all the usual platitudes, and I look forward to the Minister repeating them when she gets to her feet. The response points out that the Government do not
“set the prices paid at the pump… The degree to which petrol pump prices respond to changes in crude oil prices is a commercial matter.”
Why? Is it not time that the Government started regulating the price of fuel at the pump, even temporarily, in the same way that they regulate—not all that effectively—domestic electricity and gas prices? If we know that somebody, somewhere is profiteering, is it not time for a regulator that can insist on the kind of open-book approach that the hon. Member for Ellesmere Port and Neston mentioned, so that we can identify where the profits have been made, and what parts of the supply chain are struggling? The few remaining independent fuel-station operators in the UK are seriously struggling. I do not think they are the ones that are profiteering, but somebody quite certainly is.
The Government’s excuse on the rate of VAT is extraordinary. Their response states that exceptions to the standard rate are possible, but
“these have always been limited by both legal and fiscal considerations.”
What legal considerations are those? The Government might have tried to use the excuse of “the Europeans won’t let us do it”, but as the hon. Member for Gower (Tonia Antoniazzi) pointed out, the Europeans seem to let everyone else do that, and it was just Britain that could not find a way of doing so within the limits of European law. We are not in the European Union any more. What has happened to taking back control? It is not Europe’s fault now—it never was—and the Government can no longer pretend that it is. They cannot pretend that it is anybody’s fault other than their own.
The Government also point out that there are “fiscal considerations”. We know that, but where were those fiscal considerations when the Government decided to spend massive amounts of public money on a scheme to deport people to Rwanda? To date, that scheme has not deported a single person—thank God. The Government cannot even tell us when—if ever—that scheme will have its desired impact of disrupting the business of people trafficking across the channel. When things will get the Government a headline on the front page of the Daily Mail, they can find the money, and “fiscal considerations” are suddenly not that important.
In January 2020, before the start of the pandemic, the average UK price for a litre of unleaded petrol was slightly more than £1.27 per litre, and the Government took 79.1p of that in tax. In April 2022—after the Government’s very generous new fuel duty price—the typical price was up to 161.7p per litre, and the Government’s tax take was 79.9p. Despite all the crowing about cutting fuel duty, the Government are taking more tax from the customer than before. As my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) pointed out, a significant part of the tax on fuel is VAT, which is a percentage of the net cost plus 20% of the duty added back on again.
Prices have now got so bad that energy firms are warning that 40% of their customers could plunge into fuel poverty before the end of the year. This is in the week the Chancellor tweeted that it was nice to see the economy still growing—in that tweet he copied numbers that told us the economy was shrinking. That was in National Numeracy Week, which I thought was quite appropriate. The Tories response to the general cost of living crisis seems to vary from, “Get a second job,” to, “Learn how to cook.” How utterly offensive that is to my constituents—to all our constituents.
It never takes the Government long to come up with a scheme that they think will get the headlines they want in the newspapers they want. If the political will was there, they would have already come up with a scheme. Whether that was a duty or a VAT regulator on a sliding scale, so that it reduced as the underlying price increased, they would have found ways to either permanently or temporarily reduce the tax burden on the fuel at the pump. They would have started making noises about regulating the price of fuel in the same way that they regulate the price of domestic electricity and gas. I bet if the Government started seriously to talk about regulating the price of fuel at the pump, the industry would sort itself out pretty quickly. The one thing that the big oil companies do not want is the public being allowed to see just how much of a profit they make at the expense of our hard-pressed constituents. They are allowed to make those excessive profits with the consent, and possibly even the connivance, of a Government that simply do not care.
James Murray (Ealing North) (Lab/Co-op)
Thank you, Ms Elliot, for the chance to respond to the debate on behalf of the Opposition. I congratulate my hon. Friend the Member for Gower (Tonia Antoniazzi) on leading this important debate on the e-petition relating to taxes on motor fuel. As she set out, the fact that it has been signed by over 100,000 people underlines what we all know from our constituents: the rising cost of fuel is a pressing and urgent part of the wider cost of living crisis that is hitting people across the country.
With inflation at its highest in decades, the cost of living crisis is causing immense hardship and driving households into poverty. At the same time, this Government are alone in making us the only G7 country to be raising taxes on working people at such a difficult time. In that context, the rise in the price of fuel is being felt particularly acutely. The Office for National Statistics has published data on fuel prices that confirms what everyone knows when filling up their cars: there has been a consistent weekly increase in price since the start of 2022, with the highest rises occurring since March. As an RAC spokesperson recently said:
“March 2022 will go down in the history books as one of the worst months ever when it comes to pump prices… To describe the current situation facing drivers at the forecourt as ‘bleak’ is therefore something of an understatement.”
