Finance Bill

Debate between Angus Brendan MacNeil and Stewart Hosie

Wednesday 2nd July 2014 Commons Chamber

[Stewart Hosie]

Indeed; I recognise all those points, and the pressures that are being applied to finite and very mobile resources, such as rigs and accommodation vessels, but I will come back to some of that later.

This measure not only penalises the drilling and accommodation vessel sector, but potentially impacts on the entire £35 billion upstream oil and gas supply chain. Derek Henderson from Deloitte UK said:

“While it doesn’t affect operators directly, many expect that the costs will be passed on to them and could discourage drilling.”

That would impact on the entire support and supply chain that is dependent on drilling activities.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

On the point about making other jurisdictions more attractive, are the Government not actually helping Scotland’s competitors by ensuring that rigs, of which there is a shortage, go to more sympathetic jurisdictions?

[Stewart Hosie]

Indeed, and Malcolm Webb from Oil and Gas UK made a near-identical point when he said:

“It is perplexing…that the Government has chosen to proceed with the bareboat measure. This can only increase costs on the”

UK continental shelf. He also said:

“we fear that this move will drive drilling rigs, already in short supply, out of the UKCS.”

That would be a ridiculous thing to do.

What makes this measure all the more peculiar is that the bareboat charter arrangements are commercial arrangements that are widely used across a range of industries, and not just in the oil and gas sector. The arrangements we are talking about are used internationally, and have formed a consistent part of the UK continental shelf operation for 40 years. So why pick now to take an extra £500 million or £600 million out of the North sea over the next five years? The Treasury’s decision in the Budget to apply this measure only to the oil and gas industry, and only now, to a few specific vessel types, is utterly illogical.

I do not want to detain the House too long, so I think that the key thing to do is to consider the points that the International Association of Drilling Contractors makes about the measure. This is not a gentle criticism of a mildly inconvenient tax; it is an excoriating critique of what the UK Government have done. The association says:

“The measure is unfair and a unilateral deviation from international best practice…with no ability for contractors to reset prices,”

it

“amounts to retrospective and double taxation”,

and in a real and practical sense, it does. It says:

“The measure will depress economic activity. The…changes affect the cost base of the drilling industry”,

with all the impact that might have. It goes on:

“The measure targets a single, specialist sector for additional rent…Specialist international companies that have relocated”

to the UK “will be particularly hit”, when they and their investment should be welcomed instead.

The association argues:

“The government has manipulated the introduction of the measure to avoid proper scrutiny.”

In a particular criticism, it goes on to say:

“It is not appropriate for legislation as complex as this to be published in initial draft form”

on the day it was due to come into effect. That is a preposterous way for the UK Government to behave. The association continues:

“The consequences of the measure have not been properly assessed by HRMC”,

and it says that there are reports that up to £2 billion could be lost from the continental shelf. It also says:

“The measure is deliberately discriminatory...all vessels bar drilling rigs and accommodation units have been exempted for reasons that are far from clear.”

To put that another way, only two sorts of vessels remain included in the scope of the measure, which appears to be the usual sort of smash-and-grab cash raid that this Government make on the North sea.

There appear to be a great many reasons why the bareboat chartering regime is wrong. There appears to be an illogicality about the way it is being introduced, as well as a complete lack of transparency and time properly to assess the long-term impact, not just on drilling rigs and accommodation vessels, but on the entire supply chain. Little concern appears to have been felt about the consequential impact on growth and jobs in the sector and in the economy in general. That is quite a scathing set of criticisms to make of this Government, although it is not unique and could apply to any number of other things that they have done.

I look forward to hearing what the Minister has to say, but unless there is a very credible explanation of the amount of tax that he believes is lost, and of how the proposals will help, rather than having the consequences that I have described, I fear that we might divide on new clause 1.

Budget Resolutions and Economic Situation

Debate between Angus Brendan MacNeil and Stewart Hosie

Wednesday 19th March 2014 Commons Chamber

[Stewart Hosie]

It is extremely convenient that, once again, we have a “North sea oil price crash” story on Budget day, some six months before the referendum. If the right hon. Gentleman keeps saying it, I am sure someone somewhere will finally believe him. I am not dreadfully convinced.

