Road Fuel Duties

Debate between Angus Brendan MacNeil and Kerry McCarthy

Tuesday 13th September 2011 Westminster Hall

[Kerry McCarthy (Bristol East) (Lab)]

I congratulate my hon. Friend the Member for Central Ayrshire (Mr Donohoe) on securing this debate. I am aware that the number of signatures on the e-petition that is doing the rounds calling for a debate on fuel duty is rapidly approaching 100,000. Since joining the shadow Treasury team, I have spent much of my time debating fuel duty with the Economic Secretary. It is indicative of just how strongly Members of Parliament feel about the matter, and of how much their constituents are affected by high fuel prices, that we have returned to the issue. It also suggests that the Government’s limited action so far—the 1p cut in fuel duty—has not done enough to satisfy people’s concern and its impact on their lives. For example, my hon. Friend the Member for Central Ayrshire referred to the impact on a nurse in his constituency.

The small increases in the cost of living and the small cuts add up. The cost of parking at a hospital may have doubled, and travel to work may cost an extra £100 a month. Such increases make the difference between people being able to get by on a modest income and being unable to make ends meet. Sometimes they must make the tough decision to give up work, because they simply cannot afford it. I want to allow plenty of time for the Economic Secretary to reply, so I will not elaborate further, but people are being hit across the board. Fuel duty rises and the cost of petrol are obviously a significant element in that.

Before the Budget in March, we called on the Chancellor to review the duty increase, and we welcomed his decision following the example of previous Labour Governments, who had cancelled or postponed rises in duty when circumstances suggested that would be a good idea because fuel prices were putting too harsh a burden on people. We welcomed the 1p cut in duty, but the savings lasted only a short time, and prices at the pump remained high. According to figures published by the Department of Energy and Climate Change this morning, the price of one litre of petrol has increased over the past seven days by 0.38p to 135p and diesel by 0.44p to 139.4p. That makes prices 20p and 22p respectively more expensive than in the equivalent week last year. I am sure that some hon. Members in rural constituencies will say that those average prices do not reflect the real prices in areas that are ill-served by petrol stations.

Clearly, the 1p cut has not been sufficient for motorists feeling the squeeze. That is partly because the Government added another 3p to the price of a litre of petrol by hiking up VAT in January 2011. Motorists are also facing the prospect of a 3p increase in January 2012, and a further increase in August 2012. That comes at a time when the Institute for Fiscal Studies is warning that the coalition’s tax rises and spending cuts will squeeze household budgets for the next 10 years, with families over the past year having suffered the largest fall in living standards for 30 years. Median net household income is down 3.5%, the consumer prices index stands at 4.4%, and the retail prices index stands at 5%, which is more than double the rate at which earnings are growing. The Office for National Statistics has highlighted that fuel costs are one of the most significant contributors to the CPI and are adding indirectly to the cost of our weekly food shopping, because distribution costs rise with fuel prices.

I need not remind hon. Members that fuel prices affect not only affect households, but are having a serious impact on businesses, which are already struggling in a flatlining economy. Only this month, the Freight Transport Association reported that the high cost of fuel remains the biggest cause for concern among haulage operators. A survey by the Federation of Small Businesses found that its members were most concerned about the fuel tax rise in January. It warned that small and medium-sized enterprises would be severely affected.

I shall move on to what the Government have said they will do about the problem. Before the election, great play was made of the fair fuel stabiliser. David Cameron said that he would introduce a mechanism to ensure that when oil prices went up, prices at the pump would go down and vice versa. That was widely seen to be unworkable, and has been proven by the fact that since coming to power the Government have not acted on it. The stabiliser in the form suggested by the Prime Minister and the Chancellor has not materialised. Even the Office for Budget Responsibility said that it would make fuel prices less stable rather than more stable.

The Treasury then moved to funding the 1p fuel duty cut with the windfall tax on the oil companies, which the Scottish First Minister described as cack-handed. It was introduced almost at the last minute, and the oil companies that it affected were not consulted. The reduced duty is funded by a rise in the supplementary charge on oil companies from 20% to 32%. The Government were then hit by evidence that that would lead to fewer new fields being developed, and greater reliance on foreign imports, which are, of course, more expensive. Under pressure, the Treasury announced in the summer that it would allow companies to offset some start-up costs against tax, but that only served to show the Government’s muddle on the fuel duty regime. They float various ideas, but when those ideas are subject to any scrutiny they do not stand up to cross-examination, and the Government have to make policy on the hoof.

