Fuel Prices

Alan Reid Excerpts

Tuesday 15th November 2011 Commons Chamber

[Mr Alan Reid (Argyll and Bute) (LD)]

I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on his campaign to secure today’s debate.

I represent a sparsely populated constituency where long drives for essential business are common, so I am well aware of the impact of high fuel prices on individuals and businesses. For example, the price of fuel on some of the larger islands in my constituency, such as Mull and Islay, is typically about 15p to 20p a litre higher than in a city centre supermarket, and on the smaller islands, such as Coll and Colonsay, the price is usually about 30p a litre higher. It should be stressed that this is not because of profiteering by the local filling stations. The reasons for the higher prices are low turnover, compared with all the fixed costs that a rural filling station has to pay, and the costs of the distribution network. The costs of fuel distribution in the highlands and islands are very high, and I hope that the Office of Fair Trading will investigate them.

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

I understand exactly what the hon. Gentleman is saying about Coll and Colonsay, but he will know that a newspaper on Coll and Colonsay costs the same as in the city centre. Should the Government not move towards more parity and equality between islands such as Coll and Colonsay—or, indeed, Na h-Eileanan an Iar—and city centres?

[Mr Reid]

I agree with the hon. Gentleman, and I hope that he will give credit to the Government for what they are doing on fuel duty on islands. The high price of fuel obviously has a great impact on people’s living standards, and makes it difficult for anyone trying to run a business on an island or in a remote rural area.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

My hon. Friend is making the important point, which has come out again and again in the debate, that people in remote rural areas in constituencies such as ours have no choice but to use a car. Does he agree that, in the long run, the Government will have to look at a system of variable road user pricing that is based on the choices available and that will enable essential users to pay a lower price?

[Mr Reid]

I certainly agree with my hon. Friend.

There has always been an environmental argument for higher fuel prices, in order to persuade people to use public transport rather than a car. That argument works fine in a city with plenty of bus and train services, but it falls down completely in a rural area, and particularly in a remote rural area such as Argyll and Bute, where in places there is a bus service only on school days. That might be okay for getting schoolteachers to and from work, but it is no good for anyone who needs to be at work outside school hours. The advantage of road user pricing would be that more could be charged for driving on city roads, with a much lower price for driving on a remote rural road. The problem with fuel duty is that it is a blunt instrument, in that the same level of duty is charged in all parts of the country, irrespective of whether public transport alternatives exist or not.

[Damian Collins (Folkestone and Hythe) (Con)]

Will my hon. Friend give way?

[Mr Reid]

I am sorry; I have used both my interventions.

To go back to the point made by the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), I was delighted when the Government announced their intention to pursue a pilot scheme whereby there will be a 5p a litre fuel duty discount for those on many of the country’s islands, including all those in my constituency. That reduction will go part of the way towards removing the price differential between fuel on the islands and fuel on the mainland. I hope that the scheme will be up and running soon, and I ask the Minister to give us an update at the end of the debate on how the negotiations are going in Europe. I am sure that the pilot scheme for the islands will be successful; if it is, I would like it to be extended to remote parts of the mainland. Operating a rural filling station is clearly not a profitable business these days. On the Kintyre peninsula, two of the five filling stations that the area had at the start of the year have closed.

There was a time when it could be argued that high fuel taxation was needed to discourage people from driving and polluting the environment, but market forces have already achieved that. The environmental argument for high fuel duty is not sustainable in the present circumstances. The high price is already discouraging people from driving, and they are making only journeys that are absolutely essential. Changing people’s behaviour is possible only when public transport alternatives are available, which is simply not the case in the highlands and islands.

I was also delighted when the Government abandoned Labour’s fuel duty escalator in the Budget, introducing the fuel duty stabiliser instead and bringing down the fuel duty because the price was so high. The Government have scheduled a fuel duty increase for January, because it was hoped at the time of the Budget that prices would have decreased by then. Prices show no sign of coming down, however, so I hope that the Government will listen to everyone who has signed the motion and spoken in the debate, and not proceed with the January fuel duty increase. The price of fuel adds to the price of everything in a rural area. The high cost is holding back economic recovery, so anything that the Government can do to bring the price down would be greatly welcomed in all rural parts of the country, and particularly in the highlands and islands.

--- Later in debate ---

[Owen Smith]

I am not going to give way on that point.

What all those Back Benchers have wanted is action. The crucial difference between what they have called for today and what has been called for by Opposition Members, including my hon. Friends the Members for Ynys Môn (Albert Owen), for Livingston (Graeme Morrice), for Dumfries and Galloway (Mr Brown) and for Stoke-on-Trent South (Robert Flello), the hon. Member for Dundee East (Stewart Hosie), my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr Clarke), and my hon. Friends the Members for East Kilbride, Strathaven and Lesmahagow (Mr McCann) and for West Lancashire (Rosie Cooper) and many others, is that we want something substantive done. For example, we want what we might have seen in the motion had it pursued the line of thought that the e-petition did. We want to see something tangible. What Opposition Members have called for is straightforward. We have said, “Cut VAT by 3p on a litre of petrol, reverse the tax increase that the Chancellor put on ordinary working people in the Budget and get the economy moving.”

[Mr Reid]

Will the hon. Gentleman give way?

[Owen Smith]

I will not give way because we do not have much time. [Hon. Members: “Go on.”] I will give way once.

[Mr Reid]

Does the hon. Gentleman not accept that such a policy would require the unanimous consent of the EU Council of Ministers? How long does he think it would take to get that agreement?

[Owen Smith]

Interestingly, the Government tried to tell us that there was no prospect of our seeking a derogation in respect of VAT on petrol, but they are, in effect, seeking a derogation for their rural subsidy—or their rural special pilot. [Interruption.] We are not opposing it, but we are saying that they could go further than simply seeking a derogation for rural areas; they could cut 3p off VAT right across the country, not just on fuel, but on all things, and get the economy moving. That is what they could do. There is a reason for them to do it, and here they should have listened to the hon. Member for Romsey and Southampton North (Caroline Nokes). She gave a very interesting speech and it was interesting to hear a Conservative Member acknowledge, so many years after Conservatives have protested that it was not true, that VAT is a regressive tax. VAT hits the lowest-paid people the hardest, and VAT on fuel does exactly the same.

It is very instructive today that so many Conservative Members should have signed the motion, albeit this bowdlerised, Whip-friendly motion. It is evidence that Conservative Back Benchers, unlike those on their Front-Bench, are perhaps concerned about the living standards of ordinary people in this country. It is also evidence that they have spotted, at last, that they were sold a pig in a poke by their Chancellor at the Budget last year. What he said when he announced, with such great hubris, that he was putting fuel in the “tank” of the economy was that the Government were going to have a fair fuel stabiliser—this is the fair fuel stabiliser that he had been promising since 2008. Hon. Members may remember that this was a pledge to link the prices of unrefined petrol and refined petrol in order to smooth out volatility. Of course that is not what Conservative Back Benchers got at all. They have not got a mechanism that smoothes out volatility or that connects petrol prices to oil prices. They have not got what they all stood on as a manifesto pledge. This is yet another broken promise from this Government.