The bottom line is that—just like the right hon. Gentleman’s intervention—the Chancellor’s speech was hugely political. He did not tell us about recovery; he did not tell us that he is trying to lift the burden from hard-working families; he did not apologise for trying to rebalance the economy on the backs of the poor. This Budget speech was a political platform for the next election, and if it was supposed to be a vindication of his policies, then it failed, because the policies have failed.

The Chancellor did of course have a deal to say about tax. He is right to increase the basic rate threshold to £10,000, and then to £10,500. Raising the threshold from £6,500 to £10,000, resulting in savings this year of £700 for the average person, is sensible, but of course, that is only part of the personal tax story. This Government have pushed ahead with a tax cut for millionaires and have continued to squeeze the middle—the genuine middle class. The threshold for those paying the 40% rate of tax has come down from £37,500 to under £32,000, so for every penny saved at the bottom, they have had to pay more than a penny at 40%. I therefore welcome the fact that the 40% threshold is going to be increased, but that is not until 2014-15. It will not change the fact that the proportion of people paying the 40% tax rate has doubled over the past two decades, and there are now 2.1 million more people paying a rate of tax that was previously only for the rich.

It is not just the middle: it is the poorest in society who have been hit hardest. We know—the right hon. Member for Wokingham (Mr Redwood) told us—that the proportion of tax cuts to tax rises is 4:1. We knew from previous Budgets that the impact of the discretionary consolidation would be £155 billion. Interestingly, the Government have removed that figure from the Red Book: they have removed the year 2016-17 from the forecast, and are now telling us that the discretionary consolidation will be only £126 billion. However, that forecast goes only to 2015-16, and I am concerned that they are not making a longer forecast, so we can see the real scale of the damage they are trying to do.

We in the SNP know where the pain of this Budget and of this Government’s policy direction will be felt. It will be the 144,000 households in Scotland who are losing some £3,500 each through changes to incapacity benefit. It will be the 372,000 Scottish households who have seen tax credits reduced to the tune of £800 a year. It will be the 620,000 families hit by changes to child benefit, who have lost an average of £360 a year. It will be felt by the 55,000 people who are losing an average of £3,000 a year as disability living allowance is removed. Those are the people whom we should be thinking about and who should be helped. Instead, the Government continue to try to balance the books on the back of the poor.

I welcome the fact that the Budget forecast at least says that there will be some growth, but it is once again heavily predicated on business investment growth. In Budget after Budget, the Government have produced five-year growth forecasts. In 2010, growth was predicted to be between 8% and 10% a year, but by the time we got to 2011 it had turned negative and they had to set yet more ambitious targets for the next five years. So it went on, and we find in the Red Book that the forecast business investment growth for last year turned negative again. I am desperate to see positive business investment growth, and the jobs that come with it, but we keep seeing the same story from the Government. They keep failing.

What should the Government have done? There are any number of policies that they might have adopted. Instead of tinkering with air passenger duty, they might have cut it properly or acted sensibly to boost international connectivity. Instead of simply freezing fuel duty, they might have introduced a real fuel duty regulator to smooth out future spikes. They might have cancelled some of their austerity measures, or at least removed the cap on discretionary housing payments to help the poorest. There are so many things that they might have done.

In the North sea, the Government announced that they would implement the Wood review in full. That will save the industry some £45 million, and it is to be welcomed. However, they are keeping the offshore chartering regime that they announced last year, which will cost the industry £600 million. They keep getting it wrong every single time.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Should the Government not acknowledge that the North sea is booming, and that the drop in revenues is due to investment being tax deductible? What we are seeing is a healthy North sea for the years to come.

[Stewart Hosie]

I am sure that we all support £14 billion-worth of investment this year and £100 billion in the plans, and the drilling of 133 oil and gas wells to invest for the future. We would all be far less happy if that investment was not taking place. The problem is that all the good things that the Government could and should have done would have required them to change their policy fundamentally, away from billions more in austerity cuts and away from the policies that have stifled growth and recovery over the past few years.

I am not at all convinced that this was a Budget for recovery. It was a political Budget from an all-too-political Chancellor. I saw Tory Back Benchers waving their Order Papers not only after the Budget statement but before it was even made, and I suspect that such hubris will come back to haunt them. I hope that with a yes vote in this year’s referendum, this will be the last Tory Budget ever to affect Scotland.

Currency in Scotland after 2014

Debate between Angus Brendan MacNeil and Stewart Hosie

Wednesday 12th February 2014 Westminster Hall

[Stewart Hosie]

No. I do not have time.

