Petrol Prices (Wyre Forest)

Mark Garnier Excerpts

Wednesday 12th September 2012 Westminster Hall

[Mark Garnier (Wyre Forest) (Con)]

I am pleased to see the new Under-Secretary of State for Transport, my hon. Friend the Member for Wimbledon (Stephen Hammond) in his place. He has long been a friend of Wyre Forest. Four or five years ago, when he was a shadow Transport Minister, he visited Wyre Forest to inaugurate a campaign to save a local driving test centre in the face of swingeing cuts in the number of centres under the previous Government. I am delighted that his predecessor, my hon. Friend the Member for Hemel Hempstead (Mike Penning) was instrumental in resolving that inequity, and that we will have a driving test centre as a result of the Department for Transport’s sterling work.

This debate is specifically about fuel prices in Wyre Forest, but the issue affects every rural and even semi-rural community throughout the country. The Backbench Business Committee has secured a debate on the matter in the Chamber later this week, and it could be argued that I might have done better to save this speech for that debate. I am sure that there will be a huge amount of interest in Thursday’s debate, and I am eager to use the opportunity today to put on the record my experience in trying to resolve the problems facing my constituents, and the apparent stonewalling by the fuel retailers, particularly the big chains.

The debate is about the inequity facing Wyre Forest and other rural communities. It is about how my constituents have been charged more at the pumps in Kidderminster, Stourport and Bewdley than those of hon. Members in larger urban and suburban centres. Let me put the matter into context. Since I was elected, I have been contacted regularly by constituents who have noticed that they can buy fuel at up to 6p per litre cheaper in nearby Wolverhampton, Dudley and even Bromsgrove than they can locally.

Around a year ago, I contacted the retailers asking for an explanation. I wanted to know why they saw fit to overcharge my constituents. Their reply, after cutting through the various explanations of Nectar points and price reductions depending on the contents of a shopping bag, was that prices are set locally and that that is how retailers best compete with each other. I thought that that was fair enough, but as I was eager to understand their pricing models further, I contacted local retail managers and asked to meet them to talk about fuel prices. They said, “Ah. We just collect local data and send it to regional price setters who are responsible for determining the price.” I then asked to see the regional price setters, at which point I was met with stony silence. It seems that fuel retailers are reluctant to talk about the prices they charge locally.

However—credit where credit is due—Tesco agreed to meet me, and Emma Reynolds, its Government relations guru came to see me recently to explain its strategy. She told me a great deal about the special offer on fuel prices that it has introduced, and many retailers certainly provide special fuel price offers to customers. A 50% reduction is available on Tesco fuel for those who buy a specific range of items, and all retailers have a form of offer. She also told me that the general pricing strategy of the fuel retailers—Tesco, ASDA, Sainsbury, Texaco and so on—is to compete with the lowest price within a specific radius of the petrol station concerned, and for Tesco that is 3 miles.

At this point in my speech I intended to make a few lame jokes at the expense of the petrol retailers, and to jest that perhaps “every little helps”, but the only people who are really helped are Tesco’s shareholders. However, I updated my research yesterday, and to my utter delight it seems that the pressure that I have been putting on petrol retailers locally has been heeded. As of yesterday, instead of a 6p premium in Wyre Forest by petrol retailers within a 25 mile radius, which was the situation I faced a year ago, the substantive premium is now just 1p, although there is a rogue cheap supplier at ASDA in Dudley which charges 2p less than in Wyre Forest.

[Karen Lumley (Redditch) (Con)]

I congratulate my hon. Friend on securing this important debate. He says that there is a 1p price range in our region, but will he comment on the fact that in Cardiff this morning, petrol was 3p cheaper than in Redditch?

[Mark Garnier]

I am grateful to my hon. Friend and neighbour, who is also a member of the Welsh Affairs Committee, and takes a keen interest in what happens in Wales. I will come to that anomaly between cities and smaller rural towns and semi-rural areas, which is a great problem.

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman has mentioned a topical and important matter in the area I represent in Northern Ireland, which is a rural community. He referred to demand and pressure in urban and rural areas. Some of my constituents must travel long distances to get to work because of where the work is, and may spend £50 or £60 a week just on petrol and diesel. Does that not underline the issue for many people in rural communities, where we need a price structure that is achievable, fair and affordable?

[Mark Garnier]

The hon. Gentleman hits the nail on the head. People living in rural communities are doubly penalised. They face not only high prices, but higher mileage because they probably have worse access to public services. I will continue to make that point throughout my speech. The hon. Gentleman was absolutely right to raise it on behalf of his constituents.

