Fuel Prices and the Cost of Living
Angus Brendan MacNeil Excerpts(13 years, 8 months ago)
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Ms Eagle
I have given way to the hon. Member for Great Yarmouth.
That statement shows that this Government are run by a Prime Minister who does not do detail and who appears to be at odds with his own Chief Secretary. The OBR has shown that a temporary rise in oil prices generates a £100 million surplus in the first year for the Treasury, but that that turns rapidly to a net revenue loss of £700 million the year after. What the Government gain from higher oil tax revenues, they lose from the effects of higher prices on consumption and the requirement to spend more on indexing pensions and benefits. A permanent rise causes permanent losses to the public finances. The Prime Minister has to stop pretending that there is a windfall in rising oil prices that he can share out, because it simply does not exist. [Interruption.]
Mr MacNeil
I am not sure what the hon. Lady thought about living standards in the Outer Hebrides when, time after time, she stood at the Dispatch Box as a Minister and said what she could not do and why she could not do it. Does she, in her quieter moments, regret not approaching the European Commission for a rural fuel derogation for the Hebrides and other islands in Scotland?
Ian Murray
I am delighted that the hon. Gentleman has managed to ingrain himself with the propaganda being put out by the Conservative and Liberal Democrat parties about the deficit. He has given me a wonderful opportunity to go back to the start of that list so that he can take it all in.
There is no doubt that the Government’s cuts in public services are going too far, too fast and too deep. Everyone knows that the deficit must be reduced, but reducing it over time would protect my constituents from the ideological cuts that the Government are introducing under the veil of the deficit.
Let me return to what is happening to that squeezed middle manager at HMRC. He faces increased national insurance contributions and an increase in VAT to 20%. His pension will be cut because it will be linked to CPI instead of RPI. He faces tuition fees for his two children. He has lost his child benefit because he is a higher-rate taxpayer, and record commodity prices are pushing up food prices. He faces a high inflation rate, partly owing to the increase in VAT to 20%. His salary has been frozen. He has job insecurity. He faces increased energy prices, increased borrowing costs and lower interest on his savings, all because of this Government. Moreover—this brings us back to the motion—the price of fuel means that the cost of filling up the family car has gone through the roof. The Chancellor of the Exchequer is taking an extra £59 million from the Scottish people because of the increase in VAT, which is directly related to the cost of the fuel that they put in their cars.
Ian Murray
I will not, if the hon. Gentleman does not mind.
Each time people drive down the street, they see the large neon sign at every petrol station, and that is having yet another damaging effect on consumer confidence.
What are we left with? We are left with a broken promise from the Government on VAT, and a broken promise on the fuel duty stabiliser. Many people in East Lothian and Edinburgh South voted for the Conservatives because they had made that promise before the election. Time after time, promises made to ordinary people in my constituency and throughout the country are broken, and it is about time that Ministers did something about it.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I am grateful for the opportunity to speak in this debate and convey the feelings of my constituents about fuel prices. In Na h-Eileanan an Iar—as the good Speaker himself would say and, of course, did say—we are paying the highest tax per litre in the UK; we are doing so consistently, at a range of fuel stations throughout the entire constituency. That has been the situation throughout the life of this Government and indeed the previous one. The last lot—the Labour Government—made excuses; this lot—the Tory and Liberal Government—are making promises. The upshot at the pumps in Ness, in Uig, in Back, in Stornoway, in Lochs, in Tarbert, Harris, in Lochmaddy, in Balivanich, in Creagorry, in Daliburgh and in Castlebay is the same; excuses and promises equal exactly the same.
The rural fuel derogation has been announced twice at Liberal Democrat conferences that have been six months apart, but there has still been no formal approach to the EU Commission. Can we be given an indication of how long it typically takes to get such a measure approved by the EU Commission, especially as it has given approvals in respect of far less rural areas in other places in Europe than the Hebrides and other Scottish islands?
Mr Andrew Turner (Isle of Wight) (Con)
I hope that the hon. Gentleman is not speaking only of Scottish islands, because the Isles of Scilly are included in this and I hope that the Isle of Wight will be too.
Mr MacNeil
As the hon. Gentleman knows, and as I have demonstrated in the past, I have great sympathy for the Isle of Wight and indeed for the Cornish Isles of Scilly, so I hope that this will extend to them as well.
May I suggest that the Government put in place a maximum percentage that can be taken at the pumps in taxation, or at the very least a desired percentage to be taken in taxation, just as the inflation rate seems to be a desired rate and a target for the country? I say that because in the UK 62% of the price of petrol is duty, which is the highest level in Europe—the lowest level in Europe is 46%. May I also ask the Government to examine the fuel distribution network, because many people have long had deep concerns about profiteering between refineries and retailers in what seems to be a very opaque business model? We have to ensure that any gains we make in the—so far promised—rural fuel derogation are felt at island pumps and are not snaffled away elsewhere.
We know what fuel tax is doing to people’s pockets on a daily basis up and down the land: it is affecting the poorest more, as this is a highly regressive tax. In areas such as mine, where wages are below the national average, the cost of living is higher and fuel poverty is high—my constituency has the highest in the land—the regressive nature of this tax is really felt. The tax pulls money out of the economy from families, businesses and individuals, and from local authority budgets and health board budgets. Clearly we need help and I ask the Government to provide it in tackling fuel tax and in taking the foot of high fuel tax off the neck of the islands’ economy.
When I last spoke in the House on this matter, on 7 February, I said—I have checked the Hansard record—that fuel was £1.44 a litre. My office in Stornoway tells me that it is now £1.48 a litre, and I shudder to think what it might be the next time I speak on this issue in the House, because the cost seems to be going in one direction. Before the staff at Benbecula airport correct me, yet again, on the price, I point out that the price in Uist will inevitably be higher. I understand that the price in Uist and Benbecula is more than £1.50 a litre. Consistently, throughout the length of my constituency, we are paying the highest fuel tax in the UK. The simple re-announcements of the intention to have a rural fuel derogation without any change coming at the island pumps are greeted with nausea by my constituents, who are tired of hearing pious words and are instead looking for pious actions.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
Can the hon. Gentleman explain to my constituents why his party is interested in giving help only to Scots in rural areas and not to people in my constituency?
Mr MacNeil
I will indeed. I imagine that in West Dunbartonshire the price of fuel is 15p to 20p a litre lower. How I wish we could enjoy the prices of West Dunbartonshire. I also wish that the hon. Lady could express some sympathy for the voters, constituents and people of the Western Isles who have suffered higher fuel prices than many other areas in the UK as a result of the policies of successive Governments.
Gemma Doyle
For the purposes of clarification, let me assure the hon. Gentleman that fuel in West Dunbartonshire is currently £1.36 a litre for unleaded and £1.43 for diesel—not far behind the prices he quoted for his area.
Mr MacNeil
I have every sympathy for the people of West Dunbartonshire—those are high prices—but with our prices of £1.48 and £1.50 a litre, I wish that we could enjoy prices such as £1.36 a litre. If I went back to the Outer Hebrides tomorrow and announced a price of £1.36, I would be regarded as some sort of hero, but unfortunately I cannot do that. I have sympathy with the hon. Lady but I am afraid that she must reciprocate and understand the problems that come when fuel poverty is higher, the cost of living is higher and wages are lower. The pilot project in the Outer Hebrides and other islands in Scotland is the right way to go. If it is a success, I hope we can extend it. I find the lack of sympathy from Labour Members about the problems in the Outer Hebrides somewhat distressing.
Cathy Jamieson
Having visited the hon. Gentleman’s constituency in the past, I understand some of the difficulties his constituents face, but does he agree that although we are talking about derogations, stabilisers and all sorts of things people want action now and that there is an opportunity for the Government to act next week? Will he support the Labour motion today to ensure that the maximum pressure is piled on the Government?