The hon. Member for Edinburgh South rightly and understandably prayed in aid Dr Carney’s recent speech, which he said did not pass judgment on the relative merits of the different currency options for Scotland, but instead drew attention to the key issues. However, Dr Carney did point out that any arrangement would be negotiated and that the Bank of England would implement whatever monetary arrangements were put in place. That is to be welcomed, not just by me, but by the 71% of people in the rest of the UK who support the continued use of sterling after Scottish independence. The same proportion—71%—of Labour voters in Scotland also support the continued use of sterling after independence.

The hon. Member for Edinburgh South and the no campaign seem to fail to understand what Scotland brings to the table. Of course we recognise the constraints—I will come on to them—but we bring export revenue receipted in sterling. The impact on the sterling balance of trade would be immediate and significant were Scotland somehow—impossibly—forced not to be able to use sterling. The same applies to trade—the rest of the UK sells £60 billion into Scotland. If we were forced to use a foreign currency and transaction costs were applied, that would imply a catastrophic loss to English businesses: additional costs that the no campaign never mentioned.

Let us put the matter into context. In 2012, the rest of the UK sold into Scotland more than it did into Brazil, South Africa, Turkey, Russia, India, South Korea, China, and Japan combined, yet we hear from the no campaign that they do not want us to use sterling, even though that is impossible, which would imply massive transaction costs and the loss of jobs in the rest of the UK. I am sure that is not something they intend to do.

[Mr MacNeil]

Will my hon. Friend give way?

[Stewart Hosie]

No, I do not have time. So where would independence while keeping sterling leave us? It would not imply a foreign currency controlling our economy, because the central bank does not control the economy. It works to a single 2% inflation target, which we think is sensible.

Fairness and Inequality

Debate between Angus Brendan MacNeil and Stewart Hosie

Tuesday 11th February 2014 Commons Chamber

[Mr MacNeil]

I thought the hon. Gentleman was going to stand at the Dispatch Box to tell us what Johann Lamont is thinking about the cuts commission, but he failed to do that.

[Stewart Hosie (Dundee East) (SNP)]

There is a lot of deflection going on. The Labour party has said that nothing is off the table, which might mean £9,000 per child per year to go to university, a return to a tax on ill health with charge-free prescriptions going and all that. In his heart, does my hon. Friend not agree that this is ideological: the British Labour party thinks that we are part of a something-for-nothing society, when all we are doing is caring for those most in need?

[Mr MacNeil]

My hon. Friend puts it very well: we are caring for those in need. Our hearts should go out to those needing help, and we should not be thought of as part of a something-for-nothing society.

--- Later in debate ---

[Mr MacNeil]

Had the hon. Lady been in Parliament when Labour were in power and seen what her party did in that period, she might be less bold. We have to look at what is good for Scotland and what we can do to create opportunity and employment in Scotland, and I will not resile or shy away from that in any way, shape or form.

The contention is that money is not circulating. That is why some years ago we had a fiscal stimulus and why we have had quantitative easing. My problem with QE is that it has not been aimed at the demand recovery for which Stiglitz and Krugman would look; instead, in the opinion of many, it is propping up financial institutions. I note that, at one time, Ben Bernanke suggested that the way to return demand to Japan 20 years ago, when the country was experiencing stagflation, was to take a helicopter full of yen notes and fly above Japanese cities shovelling them out. That is certainly one way to return demand to the economy, but of course serious voices would recoil at the idea and not allow it to happen. There are some answers in economics, however, that are counter-intuitive to many of the things we naturally feel and do daily. We should not be afraid of looking at some of the other, more grounded, ideas, but I fear that a Government who have chosen the cult of austerity over the pursuit of growth are unlikely to look imaginatively at what they can do for the economy—they certainly have not done so in the past three years.

Growth in productivity has not been matched by growth in wages. The “Working for Poverty” report notes that

“Wages and economic output began to decouple in 2003, five years before the onset of the financial crisis. Real average wages have grown by 13% since 1999, whereas economic output”—

that is, productivity—

“has risen by four times this rate.”

That means again that economic growth alone will not solve Britain’s low pay crisis. The Government should set up a commission of inquiry into poverty and inequality, as we call for in the motion, to look at how we can improve the lives of citizens—people we see daily; people we perhaps knew in school, or relatives; people who live in our communities. They should not be left behind, with only 18% escaping low pay over a decade, as we heard earlier. In a further example, the report notes that

“Productivity growth and median pay began to decouple in the 1980s and median hourly earnings have failed to keep pace with the average value of output that workers produce.”

