Petrol and Diesel

Andrew Percy Excerpts

Wednesday 23rd May 2012 Westminster Hall

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I sincerely congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing this debate. We are all aware of the passion with which he and other Members who have spoken campaign. So many have contributed to this discussion that I will struggle to name them all, but I shall endeavour to address the breadth of the debate.

I shall start by saying, as my hon. Friend did, that even though average pump prices have fallen by about 6.5p over the past month, there is little doubt that the price of petrol and diesel remains a very difficult issue and a concern to many families and businesses throughout the country.

Since we came to office, the Government have listened to those motorists and the many others who are concerned about high pump prices. Motoring is an essential part of everyday life for many households and businesses. Fuel costs affect us all in various ways, and the Government recognise that the rising price of motoring fuel is a significant part of day-to-day spending.

I will give a little historical context by noting that in 2009 the previous Government introduced a fuel duty escalator, which was a time bomb that involved planning for seven fuel duty increases. That could have resulted in average pump prices being a whole 10p per litre higher than they are at present. The previous Government would then have introduced further above-inflation increases in 2013 and 2014. None of those planned increases were subject to either oil price or pump price movements, unlike the fair fuel stabiliser that we have introduced.

We know that high oil prices are causing real difficulties in ensuring that motoring remains affordable. It is important to remember that pump prices are affected both by world oil prices and by duty rates, as I know all Members present will understand. It is important that a responsible Government are able to consider their actions and take them in that context. Although the Government cannot control world oil prices, they can control duty rates, which is what this Government have done. We have acted by providing £4.5 billion-worth of relief on the burden for motorists between 2011 and 2013. Indeed, VAT and fuel duty last rose in January 2011.

[Andrew Percy (Brigg and Goole) (Con)]

The Minister is right to say that the Government cannot control oil prices, but they can stop the European Commission attempting to frustrate the development of the Canadian oil sands, which has the potential to offer billions of barrels of oil to the US market, which will help bring prices down.

[Miss Smith]

My hon. Friend is right to highlight the complexity of the global market and its relevance to this debate. I suspect that there is a much broader debate to be had about where we might look for energy security and breadth of supply in the future, but he is right to raise that point.

On the impact of what the Government have been able to do, duty at the pump has been frozen for 16 months and pump prices are now 10p lower thanks to this Government’s actions. To put that into pounds, as other hon. Members have endeavoured to do in their contributions, a typical Ford Focus driver will be £144 better off as a result of those actions, and a haulier will benefit by £4,400 on average.

I understand why the August duty increase is one of the main points that has been raised. I am well aware of the burden caused by the rise in the international oil price and the concern it creates for businesses and families. This is, after all, a time of real uncertainty and instability from which no country can be immune. Britain has been comparatively stable in recent weeks. Only yesterday, the International Monetary Fund said that our approach is right and that we have earned Britain credibility again in our economy. Families and businesses benefit from that earned credibility, through lower interest rates.

Calls for the August increase to be scrapped raise an important question, because we would need to consider how to replace the £1.5 billion it would cost. That money would need to come from higher taxes or lower spending elsewhere.

The Centre for Economics and Business Research report that has been cited today has a couple of weaknesses. Its analysis is not straightforward. For example, it makes no mention of the relationship between oil prices and pump prices. It does not recognise the range of factors that go into pump prices. As such, its proposed fuel duty cuts could be totally offset by increased oil prices, which means that there may not be any reallocation of spending elsewhere in the economy. It is important to place that point about this frequently cited report on the record. We really need to consider the volatility of global oil prices. Any Government action would have to be taken against that backdrop. It is not certain that cutting fuel duty would have a positive effect on families or businesses.

Instead, the Government have taken action to help in areas in which we can be sure of a positive impact: supporting businesses through cuts in corporation tax and helping families through increases in the personal allowance threshold, which means pounds back in the pocket.