Mr MacNeil
I probably will support the Labour amendment, but at my own risk. I am grateful for the hon. Lady’s words. She is very welcome back in Na h-Eileanan an Iar at any time of her choosing. I would be more than pleased to show her around the islands or to entertain her in Stornoway—at my expense.
I must wind up, because I have to speak at a meeting at 3 o’clock about coastguards, which are a very important issue in my constituency. The last time I spoke about this issue I said that the rural fuel derogation was not like Christmas because Christmas had been and gone. It seems to me that it will not be like Easter either, because it looks like Easter will also come and go while we are still waiting.
Scotland Bill
Angus Brendan MacNeil Excerpts(13 years, 8 months ago)
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Stewart Hosie
The hon. Gentleman makes a very interesting point, which relates to what the Government say. They believe in tax competition, as do I, but we must avoid unnecessary tax or regulatory arbitrage not just within the UK but between the UK and other countries. There is a balance to be struck between proper tax competition, which is legitimate and fair and proper to stimulate growth, and unnecessary changes simply to get a quick short-term fix in terms of the arbitrage, which would be unhelpful. That highlights the analogy with price fixing that the hon. Gentleman drew, and he is right to be conscious of that.
We rehearsed the arguments about fuel duty at some length in our debate on the Supply day motion a few weeks ago, so I do not intend to go into that in considerable detail, but I will go into it in some detail.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Is my hon. Friend aware that there is to be a photo call on fuel outside Westminster at 2.30 tomorrow afternoon involving the Leader of the Opposition and the shadow Chancellor? Does that not remind my hon. Friend of a couple of sly foxes complaining there are no more chickens left in the coop?
Stewart Hosie
That is the sort of analogy a crofter from Barra would want to draw. When in opposition, the Liberal part of this Tory-led coalition promised a rural fuel derogation and the Conservative part promised a fuel duty regulator, and instead of being foxes round a chicken coop I would rather they both kept their promises and delivered on their pre-election commitments.
Stewart Hosie
Not at the moment, because I want to make a couple more points.
As we have said in previous debates, this issue is important because in Stornoway, in my hon. Friend’s constituency, fuel routinely costs £6.50 a gallon; in the Chief Secretary’s constituency diesel routinely costs £6.30 a gallon; in the major cities fuel costs more than £1.33 a litre—more than £6 a gallon; and I am told that Orkney recently had the £7 gallon. Hon. Members will know from the testimonials from the road haulage industry, the Freight Transport Association, FairFuelUK, taxi drivers, the Federation of Small Businesses and many others that businesses and communities are struggling with the inflationary effects of high fuel costs.
Mr MacNeil
Tomorrow, the Leader of the Opposition and the shadow Chancellor will complain about the price of fuel, but is not the point that for years and years as the price of fuel rose they said not a cheep? They were utterly blind to the troubles we had in the Western Isles when they were in government, but all of a sudden they want to say something .
Stewart Hosie
It was not that they were simply blind to it; members of the Labour party have said—I believe that their leader recently said this—that Labour found it difficult to implement a fuel duty regulator when they were in power. It was not so much that Labour found it difficult as it actively opposed every attempt to do it.
Mr Donohoe
I am sure my hon. Friend has examined my two new clauses, which are self-supporting. It is correct that in the first instance I want to bring back coterminous boundaries for all MSPs, so that there is a semblance of an organisation that can be supported by all parties in this place and elsewhere. However, the second point that I want drive home is as important as the first. I do not believe that list Members should be allowed, under any circumstances, to pick up the funds that are currently available to them to represent—or not represent—what they perceive to be their constituents.
That brings me neatly to list MSPs themselves. On a substantial number of occasions, the list Member has cherry-picked, to the detriment of the possibility of inward investment by companies of some size into my constituency—I take exception to that more than anything. On the basis of what they perceived to be environmental issues, they have come in and destroyed any possibility of a company coming into my constituency. That is wrong, and there must be accountability, but the list Member is not accountable to constituents as I am to mine. That must be fundamentally wrong. No hon. Member can tell me whether the list Members have any accountability within the structures of their political parties. That is the problem. There is no accountability whatever for list Members—[Interruption.] Does the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) want to intervene?
Mr Donohoe
I did not think he would. That demonstrates exactly what I am saying. There is no accountability, and no structure to allow it, for list Members. That is a major problem, and why I have tabled new clauses 1 and 2.
Mr Donohoe
The only one I could think anybody would recognise would be the ex-Member for Cumnock, Carrick and Doon Valley, George Foulkes. Whether that is because of his politics or because he was the chairman of Hearts I do not know.
Mr MacNeil
I am grateful that the hon. Gentleman mentions list MSPs. In the highlands, we know that Rob Gibson and David Thompson are the SNP list MSPs, but I have no idea whatever who the Labour MSPs are.
Mr Donohoe
The hon. Gentleman makes my point. Nobody actually knows their list Members. I could not name the ones in my constituency because there are 24 of them.
Mr Donohoe
Perhaps the hon. Gentleman’s smile will be on the other side of his face come the end of May. There is absolutely no doubt that Iain Gray will become as well known as anyone in Scotland as a result of becoming First Minister after 3 May this year. That was a great intervention—I would be happy to take similar ones all night.
Mr MacNeil
I do not know who the highlands Labour list MSPs are, so could the hon. Gentleman inform us?
Mr Donohoe
The hon. Gentleman indicates that I got that one right.
The fact is that we must look seriously at the current situation. This argument is what might be described as a slow burner, but I would like to develop it by moving on to the first-past-the-post system. I realise that I am running out of time, but I have a lot of support on both sides of the Committee, even if some hon. Members are hiding behind their mantle.
The fact is that there is only one solution to the problem that we face north of the border—to bring about first past the post for every MSP. As a result, I suggest, for all sorts of reasons, that the best solution is that instead of the list Members system, by which there are 129 MSPs, we simply have two MSPs per Westminster constituency, with the exception of the Western Isles and Orkney and Shetland. I would make that concession. I am sure that the hon. Member for Na h-Eileanan an Iar would be very happy with that indeed. As a result, we would have 119 Members.
Fuel Costs
Angus Brendan MacNeil Excerpts(13 years, 9 months ago)
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Stewart Hosie (Dundee East) (SNP)
I beg to move,
That this House notes that the oil price has reached $100 a barrel, and that diesel in the UK is the most expensive in Europe; further notes that the combination of the 1 January 2011 duty rise and the increase in value added tax is estimated to have added 3.5 pence to the cost of a litre of fuel; acknowledges the sharp rises in fuel prices over the past year and the resulting impact on headline inflation figures; recognises the financial pressure this places on hard-pressed families and businesses already struggling with high inflation and the impact of the recent rise in value added tax; condemns the Government’s continued dithering over the implementation of a fuel duty regulator (or stabiliser) as neither a sustainable or stable way to make tax policy; further recognises the specific additional fuel costs for those living in remote and rural parts of the UK; is concerned that diesel in such places is approaching £7 per gallon; condemns the Government for its failure to prioritise the implementation of a fuel duty derogation; and calls for the introduction of a fuel duty derogation to the most remote areas at the earliest opportunity.
The issue of high and spiking fuel prices is one of major concern around the country, as we can witness from the campaigns run by national and local newspapers and by campaign groups local and national the length and breadth of the country. Those campaigns—my favourite is the “fight for fairer fuel” run by The Courier—are not driving public opinion but reflecting it.
I was taken by the front page of the newspaper a week or so ago, which stated, “Osborne ‘may override 1p fuel duty increase’”. The Chancellor had clearly been listening to some of the concerns that had been expressed. The newspaper went on to report that when he was asked on a local radio station if he could do anything about fuel duty, he said:
“We can over-ride it, we are looking at that.”
He also seemed to confirm that Ministers were looking into a fuel duty stabiliser so that, as he said,
“the Government steps in to try to protect people from the effects”
of volatility at the pumps.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
It is not just the Dundee Courier; the Stornoway Gazette is admirably drawing attention to rural fuel derogations in some areas of Europe, particularly Mediterranean islands that do not have the same fuel demands as the north of Scotland. The question has been raised why the matter is taking so long, why it is stalling in the European Commission and why the UK Government are not moving as efficiently and effectively as some European Governments in respect of their citizens’ needs.
