Fuel Prices and the Cost of Living

Graham Stuart Excerpts

Wednesday 16th March 2011 Commons Chamber

[Mr Graham Stuart (Beverley and Holderness) (Con)]

The hon. Gentleman is making a powerful speech about the impact of high fuel prices on his constituents and mine. Like him, I should like to see action from the Government, but will he tell us what he would do to secure the reduction in the deficit to which all the tax rises are contributing? I understand that, because of the legacy of the last Government, the present Government’s net debt will rise in every year of the current Parliament—that, in the final year of this Parliament, we shall still be borrowing more money because of the deficit left to us by the last Government. We should love to be given some idea of how, in the real world, we could both make the savings and deliver the benefit.

[Ian Murray]

I am delighted that the hon. Gentleman has managed to ingrain himself with the propaganda being put out by the Conservative and Liberal Democrat parties about the deficit. He has given me a wonderful opportunity to go back to the start of that list so that he can take it all in.

There is no doubt that the Government’s cuts in public services are going too far, too fast and too deep. Everyone knows that the deficit must be reduced, but reducing it over time would protect my constituents from the ideological cuts that the Government are introducing under the veil of the deficit.

Let me return to what is happening to that squeezed middle manager at HMRC. He faces increased national insurance contributions and an increase in VAT to 20%. His pension will be cut because it will be linked to CPI instead of RPI. He faces tuition fees for his two children. He has lost his child benefit because he is a higher-rate taxpayer, and record commodity prices are pushing up food prices. He faces a high inflation rate, partly owing to the increase in VAT to 20%. His salary has been frozen. He has job insecurity. He faces increased energy prices, increased borrowing costs and lower interest on his savings, all because of this Government. Moreover—this brings us back to the motion—the price of fuel means that the cost of filling up the family car has gone through the roof. The Chancellor of the Exchequer is taking an extra £59 million from the Scottish people because of the increase in VAT, which is directly related to the cost of the fuel that they put in their cars.

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[Stephen Williams (Bristol West) (LD)]

First, I want to strike a note of empathy with people both in my constituency and around the country who are struggling with the spike in prices that we have all witnessed in recent months—and, indeed, the last couple of years. This morning, I asked those in my office to check the petrol prices at the garage nearest to my home in St Andrews in Bristol: the Texaco garage on Gloucester road. For the first time, prices in Bristol have risen above 140p. One of the most popular places to fill up in the city is Tesco in Eastville; my constituency neighbour, the hon. Member for Bristol East (Kerry McCarthy), will be familiar with it. Prices there are now 136.9p. Everywhere in the city of Bristol, prices are now above 130p, yet only a couple of years ago I remember being surprised when prices went through the £1 barrier.

In cities, there is competition: there is competition on the forecourts, and there are also alternatives on public transport. Many rural constituencies, such as those in the south-west, mid-Wales or, indeed, Scotland, cannot benefit from that price competition, however. My hon. Friend the Member for Argyll and Bute (Mr Reid) was present for the earlier part of the debate, but has had to leave to attend a Scottish Affairs Committee meeting. He told me that on the island of Colonsay in his constituency, the price of diesel is 163.3p, a full 23p higher than the price in my constituency.

We face a fourfold political challenge. We have to decide how to respond to the pressure on household budgets, how to make that response against a background of having to maintain the taxes and duties necessary to tackle the appalling fiscal legacy left us by the last Government, and how to continue to incentivise a switch to a lower-emissions and lower-carbon economy. Finally, we must consider the background of international factors, such as movements in the oil price and in exchange rates, which are effectively beyond our control. We have to respond to those factors and political challenges responsibly, not in the blatantly opportunist way set out in this motion.

[Mr Graham Stuart]

My constituents, like those in many rural areas, are not just suffering from the price of fuel at the pump. As they do not have gas at home but oil-fired central heating, the price of which has increased too, there is a double whammy of cost. There is therefore a strong moral case for making sure that the Government find ways to help the most vulnerable people in rural areas, despite the appalling legacy left, as my hon. Friend rightly says, by the Labour party.

