Fuel Duty (Northern Ireland)

Baroness Ritchie of Downpatrick Excerpts

Wednesday 22nd February 2012 Westminster Hall

[Ms Margaret Ritchie (South Down) (SDLP)]

I am pleased to have secured this important debate and I look forward to contributing under your chairmanship, Mrs Main. I am also pleased that the Minister is present, and I look forward to her response.

In the run-up to the Budget, it is more important than ever to bring into sharp focus the record high price of vehicle fuel, which has now reached a critical level. The increased cost of fuel, together with the correspondingly steep rise in inflation in the past year, has put individuals, families and businesses under increasing pressure. There is clearly an over-reliance on importing fossil fuels. Until that is cut, we will always be tethered to external forces. I note with great interest that the incoming Secretary of State for Energy and Climate Change placed an emphasis on energy production that is clean and green. I welcome him to the role, especially if he follows through with that commitment. My own party is committed to a green new deal in Northern Ireland providing jobs, investment and energy security. However, I recognise that that is a long-term goal and we must tackle directly the problems facing consumers and businesses now.

[Ian Paisley (North Antrim) (DUP)]

I thank the hon. Lady for giving way and say that that is the one green deal that my party would support alongside her party. [Laughter.] My hon. Friend the Member for Strangford (Jim Shannon) says, “The only green deal”, but it is a worthwhile point.

The hon. Lady will be aware that since we became Members of Parliament two years ago, the one issue we have debated most is fuel duty and the implications of its constantly rising cost. I am sure that, like me, she understands that the little piece of water between the mainland and Northern Ireland—those 17 miles—is the most expensive stretch of water in these islands, as it inflates prices of fuel disproportionately. For our rural constituencies, the smack is double, because rural areas suffer more. The luxury of car transport is a necessity to get kids to school, and people to work and into employment.

[Mrs Anne Main (in the Chair)]

Order. Will hon. Members please ensure that interventions are brief?

[Ms Ritchie]

Thank you, Mrs Main. I thank the hon. Member for North Antrim (Ian Paisley) for his long intervention. I could not agree more—rural communities, particularly in Northern Ireland, are more deeply affected because they rely totally on car transportation. There has been insufficient investment in public means of transportation—a matter for the Northern Ireland Executive—and no doubt the Minister will take care to pass that on. We will no doubt pass that point on as individual Members of Parliament from Northern Ireland.

I will highlight specifically the problems faced by businesses and consumers in Northern Ireland, but those problems do not exist in a vacuum. We must consider the scale of the problem confronting consumers across these islands. The Automobile Association’s latest data, from industry price trackers Experian Catalist, showed that the latest average pump prices for petrol are 134p, compared with 128p a year ago, and 111p in mid-January 2010. That is within sight of the record prices witnessed last May. Indeed, the average price of diesel has just hit an all-time high at an average price of 143p. The AA reported that in Northern Ireland the price of diesel is the highest of any region in the European Union.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Lady share my concerns? The fuel that comes in through the ports of Belfast and Londonderry, and is then dispersed across the whole of Northern Ireland, is the same as the fuel in Great Britain, so why is it so much dearer in Northern Ireland? It is an unfair penalty towards those in the rural community.

[Ms Ritchie]

I thank the hon. Gentleman for his intervention. I agree that it is the same fuel type, which is imported directly from the middle east and wherever it is refined before it reaches the ports of Belfast and Derry. I also agree that rural communities are more deeply affected as a result of fuel duty increases. We find little reassurance in the current global situation. Just this week, Iran suspended the sale of crude oil to the UK, and the strait of Hormuz, through which 35% of all traded oil travels, is in a state of great uncertainty. It is not my intention to turn this into a debate on Iran and the middle east, but the point remains that while we rely so heavily on imported fossil fuels we will be somewhat captive to external events. Set against that, the Treasury is not doing enough to ameliorate the consequences of these events for consumers and businesses alike.