Stewart Hosie
I will come to the rural fuel derogation in the second part of my comments, but in relation to the Stornoway Gazette, I am sure that there are many other such campaigns. My hon. Friend’s point reflects what I have just said—this is an issue of extreme concern in many parts of the country.
I was explaining that The Courier reported that the Chancellor had suggested that the Government were looking into a fuel duty stabiliser. I was about to say “so far, so good”, but unfortunately the next paragraph of the newspaper’s front page read:
“The Treasury later played down any suggestion that the Chancellor was announcing any intention to scrap the rise”.
The Government’s position is clear as mud.
Although the scrapping of a single rise would be extremely welcome, it is not what is fundamentally needed. We need a permanent fuel duty regulator and a stabiliser mechanism that is always in place to smooth out spikes when prices rise at the pump. It is not that the Government do not know that that is needed, because in the very same article, the Secretary of State for Business, Innovation and Skills is quoted as saying, I believe at a Press Gallery lunch:
“It is quite likely that we are going to get a nasty period of high fuel prices.”
I say to him that we are not going to get that; we already have a nasty period of very high fuel prices.
In January, diesel in Stornoway was £1.42 a litre—that is almost £6.50 a gallon. In Aviemore, in the Chief Secretary’s constituency, the price was £1.38 a litre, which is nearly £6.30 a gallon.
Mr MacNeil
Those prices almost seem cheap now. They have gone up to £1.45 and £1.46 a litre. At Benbecula airport today, I spoke to Rhoda Macauley, who lives in Daliburgh and has a 50 mile round trip to work at the check-in, and is seriously considering whether working is worth her while, such is the price of fuel.
Stewart Hosie
That does not surprise me. In previous debates, after we have experienced high spikes, several Members in the House and elsewhere have reflected their constituents’ views that they had almost reached the point when it was not worth going to work, particularly in rural areas with long distances to travel—I will deal with that later—because of the price of fuel. However, that applies not just in Stornoway, Aviemore or my hon. Friend’s constituency. In Dundee last week, I paid more than £1.33 a litre—more than £6 a gallon in the city. That is now not uncommon, and it is unsustainable. It is inflationary, decimates family budgets and puts untold pressure on many businesses and business sectors. It is having a catastrophic effect in remote and rural areas. That is why we call on the Tory part of the Government to keep its promise to consult on and deliver quickly a fuel duty stabiliser, and on the Liberal part of the Tory-led Government to keep its promise to deliver a fuel duty derogation for remote and rural areas.
I have said that the high fuel prices are bad for business. The Federation of Small Businesses has told me just how bad. According to its January poll of members, should fuel prices continue to rise, 62% of those polled said that they would be forced to increase their prices; one in 10 suggested that they may lay off staff; more than a quarter said that they could be forced to freeze wages; more than a third said that they would have to reduce investment; and 78% said that rises would put overall business profitability in jeopardy. When we are trying to grow our way out of recession and into sustainable recovery, that is the wrong thing to do.
Stewart Hosie
The hon. Gentleman has been here long enough to know that this is an Opposition day motion. If he waits until the Finance Bill, I am sure that both I and his hon. Friends will be happy to put forward detailed proposals and provisions, as we have all done on a number of previous occasions. Had he been listening to my response to an earlier intervention, when I explained how the proposal was due to work, he would know that we suggested it in 2005. We presented an amendment in 2008, and the then Conservative Opposition proposed something similar in July 2008. If he holds his horses, I suspect that we will have the detailed provisions for such a mechanism soon enough.
Stewart Hosie
I am going to make some ground.
This motion is not simply about the fuel duty regulator; it is about the problems in remote areas, where there is no choice but to drive. In a debate on introducing a rural fuel derogation in 2006, the argument was put as follows. The purpose of the proposal—on that occasion contained in a new clause—was to
“enable the Treasury to specify lower rates of duty on fuel to apply in remote rural areas. Hon. Members will know that article 19 of the European Union’s energy products directive allows member states to apply for a derogation to allow lower duty rates in specified areas. In October 2004, the French Government, with the support of UK Ministers and Ministers of other member states…did just that, following the example set by the Portuguese and the Greek Governments in previous years.”
The argument for applying such a measure in the United Kingdom rested on
“the very serious economic impact that higher fuel prices in rural areas have on areas such as the highlands and islands of Scotland. The truth is that people…in remote areas such as the highlands and islands are victims of a triple whammy. They pay higher fuel prices and have much longer distances to travel, with few or no alternatives to making those journeys by car. Unavoidably, they spend more on transport than others and therefore also contribute more to the Treasury. Motoring costs represent some 18 per cent. of total household expenditure in rural Scotland compared with 13 per cent. across the rest of Scotland.”—[Official Report, 4 July 2006; Vol. 448, c. 738-39.]
Those were not my words; they were the words of the current Chief Secretary to the Treasury. I am disappointed that he is not here to stand by his words and make a commitment to drive forward a rural fuel derogation at the earliest possible opportunity.
Stewart Hosie
I am delighted to hear that the rural fuel derogation is going to happen. I cannot wait to hear that from a Minister, because the reports that I read earlier tended to indicate a little confusion in the Government’s ranks. I hope that that happens soon, for the following reasons.
In the final bit that I want to quote from the Chief Secretary’s speech in 2006, he said:
“Median earnings in the highlands and islands are some 85 per cent. of the UK figure, so the inequitable situation”
that he had described
“hits an already poorer region very hard.”
He said that, before coming to the Chamber, he had conducted
“a random survey of pump prices for a litre of unleaded petrol. In Aviemore in my constituency…the…price is 99.9p per litre. In Dalwhinnie, a little further south, it is 102p per litre. In Thurso, in the constituency of my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso), it is 102p per litre. In Lerwick, in the constituency of my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael), it is 106.9p per litre. By comparison, at Asda in Leeds the price is 92.9p, while in Morrison’s in Camden in north London, it is 90.9p.”—[Official Report, 4 July 2006; Vol. 448, c. 739.]
In preparation for today, we were told by the AA that petrol cost £1.34 a litre in Portree and £1.42 a litre in Stornoway. With prices now more than 30p a litre more than four years ago, that means an increase of more than £1.30 a gallon—many hon. Members will remember when that was what a gallon of petrol itself cost. If the argument was correct then, when the price was between 90p and £1 a litre, it is even stronger today, when the price is £1.30 a gallon more.
Mr MacNeil
Does my hon. Friend remember just how full the Chamber used to be of Liberal Democrat Members when the prices were 30p a litre cheaper? Now, following the massive increase in prices and the real rural pain being felt as a result, where are they? I see two Liberal Democrats here today. Any more? Please stick your hands up! No, just two Liberal Democrats. Shocking!
Stewart Hosie
My hon. Friend makes his point in his own inimitable way. I have to say that I cannot remember a time when the House was ever full of Liberal Democrats, but I think I know what he means.
I want to raise three specific issues in relation to the vital importance of the rural fuel derogation. In urban, built-up areas, 95% of people live within 13 minutes of a bus stop with a service more than once an hour. That compares with less than half of residents in villages and hamlets. Before any Member gets up to make a point about that, let me say that I know that there are parts of every constituency in which there are no bus stops, no bus services and no choice but to use a car.
Justine Greening
I can assure the hon. Gentleman that I shall set out our approach to policy in this regard in the run-up to the Budget in my further comments, but we need to recognise that the fuel duty escalator was put in place by the last Government. They have, I believe, a blank piece of paper that is called their economic policy, and they owe the House the honesty of being transparent about whether they believe that putting that policy in place was the right or the wrong thing to do.
