Taxes on Motor Fuel

James Murray Excerpts

Monday 23rd May 2022 Westminster Hall

[James Murray (Ealing North) (Lab/Co-op)]

Thank you, Ms Elliot, for the chance to respond to the debate on behalf of the Opposition. I congratulate my hon. Friend the Member for Gower (Tonia Antoniazzi) on leading this important debate on the e-petition relating to taxes on motor fuel. As she set out, the fact that it has been signed by over 100,000 people underlines what we all know from our constituents: the rising cost of fuel is a pressing and urgent part of the wider cost of living crisis that is hitting people across the country.

With inflation at its highest in decades, the cost of living crisis is causing immense hardship and driving households into poverty. At the same time, this Government are alone in making us the only G7 country to be raising taxes on working people at such a difficult time. In that context, the rise in the price of fuel is being felt particularly acutely. The Office for National Statistics has published data on fuel prices that confirms what everyone knows when filling up their cars: there has been a consistent weekly increase in price since the start of 2022, with the highest rises occurring since March. As an RAC spokesperson recently said:

“March 2022 will go down in the history books as one of the worst months ever when it comes to pump prices… To describe the current situation facing drivers at the forecourt as ‘bleak’ is therefore something of an understatement.”

[Patricia Gibson]

The hon. Gentleman is talking about the impact that prices are having across the whole of the UK. Every community and constituency is affected. Does he share my disappointment that there are no Tory speakers? No Tory MPs appear concerned enough to have participated in this debate.

[James Murray]

Like the hon. Member, I find it very depressing to see no Conservative Back-Bench Members apparently interested in this debate. However, if the best many of them can come up with is to suggest people buy value brands or get a different job, I am not surprised they have little to add to the debate.

As my hon. Friend the Member for Gower said, the Petitions Committee’s survey to the respondents of the e-petition has helped bring to life some of the real impacts that fuel price rises are having on the lives of people across the country. Those responses include the supply teacher who explained the necessity of reducing working hours due to the cost of driving to different schools. An NHS worker reported the challenge of transporting her disabled children to the special educational needs school, and having to cut down on food in order to balance the cost of fuel. A carer reported being unable to attend appointments to give essential care to vulnerable people; a taxi driver was unable to make ends meet. Parents reported having to remove their children from nursery as the cost has become unsustainable, and people have been unable to visit elderly relatives.

Fuel prices have been hitting people across the board. At the same time, businesses have reported that the increased fuel costs have made it more challenging to recover from the losses suffered during the pandemic. Respondents felt that the temporary 5p reduction in fuel duty did not go anywhere near far enough—something that we have heard from many Members today—and was ineffective, as the saving was quickly cancelled out by rising prices. When it comes to the price of fuel, respondents confirmed what we had all concluded about the Government’s actions so far. Following the spring statement and the announcement of a temporary 5p per litre cut in fuel duty, the Chancellor was quick to arrange a glossy photoshoot in a borrowed car at a petrol station forecourt, but the reality is that the 5p cut in fuel duty has been quickly eclipsed by the rapid rise in the overall price of fuel.

As we know and as other hon. Members have said, fuel prices are just one of many pressures hitting people’s lives, and the Government’s response to the cost of living crisis has fallen woefully short of what is needed. People across the UK are seeing the biggest squeeze on their finances in a generation, while at the same time, oil and gas producers’ profits have shot up. As has been widely reported, BP’s chief financial officer said that

“we’re getting more cash than we know what to do with”,

while its chief executive has said that the current rising prices are making BP a “cash machine.” In the first three months of 2022, 28 of the largest oil and gas producers made close to $100 billion in combined profits, with Shell, for instance, making over $9 billion—almost three times what it made in the same period last year.

Faced with oil and gas producers receiving such bumper profits while everyone else suffers the cost of soaring energy bills, Labour has called on the Government to implement a simple, effective and fair solution: levy a windfall tax on oil and gas producers’ profits to help cut people’s bills by up to £600. People need that help, as they are left with no other options. Martin Lewis, the founder of MoneySavingExpert, has said that he no longer has any ideas for how people can save money to cope with the massive surge in the cost of living.