I am heartened to know that even the Prime Minister supports the living wage, saying that where companies can afford to pay the living wage, they should. A living wage is only £7.65 an hour—that is the figure mentioned in the White Paper for independence and in the “Working for Poverty” report. That is only £306 for a 40-hour week or about £16,000 per annum—not a king’s ransom by any means. We should remember that the minimum wage is £6.31 an hour, so it takes an increase of only £1.34 an hour to get to the living wage. I praise the Prime Minister for what he said, but while he apparently sees the justice and wisdom of the measure, as a politician in charge of a Government, he is doing nothing about it. We should realise that life is short, life in politics is shorter, and life in power is shortest of all, so Governments should take the opportunity when they have power to do a lot to improve the lives of the people they govern.

Some of this debate is mere dry statistics. We should look at some of the human stories in the “Working for Poverty” report—the accounts of normal, decent people across the countries who are trying to earn an honest living in a state, the UK, that does not value all its citizens fairly. Their stories should be heard and understood; they inform the debate and help to remove the dryness of the statistics.

[Stewart Hosie]

Very generously indeed, my hon. Friend has praised the Prime Minister, who at least wants to do something about the minimum wage, but is it not disappointing when the hon. Member for East Dunbartonshire (Jo Swinson) was answering questions about the living wage, she said, even though it is £7.65 in Scotland and £8.80 in London, that it was “too difficult to calculate”? Is not that a rather bizarre position for the UK Government to take, given that we already know what the figures are?

[Mr MacNeil]

My hon. Friend puts it very well indeed. I do not think any more needs to be said.

Case study 1 in the interim report from the Living Wage Commission is Paul’s story. The report tells us that

“Paul is a support worker in the care sector in the North West of England. His partner is a youth worker in the youth justice sector for the local Borough Council. They have a sixteen year old daughter and are both paid below the Living Wage.”

Paul says:

“I started work for my current employer in 2009 and have never been given a pay rise. During this time I have experienced a palpable leap in the cost of living. My wife started her employment in 2010 and she has witnessed a drop in the amount of money she is paid for her considerable and anti-social working hours.

We are both working full-time, living in local housing association rented accommodation and we are always struggling to pay our way. We have no luxuries, we have not been on holiday and we do not socialise. We work, eat and sleep. There are no extra benefits we can claim to help us. There is little we can hope to do but keep on working in the hope that we will eventually see some ‘light at the end of the tunnel’.

I have juggled our debt as best as I am able to. I have moved some debt onto zero interest credit cards which have given us an 18 month window to clear some debt without accruing the hefty interest charges which would be crippling.

We are substantially in arrears with the rental of our home. The landlord is attempting to negotiate a payment plan to help us to manage this debt. We avoid doing so to enable us to more flexibly manage our debt. One week we can pay a little off our rental debt but the next we must buy food and fuel, pay outstanding vets bills, and more besides.

We often spend days apart. This is due to my low pay and the need for me to do sleep-in duties as a carer to garner something like a liveable income. We can often only communicate through rushed text messages and leaving voicemails for each other. Our sixteen year old daughter misses us both greatly. We did not even have a day out together as a family in 2013.”

That one story crystallises in many ways the nub of today’s debate. I am grateful to the Archbishop of York for his report and for setting out people’s experiences. Perhaps the saddest line in that quotation is:

“We work, eat and sleep”.

It is shocking that the citizens of a first-world, G7 country are living in that way.

Government Members often talk about the importance of family as a building block of society. I would argue that the living wage benefits and reinforces families. To take home the same wage that an employee on the living wage would receive for a typical 37.5 hour week, minimum wage earners would have to work 52.3 hours a week in London or 45.5 hours a week outside London. In a typical Monday-to-Friday working week, that is equivalent to working 10.5 hours a day in London or 9.1 hours a day outside London. That rises to 11.5 hours for London or 10.1 hours outside London if we include an hour’s lunch break.