Mr MacNeil
Far be it for me to draw it to the hon. Lady’s attention, but since last May she has been in government. We want to know—in Lewis, in Harris, in North Uist, Benbecula, South Uist and Barra—what she is going to do about the price of fuel.
Justine Greening
The hon. Gentleman will be pleased, as I have looked at the Scottish National party website today and seen the letter he wrote to voters last April, in which he said that it was the SNP who first called for this “derogation” for fuel areas. I can assure him that I am getting on with that very policy.
Justine Greening
Presumably, the hon. Gentleman wants to intervene again to welcome the efforts of the coalition Government.
Mr MacNeil
I will welcome those efforts when they bear some fruit. We had four years of shilly-shallying from Labour—and I do not want to hear any more shilly-shallying from any Government from the Treasury Dispatch Box.
Justine Greening
The hon. Gentleman will be aware that the derogation will come about as the outcome of a process. He seems to be asking me whether we are getting on with that process, and how much progress we have made. I trust that if I explain what the process is, what we have done so far and what will happen next, he will have been given so much information that he will find it necessary to take a more considered approach.
Let me explain the timing involved in the process leading to European Union and Commission clearance. We must begin by undertaking informal talks with the Commission abut the implementation of the scheme. That will give us a better chance of presenting a proposal that it will agree is, as it were, right first time. As Members have pointed out, similar schemes exist in other countries. It is sensible for the Government to engage in a process that includes talking informally to the European Commission about those schemes, and about the ways in which our scheme may resemble or differ from them.
Mr MacNeil
Will the Minister tell us how long it has taken other Governments to proceed from the informal talks stage to implementation of a rural fuel derogation, and how long she thinks it will take this Government to do so? Time is of the essence.
Justine Greening
Obviously it will not be a short process involving a few weeks, but I think that the hon. Gentleman and his party know from their experience of the process involved in calling for the derogation that the route that we are taking can provide real support for motorists in rural areas.
Justine Greening
The hon. Gentleman will know that alongside those measures to support companies, particularly small ones, I could have mentioned the regional growth fund and the regional reduction in national insurance for new start-up companies creating new jobs. He will also be aware of the rise in the personal allowance, which has removed about 880,000 people from paying income tax altogether. We have also raised the threshold for national insurance, which means that employers no longer have to pay employer national insurance for thousands of employees. Across the board we are doing what we can, despite the challenging financial deficit left to us. We are doing what we can to make sure that we tackle the overriding priority of sorting out the deficit—that is what we have to do. For motorists, companies, families and unemployed people wanting to get back into the employment market and get a job, we have to get the economy back on its feet and public finances back on a sustainable footing. At the same time, we understand the pressures and challenges for motorists.
As things stand, there are alternatives for the devolved Administrations. I have to challenge hon. Members representing the Scottish National party in Scottish constituencies on whether they have considered using some of the devolved Administration budget to fund their own grant scheme to support motorists in their areas. They have taken different decisions on tuition fees to those taken in England and there is now additional scope for them to see this issue as a priority for their spending, as well as for the national Government to consider how we might be able to help in terms of tax policy.
Mr MacNeil
I want to ensure that the hon. Lady is aware of the importance of what the devolved Scottish Government—in what is an independent Parliament without the powers of independence—have done for the Outer Hebrides. We have introduced road equivalent tariff pilots, which have substantially reduced transportation costs, but the difficulty is that when the Scottish Government produce schemes that stimulate and grow the economy, the tax revenue goes not to our Government but down to Westminster. We are doing good work, but there is a double whammy: as we stimulate the economy, Westminster benefits, and then it comes and sticks on a fuel tax—thank you!
Justine Greening
I think the hon. Gentleman is taking the debate slightly wider than the wording in the motion. However, I will say to him that the measures we are taking are designed to get our economies in his part of the United Kingdom and the rest of it back on their feet. I hope that he welcomes the tax reductions we are bringing forward.
Kerry McCarthy
Those matters were also affected by fuel prices at the time, but it is not my position to apologise for, or to express an opinion on, what my predecessors did.
The VAT rise now is the important thing. VAT went up at the beginning of the year from 17.5% to 20%. According to the Library, the VAT rise increases the cost of a litre of petrol by about 2.6p, assuming that it is passed on in full. That compares with the fuel duty increase in January of 0.76p per litre, so the VAT rise to 20% is hitting the motorist harder and people in rural areas, who rely on their cars most and have to travel longer distances, particularly hard.
Mr MacNeil
Is there any tinge of regret among Labour Members that for at least four years the previous Government did absolutely nothing on a rural fuel derogation?
Kerry McCarthy
I will deal later in my speech, if I may, with the rural fuel derogation and the problems that we see in implementing it.
The VAT rise did not have to be imposed. It flew in the face of all the warm words that Conservative politicians uttered before the election about ending the war on motorists, helping hard-hit families and keeping fuel costs down, but now it has been done and motorists are paying the price.
Let me turn to the fuel duty stabiliser, or regulator, which the Minister glossed over very quickly.
Mr MacNeil
If we are talking about glossing over, I feel that the hon. Lady glossed over my question. Will she take this opportunity to apologise for her Government doing nothing for four years on the rural fuel derogation?
Kerry McCarthy
As I said, I am coming on to the derogation, but it is not my place to express such opinions.
In principle, on paper, the fuel duty stabiliser sounds like a fairly simple, reasonable proposition—as oil prices go up, fuel duty goes down, and as oil prices drop, fuel duty goes up, so the motorist pays more or less the same for fuel and the Exchequer gets more or less the same in revenue. However, economics are not that simple.
The idea of the regulator has been floated for some time. During the debate on the 2008 Finance Bill, the Scottish National party spokesman, the hon. Member for Dundee East, suggested that a statutory instrument should implement an automatic mechanism so that as additional income from VAT receipts came in, it could be used to offset fuel duty in direct proportion. However, the regulator was based on rises in oil prices, not on rises in VAT receipts. It was assumed that one would flow from other—the hon. Gentleman reiterated that assumption today—but that is not necessarily the case, as the Office for Budget Responsibility has said.
Mr Alan Reid (Argyll and Bute) (LD)
Representing a sparsely populated rural constituency, I am only too aware of the severe impact of the high fuel price on motorists and local businesses. It is important to remember that, in remote areas, a car is an essential, not a luxury.
Let us consider the purpose of high fuel duty. Two arguments are often advanced: the green argument and the tax-raising argument. The green argument does not stack up in rural areas, because it is based on encouraging people out of their cars and on to public transport. That fails completely in the highland and islands of Scotland, where buses are few and far between. Indeed, there would be no point in rural councils in remote areas subsidising buses that run with only one or two passengers to try to reduce carbon emissions. Clearly, one or two people taking a car will cause far fewer carbon emissions than one or two people on a bus.
I represent many of the islands of the Inner Hebrides, and the price of fuel is far higher there than on the mainland. On the larger islands, such as Mull and Islay, the price of a litre of fuel is typically 15p higher than in a city. On the smaller islands, such as Coll and Colonsay, the price is often about 30p a litre higher. I was therefore delighted when the Government announced their intention to pursue a pilot scheme under which there would be a 5p fuel duty discount on many islands, including the Inner Hebrides. I realise that they must get EU permission to go ahead with that scheme, but since other EU countries operate a similar scheme for islands, I see no reason why permission will not be granted. It takes time to take such projects through the EU, and it is important that the Government get their proposals right, but I plead with them to take their proposals through as quickly as is humanly possible.
Mr MacNeil
When does the hon. Gentleman hope to see the rural fuel derogation in action on the Inner Hebrides?
Mr Reid
I hope that the scheme will be implemented as soon as possible, and that it can be extended to remote parts of the mainland once the pilot schemes are proven to be successful, as I am sure they will be.
Any argument that fuel duty must increase yet further in order to deter car use is complete nonsense. The high price of fuel already deters car use, and simply increasing the duty further will have no effect on the environment. As other hon. Members have said, increasing the duty will simply harm the rural economy.
