Fuel Prices

Esther McVey Excerpts

Tuesday 15th November 2011 Commons Chamber

[Caroline Nokes]

I am not convinced that that would be legal.

This morning I met representatives of the Freight Transport Association. They told me that high fuel prices have had a crippling effect on the logistics industry, whose business viability is determined by the price of fuel. Even the smallest rise makes a massive difference to them. A 5p increase in fuel duty adds another £2,350 to the annual price of running an articulated lorry, and the 3p increase that is planned for January would mean that a fleet of 50 vehicles would have to recover £37,000 more per year.

[Esther McVey (Wirral West) (Con)]

Will my hon. Friend give way?

[Caroline Nokes]

I am sorry, but I do not think I have time to do so.

Profit margins for hauliers are incredibly tight, which makes haulage a very vulnerable business. In particular, fuel companies are not willing to extend credit terms, with the result that some payments are shrinking to as little as three days’ worth. As haulage firms are often not paid for work for up to 60 days, this is very much a hand-to-mouth industry, and companies can afford to think only as far as January. That hinders growth, investment and further recruitment.

There are about 100 Freight Transport Association members in my constituency, which is, of course, close to a deep-sea port. Fuel duty is lower on the continent, and £1,000-worth of diesel purchased on the continent can give over 200 extra miles to the driver. That has led to European businesses becoming more competitive than their UK counterparts, further heightening the pressure on domestic hauliers.

I acknowledge that we are facing a very difficult economic situation, and that we need to take robust steps to tackle the deficit, and I also know that the planned rises are less than the previous Government had intended. It is a relief to constituents that the Government delayed the scheduled tax rises and have introduced a fuel stabiliser but, like others supporting this motion, I want us to have a stabilisation mechanism under which duty rises and falls in response to fluctuations in the underlying price of oil.

As I am a member of the Environmental Audit Committee, it would be wrong of me not to mention the impact motorists and hauliers have on our nation’s carbon footprint, but fuel taxation is a blunt instrument and the reality is that people in rural areas are having to bear the additional cost as they often have to make the same essential journeys as before.

There are alternatives to petrol and diesel that are more environmentally friendly. One of them is biodiesel, produced from used cooking oil. Over the last year, 99 million litres of used cooking oil was collected from restaurants, food manufacturers and caterers. It is an entirely sustainable fuel derived from a waste product and devoid of some of the negative impacts traditionally associated with biofuels. Therefore, if taxation on fuel is partly about encouraging behavioural change, rather than just being about revenue raising, the Government should encourage the use of this fuel, rather than see it as another target for increasing duty. The removal of the 20p per litre duty differential on this type of fuel, which is an excellent source of green energy, sends entirely the wrong message.

--- Later in debate ---

[Fiona Bruce]

I entirely agree. Small businesses are being forced into an impossible predicament. Do they transfer the increased costs to their customers, do they lose their customers, or do they sacrifice the making of any profit just to keep going, which is not sustainable in the long term?

[Esther McVey]

We are talking about small businesses, which I too represent here today. In the Wirral there is the double whammy of not only increasing fuel prices but increasing toll prices. Marginal profit is completely wiped away when both of those are taken into account.

[Fiona Bruce]

My hon. Friend makes a very good point.

Let me give the House some specific examples of small businesses in my constituency that are suffering in that way. Smallwood Storage Ltd is a transport and storage business in Sandbach employing nine people. This week it told me:

“We need a level playing field, the price of fuel has become too high as a percentage of our overheads and is out of proportion with the rates we charge. As a small business, we do not have the power of larger companies and are being squeezed from all sides.”

Another local company, B Lakin Transport, a haulage businesses in Somerford employing 10 people, said:

“Increased fuel costs have knock-on effects on everything…as the price continues to creep up, customers will go elsewhere and even look to foreign drivers who can use cheaper fuel from the continent; avoiding the extortionate prices in Britain.”

It continued:

“A driver from Luxembourg can fill up their petrol tank in Luxembourg at a fraction of the cost here. In October 2011, 1000 litres of unleaded fuel would cost £1130 in Luxembourg compared to £1350 in the United Kingdom—that’s a saving of £220 each time the tank is filled.”

Let us remember that haulage competitors from Luxembourg can fill their tanks there, drive to the UK and then return to Luxembourg without having to fill up here at all. B Lakin Transport tells me:

“Combine this with the exemption from road tax for foreign drivers, and we are clearly at a significant disadvantage to these foreign drivers from the outset.”