Fuel Prices and the Cost of Living

Angus Brendan MacNeil Excerpts

Wednesday 16th March 2011 Commons Chamber

[Kerry McCarthy]

I would not expect any less of the Minister, as she certainly should be meeting the organisations. It is a shame that the Chancellor and the Chief Secretary to the Treasury were not also here today to listen to people.

The hon. Member for Brigg and Goole (Andrew Percy) talked about his election leaflets hounding his constituents about the fuel duty stabiliser. He referred to the work that Conservative central office had put into the policy, which he described as a well-thought-out policy from before the election that will be implemented shortly. I may disabuse him of that delusion a bit later in my speech.

The hon. Member for Amber Valley (Nigel Mills) talked about the impact in rural areas and the fact that people could not afford to go to work, and he urged the Chancellor not to go ahead with the fuel duty escalator. My hon. Friend the Member for Stockton North (Alex Cunningham) ventured further afield and discussed the impact of fuel poverty on people who were having to spend more than 10% of their income on heating their homes, saying that what the Government are doing across the board is likely to push more people into fuel poverty. It was a very thoughtful speech.

The hon. Member for Bristol West (Stephen Williams) talked about petrol prices in Bristol. I am sure that one of the few things on which we can agree is that Bristol desperately needs to sort out its transport issues and develop a better public transport system. It has the worst congestion of any city in the country, and we need to address that. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil)—did I pronounce that correctly?

[Mr MacNeil]

Almost.

[Kerry McCarthy]

Almost. The hon. Gentleman talked about the rural fuel derogation, but I do not think that he got an answer from the Economic Secretary. He asked when the pilot in the Outer Hebrides would happen and whether he could have more details.

The hon. Member for East Antrim (Sammy Wilson) went on a bit of a flight of fancy about the Economic Secretary engaging people in head-locks and bare-knuckle fighting, which, I am afraid, she missed. He then expressed disappointment that we had had no softening up from her—I am not sure where he was going with that. However, he also spoke evocatively about the impact of the fuel price rise on his Northern Ireland constituents.

The hon. Member for Dover (Charlie Elphicke) accused the Labour party of shameless opportunism in speaking up for constituents and trying to address the impact on hard-hit motorists. What I would describe as shameless is the Conservative party’s leading people to believe before the election that it could cut 10p off the price of petrol and then doing nothing about it.

[Mr MacNeil]

Will the hon. Lady give way on that point?

[Kerry McCarthy]

I am sorry, but I have no time to allow any more interventions.

We heard today that unemployment has now risen to more than 2.5 million. Another 27,000 people have been added to the dole queue in the past three months. Those who are in work find their income squeezed by the rising cost of living, with inflation surging over 5%, but average wages growing by just 2.3% and many in the public sector facing a cut in real terms. People are struggling to make ends meet.

This month, the Office for National Statistics added iPhone apps and online dating fees to its RPI shopping basket—I am not sure what was in its RIP shopping basket. The ONS believes that essentials such as food and fuel now make up an increasing proportion of the average family spend. Of course, we have heard today that the price of fuel is rising fast. A litre of fuel is now £1.32, which is up 7p from the beginning of the year. That is an extra £80 for the average driver.

We accept that the Government cannot control the price of oil. We understand that the turmoil in the middle east and north Africa is having an impact on global prices. However, the Government are not powerless. They have a choice. They could choose to help working families get through the tough times, or to carry on regardless down their reckless path of cuts, which are too fast and too deep, slashing support for families and putting the recovery at risk.

The Government have made the wrong choice. The Chancellor chose to raise VAT to 20%, which hits low and middle-income families hardest and has pushed up the prices of fuel, energy and food and, as we have heard, has hurt businesses, too.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

This has been a helpful debate. There is little doubt that the cost of living and the rising price of fuel are difficult issues that affect all our constituents. I thank my hon. Friends who raised issues from their constituencies, in particular my hon. Friends the Members for Worcester (Mr Walker), for Amber Valley (Nigel Mills), for Bristol West (Stephen Williams), for Devizes (Claire Perry), for Rugby (Mark Pawsey), for Brigg and Goole (Andrew Percy) and for Dover (Charlie Elphicke).

When times are hard, things are clearly very difficult, and we understand that people want us to do something. We have to address the deficit. The plans that we inherited were not credible. One plan announced by the previous Government was to increase fuel duty six times over the course of the next few years. The Chancellor will, of course, update the House next week on our plans on all tax matters. I am sure that the points that have been raised today will be fully taken into account.

I will focus on one particular Opposition proposal: the suggested cut in VAT on road fuel. In advance of a Budget, the Opposition seek to find a popular and eye-catching policy to get some headlines and broadcast time. One can imagine the enthusiasm of the shadow Chancellor when he told the Leader of the Opposition of his cunning plan. He wanted to use the money from a tax on unpopular people—our bank levy—to reduce costs for motorists. However, rather than the obvious proposal of reversing fuel duty increases, which might have been a little awkward for the Labour party, he proposed to focus on VAT on fuel, and in so doing to distract attention from the fact that Labour is dropping its opposition to other parts of the VAT increase.