I recognise that fuel duty brings in a lot of money for the Treasury, and that the Budget must be balanced. We face an enormous budget deficit, which was inherited from the previous Government, but I put it to the Chancellor that yet another fuel duty increase in the coming Budget will harm the economy, particularly in rural areas, and I urge him to find another way of raising that money. Fuel duty discriminates against rural areas in a way that no other tax does. Almost any other tax increase to replace an increase in fuel duty would therefore be an improvement.
We have debated the stabiliser previously, particularly during proceedings on the Finance Act 2009, when the hon. Member for Dundee East (Stewart Hosie) proposed one. The crucial decision is on the amount around which the price should be stabilised. The Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Taunton Deane (Mr Browne), who was a Liberal Democrat Treasury spokesman at the time, pointed out that the proposal from the hon. Member for Dundee East would mean that the fuel duty would have been 4.5p higher if it had been introduced in the 2008 Budget. I am disappointed that in the intervening two years, the hon. Gentleman has not come forward with a detailed, workable proposal.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I shall try to be brief to allow my hon. Friend the Member for Angus (Mr Weir) to get in.
Simply put, fuel in my constituency costs a ridiculous amount, at £1.45 a litre. What we want, in essence, is to pay the same tax as elsewhere. We are only looking for fairness. A rural fuel derogation would not achieve fairness, but it would take us to the foothills of fairness and would be a big step in the right direction, reducing the price from £1.45 a litre to £1.40. I have sympathy with those in South Derbyshire; I only wish I was enjoying the prices that they are currently burdened with. We have to remember that, at the back of this debate, we want to look at fuel distribution throughout the country, which is often a difficulty to do with refineries—part of the excuse that some of the companies use as well.
Remoteness is often blamed, but I discovered recently that while we pay £1.44 a litre, those in the Faroe islands pay 94p a litre for diesel and £1.10 for petrol. For those who do not know, the Faroe islands are halfway between the Hebrides and Iceland, where petrol and diesel are £1.10 a litre. We do not need to go too far back to remember the difficult economic situation that Iceland faced. It has a big debt, although its deficit is not in the same situation as the UK’s, but it clearly understands that high fuel costs choke recovery. Iceland is not making that mistake; indeed, in the last quarter, Icelandic GDP grew far more than the UK’s. The Government here can talk of the deficit, but if they carry on like this, they will choke the recovery and will not see revenues flowing into their coffers, as they should and would like to.
The price is painful for us. As I left Benbecula this morning, the fuel concerns of Mr Alec MacIntosh, who works at Benbecula airport, were ringing in my ear, and small wonder, as he had just bought some fuel at £1.46 a litre. I think that his week’s wages had just about gone in filling up his vehicle. Those at Stornoway airport attacked my other eardrum on the issue. There is scarcely a place I can go without people seeing me as a telegraph to relay to the Treasury the pain that people are feeling. That pain is real, and I hope that that is taken on board. Indeed, it is not just pain; it is anger, because people know that more tax is flooding from my constituency to London than from just about any other constituency. We have the highest fuel poverty in the UK, and small wonder. The islands really need a rural fuel derogation, and they need it quickly. The hon. Member for North Ayrshire and Arran (Katy Clark) spoke earlier, and I have sympathy with those on Arran, too. Indeed, I saw the MSP for Arran, Kenny Gibson, on the television vociferously calling for a rural fuel derogation.
The high cost has an impact on a whole raft of other budgets. Local councils are haemorrhaging cash because they can run their vehicles only by paying higher fuel costs—again, the money goes directly to the Treasury—as are our health boards, and our police, fire, coastguard and ambulance services. They are all having to deal with budgetary cuts every time they fill up their vehicles, because of the cost of fuel. Businesses are losing too, and less money is circulating locally. Indeed, so vexed was one constituent of mine—Erica MacDonald—that she started a petition a few months ago and came to the Treasury. She is now wondering whether the EU’s rural development policy—€96 billion over a number of years—can be used. I do not think that it can, but such is the level of research being done by individual voters in rural and island Scotland, who are looking for solutions and hoping that the Treasury will listen to some of them.
Talking of solutions, we certainly listened to the Labour party earlier. We heard a repetition of what I would call the Pontius Pilate approach. The Labour party seemingly has no view on a rural fuel derogation or a fuel duty stabiliser, and no other plans or suggestions. Indeed, if those on the Labour Front Bench have a concrete plan or suggestion, I would ask them to tell us what it is. We definitely heard no apology for the years we spent in this place listening to the previous Government’s excuses for doing absolutely nothing, leaving places such as the Outer Hebrides with shockingly high fuel costs.
Stewart Hosie
My hon. Friend talks about the dearth of opinion on the Labour Front Bench. Might that be a consequence of the Labour leader saying recently that Labour found it difficult to implement a fuel duty regulator when in power, when in fact Labour voted against every single attempt to introduce one?
Mr MacNeil
Absolutely. Labour was against a fuel duty regulator, a rural fuel derogation and anything else that would have helped people in the Hebrides.
Mr Reid
What the hon. Gentleman is saying about the previous Labour Government is perfectly correct, but does he not have it within himself to congratulate the coalition Government? He knows that, time after time, I, along with my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) and other Liberal Democrats, put forward proposals in debates on Finance Bills for rural fuel derogations, and the Labour party rejected them. This Government are going to implement that. Will he not have the decency to recognise that and congratulate the Government?
Mr MacNeil
I certainly do have the decency to recognise that. I am very pleased that that announcement was made in the autumn. In fact, I think I text messaged the Chief Secretary to the Treasury to say how delighted I was. My only fear is that Liberal Members have lost the fierce urgency that they used to have in opposition, and are not really looking for a date on which we will see a rural fuel derogation. By Christmas we had heard that nothing formal had happened—that was one of the lines that came out. We want things to happen, and we genuinely need them to happen. The coalition agreement mentioned the rural fuel derogation. It did not mention the VAT rise, but hey, that was put in place quite quickly—by new year—yet we have not seen the rural fuel derogation.
The European Commission has been blamed, so I wrote to the Commission asking for the timetable, to see whether things are indeed being held back. However, the European Commission being the European Commission, it probably does not feel very accountable to democratically elected citizens in the member states of the EU. That is a matter for the European Commission. I hope that it is listening and will respond quickly, because we need action now. I need to know from the Government whether the formal stage has started. Just when will we see a rural fuel derogation? How long has it taken to get a rural fuel derogation in other countries? Those are the questions that I am being asked when I go back to the Hebrides, and I need answers from the Treasury now.
The rural fuel derogation is not at all like Christmas, because Christmas has come and gone, but where is the rural fuel derogation? I acknowledge that progress has been made, and I am pleased to see that. There are good intentions behind it, but thus far, it has been as effective only as the progress made by Labour. I hope that, in a year’s time, the situation will be very different. I hope that we will not have to debate the issue again in a year’s time, but I fear that we will. The Labour Government were famous for the ridiculous, obstinate answers that they gave us over the years—they were against giving any help at all to the islands—and my worry is that the Liberals have really lost the urgency of now. They should remember that there are elections in May, and that if there has been no action by then, the voting will hurt them.
Mr Gauke
The two particular areas we have debated today are the fuel stabiliser and the rural fuel duty rebate, which this House has debated on a number of occasions and is clearly of close interest to a number of hon. Members. The Government have made no secret of the fact that we are considering such a rebate. People in rural areas do face particular challenges on petrol and diesel, as fuel prices there tend to be more expensive because of relatively high transport costs—a number of hon. Members have made that point. A lack of alternatives means that people in rural communities have little or no choice but to use the car, which is why we have announced our intention to introduce a rural fuel duty pilot. It will deliver a duty discount of up to 5p a litre on all petrol and diesel which, as the Economic Secretary said at the start of today’s debate, would save some drivers in rural areas upwards of £500 a year.
Mr MacNeil
The hon. Gentleman knows that I really welcome the rural fuel derogation and hope it comes soon. Will he give us any idea of when that might be?