[Stephen Williams]

My hon. Friend makes a powerful point about the price of heating oil, which many households in rural communities have no choice but to use.

The first challenge is how to respond to the pressures on household budgets that I was describing. The coalition Government have said that their priority is to ensure that as we make difficult decisions, the poorest and most vulnerable households are protected. We have already made progress on reducing income tax for the lowest-paid, and I look forward to further progress being made in the Budget. We have a triple lock in place for pensioner households and we are going to introduce work incentives in order to tackle worklessness, which is the major cause of poverty in our country.

However, we also have to tackle the deficit. We have been waiting 10 months for a specific proposal from the Labour Opposition on tax, and this motion is the first detailed one that we have received. The critique that we have heard repeatedly from them is that they want fewer cuts in public expenditure and more emphasis on raising tax, yet their first detailed proposal is for a reduction in tax. In effect, this is another uncosted spending pledge. The hon. Member for Wallasey (Ms Eagle), who led for the Opposition, rightly said that the increase in VAT represents about 3p on the pump price that we all have to pay. We know that each penny of that pump price raises about £500 million for the Exchequer, so the motion is proposing a £1.5 billion spending pledge. However, the Opposition cannot tell us, other than in an allusion in the motion to the banking levy, how on earth they are going to find that £1.5 billion. As has been said, they are in effect proposing a new VAT rate of 17.5%, but they know that under international law, they cannot do that.

This duty as a whole raises about £30 billion as a contribution to reducing the deficit, and it makes up about 62% of the pump price. That is a considerably lower proportion than a decade ago, when the share of the pump price represented by taxes was in excess of 80%. I well remember, when I was on the Opposition Benches and the Labour party was in government, that the person who is now leading the Labour party had much promise when he became Energy Secretary. He certainly talked a good talk in that post, although he was perhaps making up for the rather “brown” years of the Labour Government. Now that he is in opposition, we find that his words were hollow and he has moved on to opportunist ground.

We need to move to a transport system that is more sustainable, with more efficient engines, a different mix of fuels, and electric cars, as proposed in the coalition agreement. As our dependency on hydrocarbons declines, we also need to move to a completely new fiscal model for taxing the use of road space, because road fuel duty and vehicle excise duty are a blunt fiscal instrument.

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[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to follow the hon. Member for Devizes (Claire Perry), who spoke with her usual panache, confidence and strength of purpose—rather like the Economic Secretary to the Treasury did in setting out the agenda from the Government’s point of view, which she set out very well. I do not agree with that agenda at all, but at least she was here to set it out, unlike the Chief Secretary to the Treasury. Like my hon. Friends who have made this point, I wonder where he is. I am rather reminded of a children’s book that was very popular with my children and I wonder, where’s Wally?

[Mr Graham Stuart]

It is admirable that Labour Members should be so disciplined in following the line they have been given, but does the hon. Gentleman agree that those on the Front Bench should spend as much time crafting their message so as not to table a motion that is illegal, impractical and careless? They should pay more attention to that rather than just drilling their Members to keep asking where’s Wally, which perhaps sums up the state of their politics today.

[Nic Dakin]

I think I was the first person to ask that in this debate. Of course, we have a clear economic message that runs counter to the posturing successfully used by the parties in government to suggest that there is a need to cut fast and deeply. Our message is that there is no need for such cuts. Three tools are at our disposal to manage our way out of the economic challenge: growth, taxes and service reductions. The Government are using only taxes and service reductions, at a heinous rate, when we should have a policy for growth. Their policy is for the opposite of growth.

Let me draw attention to the headlines sought by the Conservative party as long ago as 2008: “Tories vow to slash fuel duty”, from the Press Association on 6 July 2008; and “Tory tax cut to beat hike in fuel” from The Sun on 7 July 2008. In a sense, since 2008 the Conservative party has made promises to the British people on fuel duties that it has singularly failed to meet in government.