A worker who does a Monday-to-Friday job in London on the national minimum wage, who gets the Government’s recommended amount of sleep each night and who has an average commute therefore gets only three hours and 45 minutes to spend as they wish in each week day. The same employee would get six hours and 45 minutes of time each day if they were paid the living wage. That is an extra three hours a day or almost double the time that a minimum wage worker has to spend with their family or to do anything else that they want to do. That shows how those in low-paid jobs have little work-life balance and have to sacrifice the time that they spend with their children or on social engagement. That can lead to other problems further down the line. If ever there was an example of what an additional £1.43 an hour could bring, that is it.

When we hear people using the family as a political argument in future, it must be backed up by some economic and legislative muscle in order that people have a decent wage and a decent start in life. The most important point to make is that the people we are discussing are working—they are the working poor. They work long hours to do what they can for themselves and their families, yet they are unable to participate properly in society.

It is a damning indictment of all of us in this House that we have tolerated the emergence of such a reality in our midst over the past few decades. Although I am only 43, all of us have a responsibility for that. We have a responsibility to speak out about it. That is why we are having this debate. I hope that the Government will listen and will bring forward a commission of inquiry on inequality and poverty, because those issues blight the lives of far too many people. It should simply be stopped.

Fuel Prices

Debate between Angus Brendan MacNeil and Stewart Hosie

Tuesday 15th November 2011 Commons Chamber

[Stewart Hosie]

Indeed, they can. What that organisation said at the time was:

“Transport is…a vital component of the fishing industry and cost increases there have applied even greater pressure, felt more acutely by the more remote fishing areas of the North West and the Northern Isles.”

I was paraphrasing what it said, as we have a whole four minutes each to speak. The point is that the response to spiralling costs under Labour was a fuel duty escalator, not a fuel duty stabiliser. The Labour Government set their face against every attempt to introduce a price stabilisation mechanism and, most cynically of all, increased duty to compensate for the temporary reduction in VAT.

The coalition’s response was to introduce the “fair fuel stabiliser”. That is what they called it. However, instead of using the windfall they already had from the North sea, they engaged in a smash-and-grab raid of £2 billion extra, with an increase in the supplementary charge. Hon. Members will remember that that led EnCore Oil to suggest that no tax would be paid on undeveloped and undiscovered oil. Other organisations said that very large projects were no longer viable because of the surprise Budget move. Chevron warned that the measure had

“shaken investor confidence to the core.”

Everyone was singing from the same hymn sheet except the Chancellor, who said that he

“did not expect investment to be damaged.”—[Official Report, 3 May 2011; Vol. 527, c. 604.]

[Mr MacNeil]

Does my hon. Friend agree that the Chancellor’s reckless smash-and-grab of North sea taxation has endangered investment in Scotland?

[Stewart Hosie]

It has indeed. There were stark and powerful warnings from the sector at the time that went on for a considerable time, and forced some limited changes to the regime. In the cold light of day, this month, the Aberdeen and Grampian chamber of commerce, along with others, carried out a survey that revealed that:

“50% of operators say Chancellor’s tax hike harmed North Sea investment.”

That policy did little to help the haulier and the motorist, but it did a great deal to damage the oil and gas sector.

Of course, it is not just the oil and gas sector and the traditional users of haulage who have been damaged. This week I have been contacted by a building company—a static business, not a haulage business—in my constituency, which told me that over the past few years, fuel as a proportion of its overheads has rocketed to 20%. We are not just causing inflation for goods that are moved, we are not just putting the haulage sector under pressure, we are not just making it difficult for people even to afford to go to work: the increasing cost of fuel as a proportion of overheads is driving other sectors to the wall too. These are very difficult times indeed.

This is only a Back-Bench debate—I am delighted that we have secured it—but the strength of feeling is very clear. There is now a body of opinion saying that constant high price rises, and the spikes in the price at the pump, are damaging the entire economy. I hope that the Minister is listening carefully to what has been said, and that action will be taken quickly.

Scotland Bill

Debate between Angus Brendan MacNeil and Stewart Hosie

Monday 14th March 2011 Commons Chamber

[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.

[Mr MacNeil]

Will my hon. Friend give way?

[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.

Fuel Costs

Debate between Angus Brendan MacNeil and Stewart Hosie

Monday 7th February 2011 Commons Chamber

[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.

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[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.

[Mr MacNeil]

Will my hon. Friend give way?

[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.

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[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.

--- Later in debate ---

[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.

Finance Bill

Debate between Angus Brendan MacNeil and Stewart Hosie

Tuesday 6th July 2010 Commons Chamber

[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.

[Mr MacNeil]

Such as £26 million on health.

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[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.