Fuel Prices

Andrew Bingham Excerpts

Tuesday 15th February 2011 Westminster Hall

[Miss McIntosh]

I will come on to that in a moment, but it would be nice to hear from the shadow Minister whether he feels any pain or anguish, or any need to apologise for where we are, particularly as many hon. Members from all parts of the House have today said that we are where we are. We need an all-party approach to get out of this, and since we know for a fact, from reading Lord Mandelson’s book, that the Labour party, had it remained in government, would have been committed to increasing VAT, we will not take lectures from Labour Members today.

Motoring organisations and some road hauliers have set out their difficulties with a fuel duty stabiliser, and perhaps the Minister in her response will tell us what stage we are at concerning the assessment reached by the Office for Budget Responsibility about how the stabiliser will work in practice. Were a stabiliser to be introduced, is she convinced that the reduction would be passed on to the motorist? If the reduction remained with the oil companies, there would be no advantage in introducing a stabiliser.

Turning to the rebate for remote rural areas, I realise the difficulties in persuading the European Union of such a necessity, but having practised the art, both as a European Community lawyer—now a European Union lawyer—and during 10 years in the European Parliament, I am more well-versed than most in how to persuade the European Union and our fellow member states, many of whose citizens live in equally remote areas. People in rural areas should be entitled to a discount on the rate of duty.

With fuel duties, the principle would obviously have distribution effects, given the greater reliance in rural areas on both private and public transport. We can have a debate and an argument about how the reduction in duty can best be administered, and I realise that a differential duty would require special dispensation, but the UK, in looking to apply a derogation for a lower rate of duty for petrol sold in one area—Scotland, for example—fails to recognise areas such as Northern Ireland, where there is a land border with an area selling fuel at a lower rate of duty. Also, remote areas that are particularly rural and do not have large centres of population, where people do not have schools closer than 13 or 15 miles and have to travel some distance to do a weekly shop, will be particularly penalised.

[Andrew Bingham (High Peak) (Con)]

My constituency is very rural and contains a huge amount of quarrying. The quarries are remote, and most of the stone is carted out by road, with hauliers paying high fuel prices. Stone is a building block for much of the economy, so does my hon. Friend agree that if there were a rural consideration, the benefits would descend to people in non-rural areas?

[Miss McIntosh]

My hon. Friend has provided an appropriate example of a business that depends heavily on road haulage to get its product to market, and I am sure that it would be a particular beneficiary if the fuel duty stabiliser or a rural rebate were introduced.

Domestic fuel is a subject that appears in my mountains of correspondence. One or two people have expressed concern about the possible operation of a cartel, particularly in the north of England—Yorkshire, the Humber and the north-east—in domestic heating oil prices. I welcome the fact that the Government have grasped that issue and are looking into it through, I understand, Ofgem, but I hope that one of the purposes of this debate is to push at what might be an open door, to press the Government to, at the very least, examine both where we are and how we got into this difficulty. My constituents have expressed their concerns in fairly strong terms. One stated:

“I like many other people in this country am fed up with having to pay over the odds in tax for what is to many people an absolute necessity rather than a luxury”.

Another wrote:

“I am the owner of a small business and am extremely concerned about increases in fuel duty, which have hit the small business sector the hardest.”

--- Later in debate ---

[Andrew Bingham (High Peak) (Con)]

Thank you, Mr Turner. I, too, congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. Much of what needs to be said has already been said, but I would like to make some quick points on rurality.

There are certain goods that can come only from rural areas. I have alluded to stone from quarries, and there is also milk from our farms. Such goods have to go into urban centres, so the people who transport them are based in rural areas. Big haulage contractors are based in High Peak because that is where the product is. The impact on small businesses based in rural constituencies has already been mentioned, and, if we are not careful, the price of fuel will drive such businesses away from rural areas into urban areas, thereby accelerating the demise of rural towns.

The Ferodo brake linings factory is in my village of Chapel-en-le-Frith. Shops in and around the village exist on the back of that factory and the people who work in it. If we drive such companies into urban areas, our small towns will suffer.

The Countryside Alliance has produced statistics showing that people who live in rural areas spend a higher percentage of their income on fuel because of the lack of public transport. Since I was elected to this place, I have been impressed by the transport in London. There are buses and the tube—there are various ways of getting about that are not available to people in rural areas. The bus I use to come here runs every six minutes, but buses in rural areas run every half hour or less, which makes getting around more difficult. Consequently, people spend more of their income on private transport. I believe that the average rural resident travels about 8,700 miles on private transport, whereas it is about 5,000 miles for an urban resident. That equates to an extra £200 in tax in a year.

[Ian Paisley]

One bus in my constituency comes once a day, and another bus—a charity bus—comes once a week.

[Andrew Bingham]

I am sure that that is right, and I am sure it is the same in other areas. That brings me to considering the solution. I know that the Chancellor is looking at the issue—he said so in the House—and I understand that he is in a very difficult position because of the financial implications. We have spoken about concessions for rural areas. My concern with that is defining what is rural and what is not. I have various small towns and villages in my constituency, such as Glossop, which shares a boundary with Greater Manchester. It may not be considered rural, but one can go a few miles up the road to a little village called Sparrowpit which is very rural. Like my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart), I worry that a line will be drawn and people will fall on the wrong side of it.