Mr Gauke
As the Economic Secretary stated, the Government are engaged in informal conversations with the European Commission and we hope to be able to bring together our representations in a formal submission to take this forward, but this matter is not as simple as the hon. Gentleman might like it to be. We are considering the exact scope of the scheme, although the inner and outer Hebrides, the Northern Isles and the Isles of Scilly will certainly be included. I say to him, and to other hon. Members such as my hon. and learned Friend the Member for Sleaford and North Hykeham and my hon. Friend the Member for South Derbyshire (Heather Wheeler), that we can go ahead only when we have got clearance from the European Union. It is important to set out proposals that will achieve that clearance and we can then obtain the unanimous support of the 27 EU member states, which is what we require. Productive discussions are ongoing and we will of course update the House whenever we have any further progress. I hope that we will be able to provide a further update at the time of the Budget. Hon. Members should note, as, to be fair, the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) did, that at least this Government are trying to make progress on this area. The hon. Member for Bristol East did not even make it clear today whether she supports our even trying to do something on this issue, and that is a remarkable position.
The fuel stabiliser proposal was raised by a number of hon. Members, and the hon. Member for Dundee East (Stewart Hosie), in particular, has taken a close interest in it for many years. There is an argument that higher oil prices will automatically lead to higher tax revenues. The Conservative manifesto said that the Office for Budget Responsibility would seek to review this policy to see what we could do in this area. We did ask the OBR to examine how the oil price affects our economy in order to determine how the Government could share the burden of high oil prices and see whether a fair fuel stabiliser could work in practice. The OBR’s assessment was that increases in tax revenue received from oil and gas production can be easily offset by things such as higher inflation, which would lead to higher benefit payments and a further drain on the Exchequer. The reality, as set out by the OBR, is that there is no sudden windfall for the Exchequer as a consequence of higher oil prices. None the less, we recognise the strains that this situation causes and we continue to examine a range of options, including the fair fuel stabiliser. It is right that we must ensure that whatever we do is not only fair, but affordable.
This Government understand the problems people are facing and are taking every action possible to help those most in need, but we also know that we have to act responsibly and ensure that we tackle the record national debt. The increases in fuel duty result from the previous Government’s proposals. Some people argue that we could abandon those proposals, but it is not clear whether that is the position of the Labour party. We need to strike a difficult balance, but our priorities are clear. We must get the economy back on its feet and we must have a private sector leading the recovery and creating new jobs. In contrast to our predecessors, we are seeking to address the genuine concerns that exist about rising fuel prices and we are determined to settle on a proposal that is fair, sustainable and fiscally responsible.
Question put (Standing Order No. 31(2)), That the original words stand part of the Question.
Banking in Scotland
Angus Brendan MacNeil Excerpts(14 years, 1 month ago)
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Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Would the hon. Gentleman care to inform hon. Members about unemployment in Norway, Iceland and Ireland relative to the United Kingdom and about the gross domestic product per capita in those countries? If he cannot provide an answer, I will.
Mr MacNeil
Unemployment in Norway and Iceland is lower than in the UK and unemployment in Ireland is higher, so on unemployment the arc of prosperity beats the UK 2-1. GDP per capita in Norway, Ireland and Iceland is higher than in the UK, so on GDP the arc of prosperity beats the UK 3-0.
Mr Davidson
That is presumably why the SNP no longer mentioned it at all. Ever since Iceland’s economy became so bad that part of the island exploded, we have heard little about the arc of prosperity from the SNP.
We went across to Ireland because, like Scotland, it was—[Interruption.]
Andrew Rosindell (in the Chair)
Order. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) will have a chance to contribute to the debate later. Perhaps Mr Davidson would like to continue.
Mr Davidson
Indeed, all that is true. However, I am in danger of becoming diverted. Far be it from me to allow that to happen. I look forward to hearing exchanges on such matters later.
Our visit to Ireland was helpful and constructive. I want to put on the record that we were pleased that all those whom we met were prepared to be perfectly open with us and that they put everything that we asked for in front of us. That made the trip more interesting, enjoyable and educational than it might otherwise have been.
It is clear that in Ireland there was a sort of crony capitalism, where everybody not only knew each other, but lent each other money. The housing prices in particular rocketed upwards to such an extent that when the crash came the central bank was not able to bail out those who found themselves in difficulty in quite the same way that we in the UK were able to. Scotland had the great advantage of being part of the Union and therefore the Bank of England was able to bail out the Bank of Scotland and the Royal Bank of Scotland.
Mr MacNeil
Did the hon. Gentleman meet many people in Ireland who wanted to return to being part of the UK or did they feel that being a low-growth area of the UK would mean not being as successful as being an independent country?
Mr Davidson
It is unrealistic to expect that many in Ireland would want to return to being part of the UK, because people there felt that they wanted independence for Ireland even if it impoverished them. Many people we met recognised that, in many ways, they were becoming more of a colony of the UK now than they had been, because high streets in Ireland were run by Tesco and WH Smith, for example.
A relatively small number of Irish businesses seemed to have a presence and they no longer had influence on the UK. People there were unhappy that they no longer had control over their own currency, because, like the SNP, they wanted to—and did—join the euro, which meant that they were unable to devalue competitively in a way that might have produced a boost for their economy. There was much weeping, wailing and gnashing of teeth, as perhaps the Irish are prone to do, about that issue.
There is no doubt that the difficulties faced by the Irish Government and people were exacerbated by Ireland’s being a stand-alone economy without control over its own currency. The Irish Government have been making huge cuts in public services—cuts in wages, pensions and services—all of which were going through when we visited. Some of those might come about now, but seeing all that was helpful and constructive.
Mr Davidson
I am sure that I will. However, the debate is not about the future economic development of Scotland; it is about the Committee’s report, which we produced some time ago. My role as Chair is to discuss what we covered at that time and ensure that it is all seen in context.
Mr MacNeil
Given that the hon. Gentleman apparently did not meet anybody who wanted to rejoin the UK, does he feel that Ireland should rejoin the UK?
Mr Davidson
It is a matter for the Irish people, not for us. In the same way, it is for Scottish and Welsh people to decide whether they wish to remain in the UK—and it would be for the people of the Falklands to decide whether they wanted to join the UK and for the people of Gibraltar to decide whether they wanted to join Spain. All these things are matters for the people involved.
Mr Davidson
It is up to them. That is my opinion. Argyll, I believe, should remain part of Scotland.
Oral Answers to Questions
Angus Brendan MacNeil Excerpts(14 years, 1 month ago)
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Mr Gauke
I understand the concern that my hon. Friend raises. The situation that we face is that there will be difficult decisions to get the deficit down—a point that Government Members appreciate. The difficulty is that looking at the issue on a household basis would mean creating a complex and large bureaucracy. We have come up with a proposal that will ensure that the poorest households are protected and will continue to receive child benefit.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I welcome the Chief Secretary to the Treasury’s weekend announcement about a rural fuel derogation, which will make the tax system infinitely fairer in the islands and is a victory for common sense. I first raised the issue a few years ago. Does the hon. Gentleman feel that time was wasted by the previous Labour Government, who sat on their hands and did nothing for the islands?
When will the fuel derogation come into being? Will the Minister acknowledge that, despite that welcome step, we in the islands will still be paying more tax per litre than those on the mainland?
Equitable Life (Payments) Bill
Angus Brendan MacNeil Excerpts(14 years, 2 months ago)
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Mr Hoban
The hon. Gentleman should really direct his anger at his own Front Benchers, who for years blocked the investigation of Equitable Life by the ombudsman, who tried to delay her report and who took six months to respond to her findings. The real culprits are on the Opposition Front Bench, not on the Government Benches.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The Minister, in his opening remarks, spoke of justice. Where does justice lie—at 10% of losses, 100% of losses or some random figure in between?
