Road Fuel Duties

Anne Marie Morris Excerpts

Tuesday 13th September 2011 Westminster Hall

[Mr Donohoe]

The hon. Gentleman should know, as should all Members, that I would be the last person in this place to call for a revolution and civil disobedience.

There is absolutely no doubt, however, that the high fuel prices are at the point of driving people out of jobs, which is the most serious aspect of the matter. I shall give an example, which makes me angry, of the desperate situation of a nurse in my constituency. She has had to put up with a wage freeze for the next two years, her pension contributions have gone up, she has to pay double for parking at the hospital in Glasgow where she works, and she has to find £100 extra a month to get to and from work because of the high fuel prices. That proposition cannot feasibly be sustained for too long, but she cannot use public transport because of where she stays and where the hospital is. That problem must be looked at.

Regarding what the Government take per litre, I always remember a case from some years ago of a retailer who was determined to show the breakdown of the price of petrol and diesel. He was told that that was not the form, and the petrol company said that it would no longer supply him, for some obscure reason. When one considers that of the average 135p price of a litre of fuel, 81p is taken, one starts to understand the cost to the individual buying the petrol or the diesel. A good 60% goes on dealing with Government intervention in the form of fuel duty, and there is also VAT. Indeed, 20% VAT increases the price of petrol by 2.5%, putting something like 2.5p on it. In addition, outside of Government intervention in the price, there are the oil companies, and it is time to argue for a windfall tax on their profits. I know that there has already been a tax, which a lot of colleagues are very concerned about in relation to the oil companies’ continued investment, but I believe that the Government should look at the correlation between profit and price.

I have already argued that a significant portion of the price of petrol and diesel in this country is made up of the Government take, and I argue that it is higher than in most other European countries as a consequence of the high level of tax. Is there any opportunity to make the price cheaper? I am sure that the Economic Secretary will argue that in the present climate there is no leeway—no room for manoeuvre—but I suggest that there might be, and I shall come on to that later.

The reason for this debate is obvious: the price of fuel is crippling a great number of the people whom I represent and, I am sure, a great many of those represented by other Members here this morning. The Institute for Fiscal Studies has announced that the living standards of UK families will decline by more than 10% over the next three years, and it predicts that in real terms the typical household income will fall by 3.5% in the year to April, which will be the steepest drop since 1981. We understand that there is little room for offsetting falling living standards by cutting taxes, but the matter must be looked at. The level of tax and duties on petrol and diesel is cutting off the prospects of many struggling families and small businesses, and since I secured this debate I have had dozens of e-mails from small businesses with examples of just what it is doing to them.

The situation is also destroying job prospects, in particular among young people. I have already had a summit in my constituency, attended by the Secretaries of State for Work and Pensions and for Scotland. Youth unemployment is reaching levels that I never thought possible—it is as high as 70% in many areas. That cannot be sustainable and it is not helped at all by the cost of living today, particularly in more rural areas—I see that the hon. Members for Argyll and Bute (Mr Reid) and for Na h-Eileanan an Iar (Mr MacNeil) are present.

[Anne Marie Morris (Newton Abbot) (Con)]

I am delighted that the hon. Member for Central Ayrshire (Mr Donohoe) has brought this important topic for debate. Is he aware that the current Chief Secretary to the Treasury called in 2007 for a rural fuel discount scheme, and so may have a favourable view? Like the hon. Gentleman, I am concerned, because the south-west has a very rural community. Three quarters of the land is agricultural holdings, so a rural discount would be of great benefit.

[Mr Donohoe]

We will have to wait for the Economic Secretary’s response on that point. As an Opposition Member, I am not in a position to give any assurances.

We must consider the problems with the Government’s approach. Although they have frozen fuel tax duty for the next couple of years, we must take into account the fact that the freeze will be more than offset by the rise in inflation. As petrol is always an easy revenue raiser, it is widely expected that the Government will make up their losses, leaving the consumer no better off in the long term.

