Fuel Prices

Debate between Lord Watts and Elfyn Llwyd

Tuesday 15th November 2011 Commons Chamber

[Mr Llwyd]

It is difficult enough to find a bank that will provide the money in the first place—when it rains, the banks want their umbrellas back—but I take the hon. Gentleman’s point.

Of course, it is not just businesses that are suffering. Families have been gravely hit by the rise in fuel prices, and, as has already been pointed out, fuel duty has a disproportionate impact on those who are least able to pay it.

[Mr Watts]

Does the right hon. Gentleman agree that the difference between this and earlier fuel price rises is that the Government’s present policy is to impose a pay freeze, while also allowing inflation to run at 5%? Families are being hit by the treble whammy of higher prices, inflation, and the increased price of petrol and other fuels.

[Mr Llwyd]

That is true. As we heard earlier from the hon. Member for Ynys Môn (Albert Owen) and others, families are being squeezed from all directions. According to figures issued yesterday by the Office for National Statistics, the poorest 20% of households pay proportionally twice as much in duty as the better off.

In rural areas such as my constituency, the cost of running a car is as important to people as their food budgets, because they cannot do without a motor vehicle. We have proposed the introduction of a fair fuel duty regulator that would prevent unexpected spikes affecting people at the pump through increased VAT, which is then pocketed by the Treasury. We suggested that an estimate be made of the fuel price over the coming six months, showing the amount of revenue that the Government would expect to receive, and that a cap be imposed if the price reaches an upper limit and VAT and fuel duty be frozen until the end of that period. The Government would, of course, receive their predicted amount, rather than a windfall from consumers who are already squeezed by the price hikes and unable to spend their income elsewhere.

Unfortunately, the then Labour Government in London stubbornly ignored the problems of rising fuel prices, and the motions in 2005 and 2008 addressing the issue were defeated. The Conservatives abstained in the vote on the 2008 Finance Bill, but decided only a few weeks later—in July 2008—that they would support a fuel duty stabiliser, a move that we welcomed at the time, believing that if they came to office they would introduce a mechanism similar to that we had been advocating. Sadly, when the matter was put to the vote in February this year, the voting pattern was reversed: the Conservatives and Liberal Democrats voted down our motion, while the Labour party abstained. This ever-changing position on a fuel duty stabiliser shows the political expediency of many politicians.

In March 2011 the UK Government cut fuel tax by 1p per litre and delayed some future rises, but the VAT increases have had a significant impact on prices. We voted against that move in summer 2010 and recommended a cut in June this year. The stabiliser model that we suggested is not the one that has been introduced by the UK Government, and it is clear that the problem has not yet been solved. Two further duty rises are scheduled for 2012, which could have dire consequences for business and motorists alike, especially given the ongoing economic difficulties, which are not likely to be solved in the near future.

We therefore need an effective and fair fuel duty stabiliser, and we must also look at pricing in rural areas. We must address the amount of VAT being levied, too. Most importantly however—and moving away from the impact of future fuel duty price rises—we also need to invest in renewable energy alternatives, to reduce our reliance on oil and other fossil fuels.

I heard the arguments about so-called Chelsea tractors. Where I live such vehicles are an absolute necessity—although they are often more downmarket than most Chelsea tractors. When I drive around the country, I have to do so because I cannot take public transport. In London and other conurbations, including Cardiff and Swansea, there is a choice. We need to make that choice viable. We urgently need to address this issue.