I said that fuel retailers have cut the premium locally as a result of my pressure, but there may be other reasons, not least that last week the Office of Fair Trading announced an inquiry into fuel prices. That welcome U-turn by the OFT is important because pressure on households is, as we all know, incredibly high. It is tough enough having to pay high fuel prices because of currency and commodity prices, but when duty and tax are added, and then local factors, households face a toxic mix of costs.

Despite local success, a number of serious factors must be taken into account. First, special offers provided by the supermarkets do not constitute a fuel price management policy. If anything, unreasonably high fuel prices locally provide an opportunity for offer-making. Although the big retailers say that helping the consumer is the reason for making offers, we all know that it is about one thing: competition between retailers. Tesco is against ASDA, and against Sainsbury and the rest of them. One offers loyalty points; another offers a discount if a minimum amount is spent in the supermarket alongside the petrol station; a third will discount fuel prices if certain items are bought, and on it goes.

Such offers are marketing plugs that associate the retailers’ names with what seems to be a special offer. I am sure that some offers are taken up, but the reality is that people refuel when the needle is on empty, and not when they have just done the weekly shop. In any event, such offers may seem enticing, but when we were paying 6p a litre more in Wyre Forest, the discount was worth 6p less than in neighbouring Wolverhampton and Dudley because the discount was from a higher level. The fundamental problem was always high local prices in Wyre Forest and other rural and semi-rural communities.

Secondly, the pricing model adopted by supermarkets and fuel retailers favours those in big cities. Fuel retailers try to be the cheapest within a three-mile radius or thereabouts. In a large conurbation such as Birmingham and the black country, many petrol stations will create a chain within 3 miles of one another. In that instance, a petrol retailer east of Birmingham who decides to have a few days undercutting the local market to try to stimulate more demand for their product will create a ripple that spreads across the whole city and probably into the black country. Given that there is a significant number of petrol retailers in that area, there will always be healthy price competition, stimulated by occasional but regular mini price wars.

However, in districts such as Wyre Forest, Strangford and Redditch there are far fewer petrol stations and, importantly, around areas such as Wyre Forest, there is a desert of petrol stations, rather like a doughnut, so the only price competition will be within the locality itself. With far fewer retailers in that closed area, price competition is lower, and it is suggested that some of the big retail chains have deliberately undercut local independent suppliers to drive them out of business, ensuring less competition on pricing. That is anecdotal, and there is no evidence to support it, but it is what people talk about.

[Jim Shannon]

Is the hon. Gentleman aware that some retailers sell petrol and diesel with no profit, and perhaps at a loss, just to keep the small independent retailers out?

[Mark Garnier]

I am grateful for the hon. Gentleman’s intervention. In Wyre Forest, the pricing policy of a local, independent retailer is to make a 3p per litre profit on the cost at which they buy their petrol and diesel. That is interesting, because for a great period, that retailer was substantially undercutting big chain retailers, and as a result, I recommended that my constituents visited it, because it provided the best deal. However, when I checked its price again, that retailer is now 3p or 4p more expensive. The big chain retailers are almost certainly buying wholesale fuel from the same wholesale outlet, and they are probably paying the same amount for that fuel. Therefore, if Callow Oils is still adopting its pricing policy of 3p more per litre, it would indicate that the big chains are running at a loss. It would be interesting to find out more—if the retailers answered my telephone calls, I could find out. I think, however, that the big retailers may well be working at a loss to stimulate local demand.

With fewer retailers in a specific area, there is a greater demand against available supply than would be seen in bigger conurbations, so the price is inevitably higher. In this instance, local factors push the price along the price/demand curve against consumer interests. It is important for big retail chains to have such areas of high pricing. If they are to ensure a sustainable average price of fuel across the whole marketplace—across the whole country—they must ensure that areas of low pricing, such as cities, are balanced by areas of high pricing. That penalises rural regions in favour of urban areas, which is very unfair, as I think we would all agree.

If someone lives in Birmingham, London, Cardiff, or any other city, they will have easy access to far more efficient local public transport infrastructures. The availability of a sensible local public transport service also provides competition to petrol retailers; they are competing not only against each other for customers, but against local public transport. However, if someone lives in a rural or semi-rural area, such as Wyre Forest, their local public transport is neither as accessible nor as user-friendly. They will need to use their own car far more than their urban-based cousin. They will have little practical choice, and will have to buy fuel to run their car. That lack of choice helps drive up local fuel prices, doubly penalising the high-mileage rural commuter.

What am I trying to achieve with this morning’s debate? First, I want yet again to highlight the inequity of the pricing policies of big supermarkets and fuel retailers. We all know about that issue, and many of my colleagues raise it again and again. This is another push in the effort to get big retail chains to heed the plight of rural consumers. People living in rural communities should not be used to subsidise the fuel bills of town and city dwellers.