Patricia Gibson
The hon. Gentleman is talking about the impact that prices are having across the whole of the UK. Every community and constituency is affected. Does he share my disappointment that there are no Tory speakers? No Tory MPs appear concerned enough to have participated in this debate.
James Murray
Like the hon. Member, I find it very depressing to see no Conservative Back-Bench Members apparently interested in this debate. However, if the best many of them can come up with is to suggest people buy value brands or get a different job, I am not surprised they have little to add to the debate.
As my hon. Friend the Member for Gower said, the Petitions Committee’s survey to the respondents of the e-petition has helped bring to life some of the real impacts that fuel price rises are having on the lives of people across the country. Those responses include the supply teacher who explained the necessity of reducing working hours due to the cost of driving to different schools. An NHS worker reported the challenge of transporting her disabled children to the special educational needs school, and having to cut down on food in order to balance the cost of fuel. A carer reported being unable to attend appointments to give essential care to vulnerable people; a taxi driver was unable to make ends meet. Parents reported having to remove their children from nursery as the cost has become unsustainable, and people have been unable to visit elderly relatives.
Fuel prices have been hitting people across the board. At the same time, businesses have reported that the increased fuel costs have made it more challenging to recover from the losses suffered during the pandemic. Respondents felt that the temporary 5p reduction in fuel duty did not go anywhere near far enough—something that we have heard from many Members today—and was ineffective, as the saving was quickly cancelled out by rising prices. When it comes to the price of fuel, respondents confirmed what we had all concluded about the Government’s actions so far. Following the spring statement and the announcement of a temporary 5p per litre cut in fuel duty, the Chancellor was quick to arrange a glossy photoshoot in a borrowed car at a petrol station forecourt, but the reality is that the 5p cut in fuel duty has been quickly eclipsed by the rapid rise in the overall price of fuel.
As we know and as other hon. Members have said, fuel prices are just one of many pressures hitting people’s lives, and the Government’s response to the cost of living crisis has fallen woefully short of what is needed. People across the UK are seeing the biggest squeeze on their finances in a generation, while at the same time, oil and gas producers’ profits have shot up. As has been widely reported, BP’s chief financial officer said that
“we’re getting more cash than we know what to do with”,
while its chief executive has said that the current rising prices are making BP a “cash machine.” In the first three months of 2022, 28 of the largest oil and gas producers made close to $100 billion in combined profits, with Shell, for instance, making over $9 billion—almost three times what it made in the same period last year.
Faced with oil and gas producers receiving such bumper profits while everyone else suffers the cost of soaring energy bills, Labour has called on the Government to implement a simple, effective and fair solution: levy a windfall tax on oil and gas producers’ profits to help cut people’s bills by up to £600. People need that help, as they are left with no other options. Martin Lewis, the founder of MoneySavingExpert, has said that he no longer has any ideas for how people can save money to cope with the massive surge in the cost of living.
The fact that people are struggling and do not know what to do makes it incredible that the Government have twice voted against Labour’s plans to address this cost of living crisis by imposing a windfall tax on oil and gas producers’ profits. We are left wondering what on earth their objection is, when consensus seems to be growing by the day that a windfall tax is the right thing to do. Current Treasury Ministers may not know what to do, but the previous Financial Secretary to the Treasury, the right hon. Member for Hereford and South Herefordshire (Jesse Norman), has said that the arguments against a windfall tax
“at present are very weak.”
He added that Margaret Thatcher would have backed a windfall tax on energy companies.
Of course, in recent weeks, Government Ministers have taken a wide range of positions. We have heard opposition to the plan for a windfall tax from the Health Secretary, the Foreign Secretary, the Business Secretary, the Northern Ireland Secretary, the Attorney General, the Minister for Brexit Opportunities and the Deputy Prime Minister, and yet the latest position from the Chief Secretary to the Treasury is that
“all options are on the table.”
Every day of delay hurts people across the country. When the Minister responds, I urge her to give some indication of when the inevitable U-turn will happen and the Government will implement a windfall tax. We have been calling for this for months, and we are all waiting for the Government to finally do the right thing.
The Treasury’s failure to act exposes a deeper failing at the heart of Government. While we have been pressing the idea of a costed and effective plan to levy a windfall tax to cut energy bills, the Government are out of ideas and out of touch when it comes to helping people with the hardship they face. The Chancellor needs to get a grip on this situation, so when the Minister responds, I again urge her not to add to the delay, but to simply tell us when the Government will go ahead with the windfall tax that we all know is needed.
The Exchequer Secretary to the Treasury (Helen Whately)
It is a pleasure to serve under your chairmanship, Ms Elliott. I thank the Petitions Committee for organising this important debate and all hon. Members who have contributed today, especially the hon. Member for Gower (Tonia Antoniazzi), who opened the debate.