Consumers and business are caught in a pincer between the volatile price of a critical commodity and an inflexible Treasury duty regime. With the current instability in Iran, combined with the suspension of the refinery at Coryton, we would be naive to think that there will be no more inflationary pressures on the price of petrol. While the Minister has little control over an uncertain world, I would like to know what plans she has to protect people from the worst effects of those circumstances. Put more bluntly, in the short-term the Chancellor must extend the freeze on fuel duty hikes that was announced in the autumn statement. The measures announced in the autumn statement—the deferral of the 3p increase in duty and the cancellation of the escalator—were welcome short-term measures, but they will do little to mitigate the increased long-term rise in fuel prices. According to Consumer Focus back in March 2011, the 1p reduction in fuel duty was wiped out within days by rising oil prices. There is not the feeling that the Treasury is shouldering its share of the rise in the same way that motorists and businesses are.

[James Wharton (Stockton South) (Con)]

I congratulate the hon. Lady on securing this important debate. I represent a constituency in the north-east of England, which in many ways faces similar economic challenges to Northern Ireland. One issue—

--- Later in debate ---

[James Wharton]

Absolutely. As the relative income is lower compared with some English regions, as it is in Northern Ireland, the effect of fuel prices is felt more acutely. Will the hon. Lady clarify whether she is looking for Government measures that are specific to Northern Ireland, or a nationally applicable measure that would benefit everybody in the UK?

[Ms Ritchie]

Naturally, I will be looking for measures that are specific to Northern Ireland because I represent a constituency in Northern Ireland. I understand the difficulties of other regions. As Mrs Main has directed, this debate is specific to Northern Ireland. If the hon. Gentleman will let me progress a little, I will explain where I am coming from.

While we rely on imported oil, fuel prices will always be vulnerable to exogenous pressures and external shocks, but the Treasury has levers at its disposal with which it could mitigate the worst of those effects for consumers. The 3p increase in fuel duty is still approaching in August and the Chancellor’s remedy would seem to be palliative rather than curative. It is a market in which price rises are passed on with alarming rapidity to the consumer, while decreases are notable mainly by their absence. It is like a seesaw with a very heavy weight at one end—a lot of jumping up and down at the other end seems to make very little difference.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

Is the hon. Lady suggesting that it would be helpful if VAT rates were set by the Northern Ireland Assembly? Of course, the reaction to that would be ensuring that the block grant also suffered.

[Ms Ritchie]

The hon. Gentleman brings me into an interesting debate about the devolution of tax-varying powers to Northern Ireland, which my party supports. He raises the other important issue of the block. No doubt, as with corporation tax, that matter will be decided by the Office for Budget Responsibility. Naturally, we in Northern Ireland would say, collectively across parties, that we are a special region within the UK, notwithstanding our political or identity differences. We are coming out of a legacy of conflict and that needs to be addressed for the people who live there.

[Stephen Pound (Ealing North) (Lab)]

Surely, the point is that Northern Ireland is the only part of the United Kingdom with a contiguous land border with another European country. Just as in Europe, there are variable tax rates on borders—between Luxembourg and Belgium, for example—so surely there is a case for recognising that the problem is not solely part of the rural differential, although that is significant. It is a cross-border issue. We must look to that as well. Surely, Her Majesty’s Government should be working in that direction.

[Ms Ritchie]

I thank my hon. Friend for his intervention. I wish to progress to the issue he mentioned, because we share a land border with the south of Ireland. There are differential tax rates and we in the north of Ireland need to be given a certain degree of comfort.

With specific reference to Northern Ireland, having brought attention to the general problem besetting the market, I now turn to our own constituencies and Northern Ireland in particular, where the situation is even more severe. I have already highlighted the general point in relation to Britain, but I emphasise that from January to December last year petrol and diesel prices in Northern Ireland were the most expensive, and in January this year the price of diesel was the most expensive in the European Union. The AA has recently demonstrated that Northern Ireland has higher fuel prices than any other region and that on average we pay 134.6p at the pump, while the average price in the UK is 133.5p.