[Mr MacNeil]

I am grateful to the Minister. I did try to intervene on the Opposition spokesman. I wonder whether the Minister is aware that 37 days ago, on 7 February, there was a debate in this House calling for action on fuel prices, and Labour MPs abstained.

[Mr Gauke]

I am grateful to the hon. Gentleman for raising that point.

With the new policy prepared, how could the shadow Chancellor’s plan possibly fail? An interview round was done on Sunday, a press conference was booked for Monday, and an Opposition day was planned for today—I believe by moving aside other plans. However, let us consider what happened. So quickly did the flagship policy of a cut to VAT on fuel unravel that the shadow Chief Secretary, in her 32-minute speech, completely skipped over it. She did not want to discuss it for a moment. What went wrong? The starting point, of course, is that the funds identified by the shadow Chancellor are a one-off amount of £800 million that is available this year from the bank levy. There are no funding plans for future years. Of course, the bank levy should be spent in myriad ways, according to the Labour party—I think it has committed it 10 times over.

Let us turn to how a VAT reduction on fuel duty would be achieved. As has been pointed out, the operation of VAT by EU member states has always been restricted by EU-wide rules. Of particular relevance is the fact that reduced rates may apply to certain specified items, but road fuel is not among them. Under the current rules in the relevant EU directive, we simply cannot do it.

Today’s motion states that we should seek a derogation, and the shadow Chancellor has said that France has obtained a derogation with regard to restaurants. That is correct, and it is perhaps worth describing the process required to obtain a derogation—unless, of course, Labour Members wish to leave the EU. That would liven up the debate, but I do not think that that is their position. If they wanted a derogation, there would have to be discussions with the European Commission, which would have to be persuaded to make a proposal. Each and every member state would have to agree to that proposal, and there would also have to be consultation with the European Parliament.

It is true that a new agreement was reached in 2009 on the list of excepted activities, but that agreement took nearly seven years from start to finish. There is no guarantee of success, either. Opposition Members dismiss the European situation, but they sought derogations to achieve lower rates of VAT for listed places of worship and green energy-saving materials. They were unsuccessful, and they abided by the decision. The VAT directive currently allows derogations only on the grounds of simplification or the prevention of avoidance or abuse, so the chances of success are slim. The shadow Chancellor’s position today is that we should begin a lengthy, and almost certainly unsuccessful, attempt to obtain a derogation that may result in our being able to reduce VAT on fuel in six or seven years.

That is not quite what the shadow Chancellor has been saying recently. On 27 February, on the “Politics Show”, he said in respect of additional VAT on road fuel that the Chancellor

“should say I will reverse that now.”

In The Sun on 28 February, he stated that the Chancellor should “act now”. Again on the “Politics Show”, on 13 March, he said:

“The VAT rise he could reverse immediately and I think he should.”

The same morning, on Sky News, he called on the Chancellor to

“act immediately on VAT…on Wednesday we’ll be urging Conservative and Liberal Democrat MPs to join with us in voting in parliament to urge the Chancellor, cut VAT on fuel now and give immediate relief to hauliers and motorists across the country.”

When he says “immediate relief” and that we should not wait until the Budget and that we should “act now”, what he really means is that we should start a lengthy process that just might, possibly, with a bit of luck and with the consent of 26 other member states, mean that we could take some action in about 2018. As an example of immediate action to help hard-pressed British motorists, that is somewhat lacking in effectiveness.

The cynical view is that the shadow Chancellor knew that that policy would not work, but it was enough for him to have something to say to get in the media. The cynics will point out his vast experience in the Treasury—he is, after all, a man with a past. How, they will ask, could he possibly be so incompetent? I think those cynics are being unfair to him. He could be that incompetent. After all, he has told us that he wants to cut VAT to help hauliers, but hauliers can reclaim VAT. He has talked about the cutting of VAT on fuel in the 1990s, but in fact that was domestic fuel. He has talked about asking for a VAT cut on fuel in rural areas, but now asks for a derogation on fuel duty.

If the Labour party is to have a shadow Chancellor who does not understand the tax system and who makes embarrassing mistakes, they would do a lot better with the previous one, who at least did that with a certain amount of charm. Only at the weekend, the current shadow Chancellor told The Guardian:

“My task is to rebuild Labour’s economic credibility, but that won’t happen in a week”.

That will certainly not happen this week. In a desperate attempt to have something to say on a matter of genuine concern, he has come up with a risible policy that is unfunded from next year and that cannot be implemented for years, if at all.

Once again the Labour party has demonstrated that on economic matters, it lacks credibility and competence, and I urge the House to oppose the motion.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.