That is partly why we tried to amend the Finance Bill to require the Chancellor to assess the impact of tax on ring-fenced profits. As I argued at the time, that seemed to be in line with the Government’s professed commitment to more consultation and greater transparency in tax policy, instead of coming up with measures without consulting industry and then having to make U-turns..

Another measure that the Chief Secretary announced and which seems to be running out of steam is the pilot scheme for the rural fuel duty rebate, which he announced last October. He was keen on that when he was in opposition, but it seems to be more complicated than the Treasury expected. The rebate would allow a discount of up to 5p a litre on petrol in the inner and outer Hebrides—

[Mr MacNeil]

There is talk in London of the scheme being complicated, but it need not be. It is happening in many places throughout Europe. The only complication seems to be the length of time it is taking to put it in place.

[Kerry McCarthy]

At the moment, it is suggested that the scheme will apply to the inner and outer Hebrides, the northern isles and the Isles of Scilly. The Minister will have to explain, but perhaps the delay is due to the fact that there is considerable pressure from other areas where fuel prices are very high. The hon. Member for Newton Abbot (Anne Marie Morris) is no longer in her place, but she made the case for her constituency in the south-west having a similar scheme.

People in the Scottish Highlands, where large distances need to be travelled and the scarcity of retail petrol stations adds to the cost of petrol, think that they, too, should be included in the scheme. Do the Government think that the scheme should be restricted only to the islands, or should it be extended? If the islands are a particular case, perhaps the Minister will clarify what that is. It is not clear whether the island populations would feel any benefit or how the discount could be delivered, and there have been warnings that such a scheme would risk putting petrol stations out of business.

Under the original idea, upfront costs would fall on retailers who might have to wait two months to be reimbursed by the Treasury. For many small retailers that is simply not viable, and if petrol stations in remote areas are forced to close, motorists will have to travel even further to fill up their tanks. I would appreciate a response from the Minister about how that could be avoided if the pilot schemes for rural islands are introduced.

Fuel Prices and the Cost of Living

Debate between Angus Brendan MacNeil and Kerry McCarthy

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.

Fuel Costs

Debate between Angus Brendan MacNeil and Kerry McCarthy

Monday 7th February 2011 Commons Chamber

[Kerry McCarthy]

Those matters were also affected by fuel prices at the time, but it is not my position to apologise for, or to express an opinion on, what my predecessors did.

The VAT rise now is the important thing. VAT went up at the beginning of the year from 17.5% to 20%. According to the Library, the VAT rise increases the cost of a litre of petrol by about 2.6p, assuming that it is passed on in full. That compares with the fuel duty increase in January of 0.76p per litre, so the VAT rise to 20% is hitting the motorist harder and people in rural areas, who rely on their cars most and have to travel longer distances, particularly hard.

[Mr MacNeil]

Is there any tinge of regret among Labour Members that for at least four years the previous Government did absolutely nothing on a rural fuel derogation?

[Kerry McCarthy]

I will deal later in my speech, if I may, with the rural fuel derogation and the problems that we see in implementing it.

The VAT rise did not have to be imposed. It flew in the face of all the warm words that Conservative politicians uttered before the election about ending the war on motorists, helping hard-hit families and keeping fuel costs down, but now it has been done and motorists are paying the price.

Let me turn to the fuel duty stabiliser, or regulator, which the Minister glossed over very quickly.

[Mr MacNeil]

If we are talking about glossing over, I feel that the hon. Lady glossed over my question. Will she take this opportunity to apologise for her Government doing nothing for four years on the rural fuel derogation?

[Kerry McCarthy]

As I said, I am coming on to the derogation, but it is not my place to express such opinions.

In principle, on paper, the fuel duty stabiliser sounds like a fairly simple, reasonable proposition—as oil prices go up, fuel duty goes down, and as oil prices drop, fuel duty goes up, so the motorist pays more or less the same for fuel and the Exchequer gets more or less the same in revenue. However, economics are not that simple.

The idea of the regulator has been floated for some time. During the debate on the 2008 Finance Bill, the Scottish National party spokesman, the hon. Member for Dundee East, suggested that a statutory instrument should implement an automatic mechanism so that as additional income from VAT receipts came in, it could be used to offset fuel duty in direct proportion. However, the regulator was based on rises in oil prices, not on rises in VAT receipts. It was assumed that one would flow from other—the hon. Gentleman reiterated that assumption today—but that is not necessarily the case, as the Office for Budget Responsibility has said.