Prices continue to rise in Northern Ireland. In December 2011, it cost £66 to fill a standard 50-litre engine—£70 for diesel—and within a year this has gone up to £70, a 6% increase. A family in my constituency that owned a Ford Galaxy car with a 70-litre engine recently told me they are faced with a £100 bill every time they refill their car. Such families will be faced with paying hundreds of pounds more than they used to every year, an amount that I guarantee the Minister is not insignificant for the vast proportion of people, at a time when they are already suffering, with welfare reform proposals coming down the line and with the cost of motor car insurance much higher in Northern Ireland, particularly in rural areas, compared with comparable regions in Britain.

The average family sends £680 a year to the Treasury in London just to cover fuel duty. Many families will be affected by the public sector pay freeze enacted by the very same Treasury. The high cost of fuel is particularly problematic for the poorest in society, for whom such an amount represents a significant proportion of income and for whom the use of a car is most important to remain economically active.

There is a discrepancy not just between regions but within them, with rural areas in Northern Ireland, including my constituency, particularly prone to high prices. Indeed, this problem is exacerbated by large retailers operating across many sites, charging different premiums by location, a practice that drives up prices in certain areas, particularly in rural locations, where the dependence on fuel is often the greatest.

The problem in rural areas can be compounded by the absence of large supermarkets to drive down the prices. For example, the AA cited the lack of Asda forecourts in Northern Ireland as a key contributory factor, meaning that price competition is not as keen as in the UK. I urge the Minister to review how location-specific pricing and the absence of large supermarkets distort the market and create an unfair playing field.

We cannot separate this problem from our investment in public transport services. It may interest the Minister to know that, historically, Northern Ireland has received the lowest spend per capita on transport infrastructure, leaving the car as king and often the only viable choice. A perfect example of this is the atrocious management of the rail link between our two biggest cities, Belfast and Derry, which has been compounded by the legacy of blinding ignorance to organising the network on an all-Ireland/island basis.

Simply put, people have no option but to get in their car. Those who are priced out of the market by high fuel prices are often left economically isolated and socially disfranchised. Indeed, there needs to be joined-up thinking on a north-south basis regarding the fuel duty regime to avoid striking disparities, particularly around the border, as my hon. Friend the Member for Ealing North (Stephen Pound) mentioned. This problem distorts the local market for fuel and leaves local retailers and consumers at a marked disadvantage.

These problems are faced not only by our people but by our businesses. We hear the Secretary of State for Northern Ireland and Treasury Ministers talk about rebalancing and growing the Northern Ireland economy. This seems to be rhetoric in search of a policy at the minute. Does the Minister not agree that one of the main things holding back business growth in Northern Ireland is the punitive price of petrol? Action here would be the ideal way for the Treasury to demonstrate its commitment to growing the Northern Ireland economy.

The Minister does not need to tell me the problems faced by small and medium-sized businesses in the current climate. Does she not agree that a cut in fuel duty would act as an immediate stimulus to the economy in Northern Ireland?

I do not want to create the impression, by focusing on these immediate measures, that I am ignoring the big picture. As a society, we must wean ourselves off dependence on oil. Without doing so we will have the same debate in the House year after year. Doing this will take foresight rather than expediency, and ambition rather than an “as you were” mentality, but until we reach that point, the Government must do more to help those in need; they must shoulder a fair share of the burden and not simply pass on price rises to consumers and local businesses. The Government must commit to their pledge to consult on a fuel duty stabiliser and cancel the planned duty increases scheduled for August.

In Northern Ireland this problem is particularly striking. We must address the basic problem, which is that our people pay more at the pump than in any region in the UK and, indeed, in the EU. There are clearly issues surrounding the operation of large retailers, which bring price competition, but not evenly across the board. As other hon. Members have clearly articulated, rural areas are often most vulnerable and often people and businesses in rural areas are most dependent on their cars. If the Treasury is serious about growing our local economy, would this not be an obvious place to start? I acknowledge that the Northern Ireland Executive at Stormont also have a major role to play.