I also thank the more than 100,000 people across the UK who signed the petition calling for a reduction in fuel duty and VAT. Those signatures are a reflection of how hard high fuel prices are hitting people. As well as being Exchequer Secretary, I represent a rural constituency, and I know that for most people in my constituency, there is no alternative to going by car for most journeys. As hon. Members have said, whether it is getting to work, doing the school run, going to the supermarket, the doctor or the dentist, or visiting family, there is usually no alternative. If we add to those journeys all the business journeys—the man in a van, delivery drivers, logistics and so on—we can see that so much of our economy is reliant on road transport.
The UK has about 30 million drivers, and the vast majority of us fill up our vehicles at the petrol station. As many hon. Members have said today, fuel prices have dramatically increased in recent months, and they reached their all-time highest levels this spring. I know that this comes at what is already a painful moment for many households, with so many pressures—ranging from heating bills to higher food costs in the shops—on people’s budgets. I welcome the Petitions Committee survey assessing the impact of increases in the cost of motor fuel on petitioners, which reflects what I have heard from my own constituents and from people I speak to up and down the country. Whether that is the parent struggling to put food on the table for their children or the care worker providing vital care across her community, we hear you, and the Government have stepped in to help, with support measures that add up to £22 billion.
However, we should not ignore the context. We are part of a global trend, driven by global issues—by the surge in demand post pandemic, exacerbated by Putin’s war in Ukraine. And just as these circumstances are not unique or specific to the UK, so they cannot be solved by the UK alone.
Prices at the pump are not set by the Government, and nor are crude oil prices more widely, but the Government have taken action to help people with recent unprecedented price increases. After the launch of this petition last October, my right hon. Friend the Chancellor of the Exchequer took the decision, at autumn Budget, to freeze fuel duty rates; this was the 12th consecutive year of the freeze. He then went further. In the spring statement, the Chancellor announced that fuel duty for petrol and diesel would be cut by 5p per litre. Unlike many international counterparts, who have introduced shorter-term relief for motorists, we have this measure in place for a full 12 months. This is only the second time in 20 years that fuel duty has been cut, and this time, it is the largest cash-terms cut ever across all rates of fuel duty at once. It represents a tax cut worth £2.4 billion in 2022-23. Coupled with the fuel duty freeze, it is worth £5 billion overall and equates to a reduction in fuel duty of about £100 over the year for the average car driver.
Justin Madders
The Minister will have heard the suggestion that the Chancellor has raked in more through increased VAT receipts than he has given away in this fuel duty cut. Will she say whether she agrees with that or not?
Helen Whately
The hon. Member comes to exactly the next point that I was going to make in my speech. The petition called for a VAT reduction, as did the hon. Member for North Ayrshire and Arran (Patricia Gibson) when she intervened. Given that VAT is applied on top of fuel duty, the 5p duty cut on petrol and diesel also results in a VAT reduction. It effectively translates to a reduction of 6p per litre overall. That said, a VAT reduction is not generally the best way to provide help with fuel costs, particularly because it would not help many businesses, many of which already claim back VAT paid on fuel for business use. About 40% of fuel is used by businesses. If we had just focused on reducing VAT instead of fuel duty, that would have left businesses more exposed to fuel price increases, in turn impacting the cost of goods for consumers. Making the focus fuel duty rather than VAT means that businesses, as well as consumers, will benefit from that tax cut. Also, by helping businesses with the fuel duty cut, we ensure that the duty cut benefit flows through to people who do not own cars, as well as those who do, because of the importance across the supply chain of the cost of fuel.
Peter Grant
Did I mishear the Minister? Is she trying to persuade us that if we cut VAT on fuel, it will lead to an increase in costs to the customer somewhere else? Is that what she is trying to say?
Helen Whately
That is not what I just said; I said that if we particularly focused on reducing VAT on fuel, that would not result in a saving to many businesses, because businesses can claim back VAT. By cutting fuel duty, we are benefiting businesses and the whole supply chain, as well as consumers who buy fuel.
Patricia Gibson
The Minister, if I understand her correctly, is saying that cutting VAT will not necessarily help business, and that the best way to help them would be by cutting fuel duty. From what the Minister said, I do not know what the answer is. Perhaps the answer is to cut VAT to help consumers, and to put a substantial cut on fuel duty to help reignite the economy, reduce the cost of living and control inflation.
Helen Whately
That goes a long way into the broader economic questions about the right way to deal with the crisis we are in, and how we raise money if we are to make further tax cuts to provide further support to consumers. As I have mentioned, and as I am sure the hon. Lady well knows, we have already put in support worth £22 billion to help people across the country with the cost of living. That includes £9 billion to help people with energy bills—some of that will be through council tax rebates of £150—and that money is already going into many people’s pockets. [Interruption.] The hon. Lady shakes her head and says that that is not enough, but the Chancellor has been clear that he stands ready to do more. We do not yet know what the retail cost of fuel will be in the autumn, and we are absolutely concerned about the rising costs to people. We have already taken steps, and that is what we are talking about today.