Oral Answers to Questions
Angus Brendan MacNeil Excerpts(14 years, 4 months ago)
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Danny Alexander
The measures in the Budget are set out precisely to ensure a sustainable recovery through a number of measures, particularly in the tax sphere and, following the earlier questions on regional growth, to stimulate business. Of course, it is now for the independent Office for Budget Responsibility to produce independent forecasts of growth, and it will do so at the time of future fiscal events.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The Budget VAT rise in January will affect economic growth on the islands of Scotland. Surely we need a rural fuel derogation in place before the rise. After all, the rural fuel derogation was in the coalition document, but the VAT rise was not.
Danny Alexander
The hon. Gentleman is right, of course, that the rural fuel derogation is in the coalition agreement. The Chancellor restated our commitment to investigating the matter in the Budget statement, and I can assure the hon. Gentleman that we will be coming forward with an announcement in due course.
Finance Bill
Angus Brendan MacNeil Excerpts(14 years, 4 months ago)
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Danny Alexander
I will make some progress and give way to the hon. Gentleman later.
The Bill shows how the Government will carry out Britain’s unavoidable deficit reduction plan in a way that strengthens and unites the country. The Budget and the Bill stand for three things. The first is responsibility—taking action to eliminate the structural deficit. The second is freedom—helping the businesses on which we all rely to rebuild our broken economy. The third is fairness—protecting the most vulnerable, while ensuring the contribution of all. Those principles are at the centre of the Bill before the House today and I shall address each in some detail shortly.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The right hon. Gentleman mentioned fairness and businesses, and I would like to draw his attention to rural areas. He will understand that the increase in VAT will affect fuel prices in rural areas. Would it not be right to have a rural fuel derogation pilot in place before the VAT increase takes effect?
Danny Alexander
I am very grateful for that intervention. The hon. Gentleman knows that we are investigating a rural fuel derogation of some sort—that was repeated in the Budget statement. Although I cannot make a commitment on timing, as he knows, I am personally very enthusiastic about such a measure and I will continue to work with my colleagues on it.
Danny Alexander
The hon. Lady says she was sympathetic—I attended a meeting where she expressed that sympathy—but no action by the previous Government resulted, despite the matter being pressed for a number of years. I am sure that my hon. Friend the Exchequer Secretary will look at all the issues as the question is investigated.
Danny Alexander
I hesitate to take further interventions, as we are somewhat outwith the scope of the Bill, but I will give way once more to the hon. Gentleman.
Mr MacNeil
I ask the Chief Secretary to consider this question. With rural fuel priced between £1.30 and £1.35 a litre, were a rural fuel derogation to apply in Na h-Eileanan an Iar, to where might we smuggle fuel? I would struggle to find anywhere where fuel is more expensive. That smuggling would be a problem is a ridiculous proposition. We had 13 years of nothing but sympathy from the last Government, with absolutely no action. I hope that this Chief Secretary does not make the same mistake.
Danny Alexander
I am grateful for the intervention, in both senses.
Returning to the Bill, I should say that our plan stands first and foremost for responsibility, because a failure to deal with the deficit is the greatest threat to our economy and to the well-being of our nation. A failure to act now would mean higher interest rates hitting businesses, hitting families and hitting the cost of repaying the Government’s debt. That would mean more business failures and sharper rises in unemployment, and it would risk a catastrophic loss of confidence in the economy. The Budget’s forward-looking fiscal mandate will eliminate the deficit in five years and put us on track to have the debt falling by 2015.
The Office for Budget Responsibility forecasts that the measures in our Budget will lead us to meet that challenge one year early and the bulk of the reduction will come from lower spending, rather than from higher taxes. My right hon. Friend the Chancellor announced that the spending review will conclude with an announcement on 20 October and address precisely how we will bring down spending.
Mr Byrne
It would be, but it appears to be absent from the Bill.
The economic gamble that the Chancellor has taken in the Budget is quite clear to the business community and, I think, to the House. There is also the question of who pays. The Chancellor is fond of taking the approach that we are all in this together. One writer called that the equivalent of a chorus line from “High School Musical”. However, the Finance Bill disabuses us of any notion that that claim might actually be true. It is now quite clear that the price of this Budget will be paid by people’s jobs, and that the greatest price will be paid by the poorest in this country.
Mr MacNeil
For the past five years, the poorest in my constituency were paying the highest level of tax per litre of fuel in the UK. Is the shadow Chief Secretary in any way embarrassed or ashamed that a Labour Government let that happen? Or does he now repent and support a rural fuel derogation?
Mr Byrne
I look forward to hearing the hon. Gentleman’s contribution to the debate a little later. It was not quite clear whether he was talking about marginal deduction rates or other impacts of the tax system but, like me, he will have noticed table A3 on page 69 of the Red Book, which shows that the marginal deduction rates for people on a 90% deduction rate, for example, have not gone down as a consequence of the Budget; they have gone up.
Lorely Burt
I am going to make a bit of progress. Before Labour Members leap to their feet to criticise, they should reflect on the fact that they had 13 years in power and they leave a shameful legacy. It required this coalition Government to come into office to introduce that, and we are doing so in such a short period.
Lorely Burt
I have given way to the right hon. Lady already, so I shall give way to the hon. Gentleman.
Mr MacNeil
I have listened to the hon. Lady’s arguments for accepting the VAT increase, but over the financial year the projected deficit fell by about £15 billion to £20 billion. Surely that blows apart the Liberal Democrat case for accepting a 2.5% increase in VAT.
Lorely Burt
Yes, the hon. Gentleman is right in saying that, but at the same time we have since discovered that a lot more money is not available to us for use. It is not there. Therefore, in order to balance the books it has been necessary to increase VAT.
Lorely Burt
I am not going to indulge the hon. Gentleman again, I am afraid.
We also welcome the postponement to 77 of when an individual can take an annuity, and of course we welcome the closing of loopholes and the anti-avoidance legislation; everyone should pay their share. That is something that we as a coalition Government will work hard to ensure.
We need tax to be simple and fair and to help us along the road to recovery. We need the stimulus for business, because business will be the engine that pulls us out of recession. We need fairness on income. We need to close the loopholes; they are already partially closed, although more work needs to be done. The least well-paid will at least be able to spend more of their own money. So we on these Benches support the Bill.
Stewart Hosie
I certainly agree that long-term, sustained and sustainable above-trend growth is the real answer, but that is not to minimise the problem of the deficit and the impact that it can have on market credibility and the cost of money. I am not one to say that we need deficit or debt at any cost; I am arguing for a credible deficit consolidation plan as opposed to a fixed-term plan that is inflexible and will not work.
The current situation has led to the VAT increase, and given that the poorest families may now pay more than £31 a week, I want to think about the impact on those families. Their unemployment benefits may be reduced in real terms, their tax credits cut and their housing benefit put under real pressure, particularly in areas where rented housing is expensive. That part of society will suffer most from the VAT rise. According to Shelter, nearly half of local housing allowance claimants are already making up a shortfall of almost £100 a month to meet their rent. Socially, a VAT increase for people who are that hard-pressed at the moment might be considered unforgivable.
Mr MacNeil
One of the fig leaves that the Liberal Democrats have used to accept the VAT increase has been the argument that they did not understand the nature or size of the deficit until they got into bed with the Conservatives. However, a glance at the pre-Budget report and the Budget shows that the deficit is actually £20 billion to £30 billion lower, thereby surely blowing holes in the Liberal Democrats’ argument for accepting a 2.5% VAT increase, which will hit the poorest in our society.
Stewart Hosie
That is absolutely correct. It is a pity that there is merely one Liberal left in his place to hear that argument. My hon. Friend makes a very good point that the deficit forecast now is less than that forecast in the Budget and the pre-Budget report. That certainly confirms the case that we made for a fiscal stimulus. Another criticism that comes from his intervention is not simply that Liberals do not understand the numbers but that the Labour Government left the UK as one of only two countries in the G20 without a fiscal stimulus, fully withdrawing it in 2010 before recovery was secure.