The fact that people are struggling and do not know what to do makes it incredible that the Government have twice voted against Labour’s plans to address this cost of living crisis by imposing a windfall tax on oil and gas producers’ profits. We are left wondering what on earth their objection is, when consensus seems to be growing by the day that a windfall tax is the right thing to do. Current Treasury Ministers may not know what to do, but the previous Financial Secretary to the Treasury, the right hon. Member for Hereford and South Herefordshire (Jesse Norman), has said that the arguments against a windfall tax

“at present are very weak.”

He added that Margaret Thatcher would have backed a windfall tax on energy companies.

Of course, in recent weeks, Government Ministers have taken a wide range of positions. We have heard opposition to the plan for a windfall tax from the Health Secretary, the Foreign Secretary, the Business Secretary, the Northern Ireland Secretary, the Attorney General, the Minister for Brexit Opportunities and the Deputy Prime Minister, and yet the latest position from the Chief Secretary to the Treasury is that

“all options are on the table.”

Every day of delay hurts people across the country. When the Minister responds, I urge her to give some indication of when the inevitable U-turn will happen and the Government will implement a windfall tax. We have been calling for this for months, and we are all waiting for the Government to finally do the right thing.

The Treasury’s failure to act exposes a deeper failing at the heart of Government. While we have been pressing the idea of a costed and effective plan to levy a windfall tax to cut energy bills, the Government are out of ideas and out of touch when it comes to helping people with the hardship they face. The Chancellor needs to get a grip on this situation, so when the Minister responds, I again urge her not to add to the delay, but to simply tell us when the Government will go ahead with the windfall tax that we all know is needed.

--- Later in debate ---

[Helen Whately]

I will move on and keep to the topic of the petition, if that is okay with the hon. Gentleman. Another question that came up earlier, particularly from the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier), was on the extent to which the fuel duty cut has been passed through. I am well aware of that concern and the suggestion that suppliers have been taking the benefit of the £2.4 billion tax cut.

To provide some context to this, the spring statement was made at a time of sharp rises in international oil markets, which would have taken some time to feed through to the pump. Diesel has faced specific pressures, because of the particular role of Russian exports in the European market. That has, unfortunately, contributed to diesel reaching all-time high prices this month. The background movement in prices makes the 5p cut harder to see. The Government have been clear that we expect all in the supply chain—from the moment fuel duty is owed to when fuel is bought at the forecourt—to pass the fuel duty cut through to consumers.

The Chancellor and the Business Secretary wrote to industry on the day of the announcement to set out that expectation. The Business Secretary wrote to industry on this matter again last week. The Competition and Markets Authority is closely monitoring the situation. To quote its chief executive, Andrea Coscelli, the CMA stands ready

“to take action should there be evidence that competition or consumer protection law has been broken in the fuel retail market”.

He went on to say that a formal investigation may be considered appropriate,

“which could ultimately lead to fines or legally binding commitments”.

The Government will continue to undertake longer-term analysis to establish the extent to which the Chancellor’s cut may have been buried beneath further wholesale price increases, and to ensure that the market does not fail to pass on the benefits of the duty cut to those refilling at the pump.

I have also heard public discussion of something called PumpWatch to regulate prices at the pump. Some comparisons have been made to Ofgem, the energy regulator, and the role of the price cap in the domestic energy retail market. However, that price cap was introduced in 2019 specifically to correct the market failure identified by the Competition and Markets Authority, which showed that the conditions for effective competition were not present in the market. While the energy price cap has shielded customers from volatile energy prices, it was specifically designed to better protect disengaged customers from being offered poor-value deals.

To date, we have not seen evidence that the same situation is happening in the fuel market, because pump prices are conspicuously displayed outside fuel stations to encourage competition and allow drivers to make comparisons and find the best deals, but I reiterate that if the CMA finds evidence of anti-competitive behaviour in the market, it is clear that it will not hesitate to act.

[James Murray]

As the Minister is drawing to a close, will she take this opportunity to let us know her opinion on our plans for a windfall tax?