I want to come back to VAT, because it has been suggested that the Treasury might be getting some kind of VAT windfall. Overall, the Office for Budget Responsibility is forecasting that VAT receipts will now be lower than it had expected in the autumn. There is not some great surge in VAT coming through to the Treasury.
Helen Whately
I will move on and keep to the topic of the petition, if that is okay with the hon. Gentleman. Another question that came up earlier, particularly from the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier), was on the extent to which the fuel duty cut has been passed through. I am well aware of that concern and the suggestion that suppliers have been taking the benefit of the £2.4 billion tax cut.
To provide some context to this, the spring statement was made at a time of sharp rises in international oil markets, which would have taken some time to feed through to the pump. Diesel has faced specific pressures, because of the particular role of Russian exports in the European market. That has, unfortunately, contributed to diesel reaching all-time high prices this month. The background movement in prices makes the 5p cut harder to see. The Government have been clear that we expect all in the supply chain—from the moment fuel duty is owed to when fuel is bought at the forecourt—to pass the fuel duty cut through to consumers.
The Chancellor and the Business Secretary wrote to industry on the day of the announcement to set out that expectation. The Business Secretary wrote to industry on this matter again last week. The Competition and Markets Authority is closely monitoring the situation. To quote its chief executive, Andrea Coscelli, the CMA stands ready
“to take action should there be evidence that competition or consumer protection law has been broken in the fuel retail market”.
He went on to say that a formal investigation may be considered appropriate,
“which could ultimately lead to fines or legally binding commitments”.
The Government will continue to undertake longer-term analysis to establish the extent to which the Chancellor’s cut may have been buried beneath further wholesale price increases, and to ensure that the market does not fail to pass on the benefits of the duty cut to those refilling at the pump.
I have also heard public discussion of something called PumpWatch to regulate prices at the pump. Some comparisons have been made to Ofgem, the energy regulator, and the role of the price cap in the domestic energy retail market. However, that price cap was introduced in 2019 specifically to correct the market failure identified by the Competition and Markets Authority, which showed that the conditions for effective competition were not present in the market. While the energy price cap has shielded customers from volatile energy prices, it was specifically designed to better protect disengaged customers from being offered poor-value deals.
To date, we have not seen evidence that the same situation is happening in the fuel market, because pump prices are conspicuously displayed outside fuel stations to encourage competition and allow drivers to make comparisons and find the best deals, but I reiterate that if the CMA finds evidence of anti-competitive behaviour in the market, it is clear that it will not hesitate to act.
James Murray
As the Minister is drawing to a close, will she take this opportunity to let us know her opinion on our plans for a windfall tax?
Helen Whately
It is interesting that the hon. Gentleman asks that question. I noticed that although this is a debate on fuel duty, he and other hon. Members took the opportunity to talk quite significantly about a windfall tax. The Chancellor and the Prime Minister have made it clear that it is not the Conservative Government’s instinct to reach for a windfall tax; that is not the most naturally attractive option to us. We want to see the energy sector invest in North sea oil and gas, which is important to our transition. However, the Chancellor has also been clear that no option is off the table.
To return to the topic of the debate, the Government take fuel duty costs seriously, and we have responded with a substantial duty cut to help motorists across the UK. The Government and the CMA continue to monitor the situation extremely closely, and Members should be in no doubt that further action will be taken if necessary to ensure effective competition. The 5p cut in fuel duty is part of a £22 billion package of support to help people with the cost of living. As the Chancellor has made clear, we stand ready to do more.
Tonia Antoniazzi
I thank the Minister for her response to the petition, and I thank the petitioners for signing it and Michael Bromley from Chorley for promoting it. This petition was created on 18 October 2021 and closed on 18 April, because they last six months, but what a six months it has been. He was concerned in October, and many people have expressed their concerns alongside him.
The sum of £9 billion was mentioned earlier—that is the Government’s support to help people with energy bills through their council tax bills. I say to the Minister—I know she cannot respond—that £9 billion was the sum that the Government wasted in relation to personal protective equipment, so we know they are not looking after their pennies.
When we left the EU, one thing we were promised was that VAT on fuel would be cut, and it has not been. There is a knock-on effect on costs, as many Members have said, and the Government need effective and rapid ways of putting money into our constituents’ pockets. Like the 100,000 petitioners, we want more to be done, because unfortunately they are not feeling the benefit of what has been done so far. I thank the Minister for responding, and we will carry on from here.
Question put and agreed to.
Resolved,
That this House has considered e-petition 599089, relating to taxes on motor fuel.