To wind gently back to VAT, I said that the increase would perhaps be socially unforgivable. It also makes little sense in economic terms. The British Retail Consortium has described it as “disappointing”, which was something of an underestimate given that it went on to state, bluntly:
“We didn’t want a VAT increase. It’ll hit jobs.”
Simon Newark of UHY Hacker Young warned that the rise could push up prices on the high street by about 2%, which could have a significant impact on inflation. He went on to warn:
“Higher inflation could trigger interest rises, risking the spectre of the double dip recession.”
Still others are warning that the rise will exacerbate cash flow problems.
Stewart Hosie
That is absolutely right, and VAT will not just hit building and the purchasing of supplies for the Commonwealth games or the Olympics, and it will not just hit the private sector and families. It will hit the public sector, which buys VAT-rated supplies and goods of all sorts. It will effectively mean spending power going out of the economy and straight to the Treasury.
Stewart Hosie
They are absolutely not a luxury. Insurance not only on cars but on homes and foreign travel, particularly for those who are slightly frail, is a vital matter. Taking £2 billion out of that sector is damaging enough, but if it is a disincentive, which stops people taking out the appropriate insurance, we could experience all sorts of difficulties in future.
Let me revert to the fuel duty derogation, and read out a quote:
“The case for a fair fuel deal for remote and rural communities is absolutely clear. People face longer journeys, much higher pump prices and few if any public transport alternatives. A lower rate of fuel duty is already available for remote and island areas in many other European countries.”
Those are not my words, but those of the Chief Secretary to the Treasury less than three months ago on 12 April. I hope that he reads today’s Hansard, remembers those words and begins to deliver.
There was an opportunity, had the Government chosen to take it, to stick to their own recently published stricture in the Spending Review Framework,
“to protect, as a far as possible, the spending that generates high economic returns”.
They could have done that by keeping tax relief for the video games industry, protecting more than 2,000 jobs and creating 1,400 new ones; saving £300 million in investment and encouraging £146 million more; protecting £282 million in revenue yield and increasing that by £133 million. However, they did not, and that is hugely disappointing for that sector and for growth in a modern industry in this country.
Mr MacNeil
My hon. Friend mentioned the rural fuel derogation. It is important that the House understands exactly why we in the islands in Scotland feel that we deserve it. We pay more tax per litre than any other part of the UK, and, therefore, for parity, equality and fairness, a rural fuel derogation might rectify the position till we approach something fair. I stress the word “approach”.
Stewart Hosie
Given that the Bill’s Committee stage is three days on the Floor of the House, it is impossible to amend it as we have previously amended finance measures to introduce fuel duty regulators or derogations, but my hon. Friend is right, particularly when he talks of fairness, which is one of the alleged underpinning principles of the coalition—I hope that members of the Treasury Bench are taking note of all the matters on which they could deliver fairness, and for which they may yet be held to account if they do not.
The Chief Secretary was unconvincing in his opening speech. The Bill is thin and the VAT increase hits the poorest—that is unforgivable. Of course, the Budget may well prove economically foolish, risking inflation, higher interest rates and recession, and making tackling the deficit and the debt more difficult rather than easier. The Chief Secretary said that what was being done is unavoidable. None of this is unavoidable. It is a political choice. The proposals are political choices, and I believe that the Government have made the wrong choices. We in the Scottish National party and Plaid Cymru will oppose Second Reading.
Mr Jones
My hon. Friend makes a very good point. Unlike the hon. Member for North East Somerset, who might be able to forgo a visit to the tailor once this year, some of the families he is talking to will not have a choice about whether to buy a new pram or other essential equipment for their baby. I have some further examples to put to the House.
Mr MacNeil
I am grateful to the hon. Gentleman for letting me into the debate. The reason I often hear from the Liberal Democrats for their support for the increase in VAT is that the figures were far worse than they expected them to be. However, the pre-Budget report said that the deficit would be £176 billion, yet when it came to the Budget proper, it was £149 billion. In the build-up to the election, the Budget deficit was greater than anticipated and the Liberals were against the VAT rise; then, when they found a decrease in the deficit, they were suddenly for the VAT rise. I am perplexed. Can the hon. Gentleman help me understand those figures?
Mr Jones
The Liberal Democrats do say one thing and do another. As I say, that will come as a great shock to the hon. Gentleman, but let us be honest, anyone who has fought Liberal Democrats in local government is used to them saying one thing and doing another locally, as well as nationally.
Andrew George
The hon. Gentleman has obviously not been listening. He is incapable of listening to anything.
We require honest and transparent information from the Treasury to help us reach a conclusion about the VAT measure’s other impacts. I hope that Treasury Ministers will revisit the issue, perhaps having undertaken further modelling and commissioned further studies on its impact on low income families, charities and businesses. I hope that they will be prepared to revise their position, if necessary during the Bill’s passage.
Several hon. Members have mentioned the rural fuel derogation and the opportunity for that to be introduced. The Chief Secretary promised to go away and make some further inquiries about that. I encourage members of the Treasury Bench to examine that carefully because the impact on rural areas will clearly be significant. The Chief Secretary made a commitment this evening to undertake further studies.
Mr MacNeil
While awaiting the big answer to why the hon. Gentleman is supporting the VAT increase, I ask him whether he agrees that a rural fuel derogation should be introduced before the VAT increase. After all, the rural fuel derogation is mentioned in the coalition Government’s programme, whereas the VAT increase is not. The Government have moved lightning quick on VAT; let us hope that they move as quickly on the rural fuel derogation. Will he support me on that at least?
Andrew George
The hon. Gentleman makes a good point. I remain agnostic about the process whereby the goal is achieved, but I wish him well with the aim and share his view, because the issue affects the very rural communities of west Cornwall and the Isles of Scilly in the same way as it affects the Scottish islands.
Mr MacNeil
I am listening to the hon. Lady talking about transparency. In the spirit of transparency, will she honestly, openly and transparently tell the House whether she regrets allowing a rural fuel derogation to the islands of Scotland? Will she be transparent and honest on that simple point about her time in office?
Ms Eagle
I have—and had—a great deal of sympathy for the issues that the hon. Gentleman had raised, which are particularly relevant in the context of the islands that he represents. When one considers extending any potential fuel duty derogation for particular areas to the mainland—that is what was asked about in this case—there are other issues that arise and there are difficulties, as the Chief Secretary will know. We certainly look forward to seeing what he might come up with in his review.
However, I want to return briefly to the OBR and what on earth has been going on there. A great deal has been made of the independent forecasts that the Office for Budget Responsibility published before and after, and which appear in the Red Book. Today, the Treasury has been saying that Sir Alan was only ever going to stay for three months. However, at the event when he was appointed, the Chancellor said:
“Whether I thank him again in a couple of years’ time is another matter”.
The Chancellor clearly felt that Sir Alan was going to stick around for years, yet he is now running off and has resigned within three months. Why has he chosen to leave so quickly, right in the middle of our consideration of the Finance Bill, when so many of the judgments in the Bill are based on his forecasts? Even today, the Chief Secretary was making much of Sir Alan’s forecasts to justify some of the Government decisions that appear in the Bill.
Oral Answers to Questions
Angus Brendan MacNeil Excerpts(14 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
My hon. Friend is absolutely right. The former Prime Minister Tony Blair gave away the UK’s budget rebate in return for absolutely nothing. We were promised at the time that it would give us leverage over CAP reform, which never arrived, and I am afraid that that is just one of the many decisions that the previous Government got wrong.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Growth throughout the UK economy has often been geographically uneven. Has the Chancellor considered what help a rural fuel derogation might bring to the highlands and, in particular, the islands of Scotland; and can I volunteer my own constituency, Na h-Eileanan an Iar, for any pilot project?
Danny Alexander
The Government are well aware of the benefits that a rural fuel derogation might bring to remote parts of the economy. We are examining that issue, which is contained in the coalition agreement, and we note the hon. Gentleman’s interests from his own constituency.