These immediate measures must be buttressed by a sustainable approach to our energy future and transport infrastructure. My party and I are committed to proper investment in new, green energy technologies in Northern Ireland. I look forward to the Minister’s response.

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

I congratulate the hon. Member for South Down (Ms Ritchie) on securing the debate and on presenting her case so eloquently. The debate is clearly well attended, with members of the Select Committee on Northern Ireland Affairs present, which puts me in mind of an extensive session that we had in the past few weeks discussing fuel fraud in Northern Ireland. I wonder whether that serious economic issue in Northern Ireland, which we all recognise, will also occupy the hon. Lady, if she has any spare time.

The first issue raised by today’s debate is what the Government have done to assist motorists and businesses in a time of high oil prices. Secondly, I will go on to what we intend to do, before returning, as requested by the hon. Lady, to some details about the fair fuel stabiliser. Before dealing with those two areas, I acknowledge what she said about the difficulties of living, working and running businesses in a rural economy, in particular given the absence of other large businesses whose decisions might be able to bring about cheaper fuel points of purchase. I live in Norwich and am conscious that I can access cheap fuel partly because of the availability of a number of large supermarkets competing with each other on price. She might not be in that position.

I note also what the hon. Lady says about public transport, although I regret that I am not a Transport Minister and cannot assist her directly today, and that she might be floating the idea of co-operation on tax matters between north and south on the whole island of Ireland. I do not know whether she is suggesting that and I hear what she is saying, but that is not something that we think that the British Treasury should necessarily do, and I am not entirely sure that the Republic would wish to do so either.

[Ms Ritchie]

I was referring to a discussion between the British and Irish Governments about harmonisation on fuel duty and about the problems encountered by people on both sides of the border, living in close proximity and able to travel with great speed from north to south, and vice versa. At the minute, prices in the south are lower than they are in the north. What amelioration can be brought to the people?

[Miss Smith]

I understand that point. The topic could be on a long list of what the two Governments discuss, and I note positive aspects of those discussions in the realm of transport, such as acknowledgement of the importance of the land border in setting air passenger duty rates, of which the hon. Lady must be aware. We also acknowledge the significance of the land border to fuel fraud—returning to that important subject—but there is a point to stop short of in harmonising tax rates.

I shall plough on swiftly with some helpful points. First, there is absolutely no doubt that the cost of fuel remains difficult for families and businesses up and down the country, as demonstrated in the debate. I am also sure that many of the hon. Lady’s constituents joined the 100,000-signature petition delivered to the Government last autumn and to which we responded in the House. Our response—indeed, I personally responded —recognised that the price of petrol, which is different from the rate of duty, is extraordinarily high in many people’s eyes. The price is the result of a combination of the duty and various global factors, which she has already mentioned, so it is not fully in the control of the Government to say, “The total cost of your litre of fuel shall be this.” What a responsible Government must do, however, is listen, consider and respond.

The Government have eased the burden on motorists by £2.5 billion up to 2012-13. We started by cutting fuel duty by a penny per litre from 6 pm on Budget day. We cancelled the previous Government’s fuel duty escalator and introduced the fair fuel stabiliser, which I shall come on to shortly. Our response also includes the deferment of last month’s duty increase to August and the cancellation of the original increase planned for August, ensuring genuine help for motorists through only one inflation increase this year. The fuel duty changes support motorists throughout the country, including Northern Ireland—I do not see a distinction—because any motorist can be approximately 10p per litre better off as a result of our Government’s actions. The hon. Lady asked me to acknowledge businesses. An average haulier will be better off by £4,400 because of our fuel duty and vehicle excise duty actions, which I am sure she will welcome in her part of the world, as everyone else does.