I will highlight three areas of concern. The first is environmental, the second is economic and the third involves the social impact of the road fuel duty. The removal of the duty differential will affect the green economy. The UK Sustainable Biodiesel Alliance has raised concerns about the Government’s decision to remove the 20p duty differential for biodiesel produced from used cooking oil by April 2012. I ask the Economic Secretary to consider that loss more closely. It does not stack up against the Government’s views on the green economy. Many see the impact of the removal of the duty differential for biodiesel as a disastrous blow for the growth of the green economy. Just outside my constituency is the company Stagecoach, which runs buses on biodiesel. It is highly successful, and particularly popular with youngsters, but it will come to an end if the differential is not maintained. Will the Minister clarify why on earth the Government, whom we have heard are the greenest Government ever, continue to consider it?

On the economic side, we risk the demise of the independent fuel sector. Retail Motor Industry Petrol told me that MRH, the UK’s largest independent forecourt operator, has highlighted the unfair pricing practices used against it by both hypermarket chains and oil companies. That is a concern. In addition, the four big supermarket chains are struggling with their own retail this year due to the downturn, which in turn is placing greater pressure on and compounding the problems of independent retailers.

Such relentless competition has been going on for some years. It is responsible for the closure of around 400 independent forecourts, and it continues. It will lead to a sparse population of fuel retailers, obliging motorists to drive great distances to top up their tanks, which is not sustainable. More than 6,000 garages have closed since 1998, which is a problem, as anybody knows who travels off motorways. Particularly in more rural areas, as I have seen at first hand, running out of fuel because there are no petrol or diesel stations is always a danger.

--- Later in debate ---

[Mr Reid]

I am grateful to the hon. Gentleman for his intervention. He is correct that there is no profiteering at the local filling station, although the distribution network, as he has indicated, might be another issue.

The high price obviously has a great impact on people’s living standards and on anyone trying to run a business on an island or in a remote rural area. I was therefore delighted when the Government announced their intention to pursue a pilot scheme under which there will be a 5p a litre fuel duty discount on many of the country’s islands, including all the islands of the Inner Hebrides and the Clyde. The Treasury is currently consulting filling station operators on the terms of the pilot scheme. Its original consultation proposals were met with significant concern by filling station operators, because they would have caused a cash-flow problem. I was pleased when the Government responded quickly to those concerns and revised their proposals in a way that removes the cash-flow problem.

The revised consultation proposals envisage two possible schemes—a distributor-based scheme and a retailer-based scheme. Of the two, it looks like the distributor-based scheme would be easier to operate, because the distributor has the resources to carry out the administration, which the small retailer would often find more difficult. I appreciate, however, the Government’s concern that a distributor-based scheme may fall foul of EU state aid rules and might not be approved by the European Commission. I hope that a distributor-based scheme can be devised that is acceptable to the Commission. If not, we would have to proceed with a retailer-based scheme.

The cash-flow problem in the original proposals has been overcome, but filling station operators are still concerned that it is not clear how they can prove to the Treasury that they are passing on the discount to the consumer. An essential principle of the scheme is that the 5p discount is passed on to the consumer. What retailers have asked me is whether the Government can provide clarity on how they should demonstrate that they are passing on the discount. That clarity would be welcomed because, as I say, the retailers are still not clear what they would have to do to comply with the scheme—and, of course, they are all keen to participate. If the islands’ pilot scheme is successful, as I am sure it will be, I would like it to be extended to remote areas of the mainland.

[Anne Marie Morris]

I absolutely endorse what my hon. Friend says, but some of the rebates that have been given in France, Portugal and so on are not limited just to the islands. The Government’s current view is that it is only in an island situation that such relief can be made available, but that does not seem valid.

[Mr Reid]

I wholeheartedly agree with my hon. Friend. As she said, other EU countries are operating a similar scheme, so I am sure that it can be successful here.