The answer is the fair fuel stabiliser. I know it is a difficult issue, and I have great sympathy with the Chancellor and the Treasury team who have to determine how a stabiliser would be introduced. Perhaps we need to hold off on the duty rise that is due while we try to get it working. Many of us here are standing up for rural areas. I do not think that people in urban areas really understand how big an issue this is to those in rural areas who fill their car up perhaps two or three times a week if they have to drive here, there and everywhere, and how much that impacts on the household budget.

I thank you for giving me an opportunity to speak, Mr Turner, even though I had not notified you earlier.

--- Later in debate ---

[Mr Hanson]

The hon. Lady might want to, but she cannot hide from the fact that her vote—and the votes of all hon. Members who have spoken today from the Government Benches—has added to the increase in the price of fuel since May last year. That is an uncomfortable fact for them, but that is what they have done. Again, I do not want to focus on the negative, because we have had some positive discussions. However, when attacked, I tend to fight back. Unfortunately, that point was made, so I have to reply on the record.

We have had a number of suggestions, all worthy of consideration. I will look at each in turn. The hon. Lady discussed the issue of the fuel duty stabiliser. The issue was raised during the election, and the hon. Members for South East Cornwall (Sheryll Murray) and for High Peak (Andrew Bingham) also touched upon it today. The fuel duty stabiliser involves some problems, so an explanation from the Minister as to where the Government are on their election pledge from last May would be worth while. The Government’s own Office for Budget Responsibility said recently that the idea of a fuel duty stabiliser is unworkable. I share that view, on behalf of the official Opposition.

In principle, the concept is simple: as oil prices go up, fuel duty will go down; and as oil prices drop, fuel duty goes up. The motorist, therefore, pays more or less the same for fuel and the Exchequer gets more or less the same in revenue. However, in reality, the suggestion is far from simple. On 14 September, the Office for Budget Responsibility published an assessment of the effect of oil price fluctuations on public finances, with the aim of informing the debate. The report found that a temporary rise in oil prices would have a negligible effect on UK public finances, while a permanent rise would create a loss. The Government would find introducing a fair fuel duty stabiliser difficult because, as the head of the OBR, Robert Chote, suggested a couple of weeks ago,

“a fair fuel stabiliser would be likely to make the public finances less stable rather than more stable”.

A 1% reduction in petrol duty would cost the Exchequer around £130 million. The fuel duty stabiliser, depending how it was operated, could cost between £3 billion and £5 billion of public expenditure. The stabiliser was a manifesto commitment, which the Conservative Government wish to carry out, but they need to explain how they will do so and how they will compensate for the loss to the public purse of such a sum. My rural constituents, as well as my urban constituents, will have to find that money from somewhere else, whether in public service cuts or extra taxation. The then Liberal Democrat spokesman, now the Secretary of State for Business, Innovation and Skills, said in opposition that he believed a fuel duty stabiliser would be “unbelievably complicated and unpredictable”, which the OBR has confirmed. We need an explanation of where we are. Is the fuel duty stabiliser still a live option? Do the Government intend to keep their manifesto commitments? What would the cost to the public purse be of the potential loss of income from the stabiliser? Since the election, all we have seen is a rise in VAT to 20%, which has increased petrol prices, not decreased them.

The hon. Members for High Peak, for South East Cornwall, for Montgomeryshire (Glyn Davies), for Carmarthen West and South Pembrokeshire (Simon Hart) and for North Antrim (Ian Paisley) suggested that we look at the idea of a rural derogation, which the Liberal Democrats proposed in their manifesto. The idea seems to have been adopted by the coalition. However, the pilot at the moment is simply for the Northern Isles and for the Isles of Scilly. We have also had representations today for the “island of Ulster”, as the hon. Member for North Antrim called it, as well as from Cornwall and mid-Wales—a very rural area, I know, as pointed out by the hon. Members for Brecon and Radnorshire (Roger Williams) and for Montgomeryshire—and from the hon. Members for High Peak, for Thirsk and Malton and for Skipton and Ripon (Julian Smith). Such areas should be included in such an issue.

How would the Government define a rural area, given the issues raised? Half of my constituency is extremely rural and half extremely urban. Throughout the Chamber, we have had discussion about where the border falls. The difficulties are real. First, why have the areas chosen for the pilot been selected? I could make a strong case for parts of Northern Ireland, where I served as a Minister, parts of mid-Wales, which I know very well, or parts of North Yorkshire.

[Andrew Bingham]

The right hon. Gentleman called for the rural derogation, which I am not against. However, that worries me, because I sort of agree with him. My constituency is rural, but includes two fairly sizeable towns, so where the lines are drawn would concern me. We could have that same problem of people shipping petrol across the lines.

[Mr Hanson]

The issues are real. Again, in response, can the Minister tell me why the pilot areas were chosen? What is the assessment of rolling out a rural derogation throughout the United Kingdom? What are the cost assessments for the pilot areas and, indeed, for the other areas bidding today? How do we change the current scheme of taxing oil when it leaves the refinery, rather than at point of sale?