Secondly, I want to appeal to the retail chains to adopt a more pragmatic pricing policy. I accept that a national pricing policy would probably not work, but using a rigid three-mile radius is probably too tight in certain areas. I would like to see a pricing policy that never allows a district to become isolated within its own pricing area. A pricing link that jumps significant gaps is needed. That can be achieved either by having a larger radius across the country, or by having a radius that takes regional petrol station density into account.

As I mentioned, the OFT last week announced its investigation, which I welcome. It will look at a range of areas. The fact that prices go up pretty quickly with oil price rises but are rather slow to come down is a key concern, but I am particularly keen for that investigation also to look into regionalised price anomalies.

I am grateful to the Minister for his time and attendance this morning. As a free marketer, I am reluctant to ask him to legislate on fuel price equalisation across regions. Fair competition must be the answer, and if the competition turns out to be unfair, or evidence emerges of local cartels, I sincerely hope that the OFT will uncover that and deal with it appropriately. The experience in Wyre Forest, where it appears that local pressure has brought the reward of better local pricing, suggests that retail chains might listen, even if they are reluctant to get together for a meeting—notwithstanding Tesco. Sainsbury’s, take note.

The Minister, of course, has a far louder voice than I or many of my Back-Bench colleagues, and I appeal to him to use every opportunity at his disposal to give petrol retailers a regular prod to ensure that the plight of rural dwellers is taken into account.

Oral Answers to Questions

Mark Garnier Excerpts

Thursday 19th April 2012 Commons Chamber

[Mike Penning]

Cycling is very popular in this country, and becoming even more so. The Government support The Times campaign. I have met many of those involved, and we support most of the things The Times has called for. The sort of roadworks my hon. Friend the Member for Dartford (Gareth Johnson) was talking about would not be affected by such cycling measures, however. We are trying to make sure that utility companies do not dig up the roads and then leave them open without having finished the works.

[Mark Garnier (Wyre Forest) (Con)]

5. What estimate she has made of the effect of the High Speed 2 rail project on job creation.

[The Secretary of State for Transport (Justine Greening)]

The Government expect that phase 1 of HS2, linking London and Birmingham, will support about 40,000 jobs. That figure includes 9,000 jobs during construction, 1,500 permanent jobs in operating the railway, and opportunities for up to 30,000 jobs in the regeneration and development areas located around stations. Phase 2, connecting Birmingham, Manchester and Leeds, will support a substantial number of jobs in those northern conurbations. A more detailed assessment is already under way as part of the sustainability appraisal for phase 2.

[Mark Garnier]

I thank my right hon. Friend for that answer. In order to reinforce the true value of HS2, will the Government give serious consideration to the expansion of Birmingham airport into a UK hub airport? That would create jobs in the west midlands, while also offering a viable and realistic solution to airspace capacity problems.

[Justine Greening]

I recognise that Birmingham airport has a crucial role to play and, as my hon. Friend will be aware, the Birmingham interchange station will enable it to be much better connected than it is at present. Birmingham airport already has planning approval for a runway extension, which should allow for the operation of airline services to more long-haul destinations. Even in the short term, there is a real opportunity for Birmingham airport to expand.

Amendment of the Law

Mark Garnier Excerpts

Friday 23rd March 2012 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

Like all Members, I am frequently visited by members of my community asking for many things that the Government can do to help their businesses or special interest groups. I have recently taken to asking them what they would do if they were Chancellor of the Exchequer for the day. I ask them to come up with three ideas, and invariably they come up with a whole load of ideas, and after a few minutes I have to say to them, “I’m terribly sorry, but you’re Chancellor for the day, not Father Christmas.” Once they have been told, people realise that when our back is against the wall, it is vital that any budget has to be balanced. Anybody who knows how to run a business knows that they simply cannot carry on borrowing to stimulate that business. Cuts have to happen, and it is important that we all share the burden of those cuts. Labour is keen to ask those on this side of the House how we will be affected by them and what our interest in them is.

[Kelvin Hopkins (Luton North) (Lab)]

The hon. Gentleman says that businesses cannot live on borrowing, but they have to borrow in the short term, and surely part of the problem is that the banks will not lend to them.

[Mark Garnier]

That is a slightly wider point, but the fact is that when someone has run out of credit on their credit card, they can use the debt that they already have, but they cannot increase it.

Many of us on this side of the House have a vested interest in the cuts. I declare an interest, in that I shall be £2,450 a year worse off as a result of child tax credit cuts, but the other side of the coin has to involve stimulating economic growth. The problem is that the Chancellor does not have a volume knob on the economy that he can easily turn up. He has to use a number of different measures. There is no simpler way to generate quick economic growth than to import investment from overseas, but to do that we need to demonstrate that we are open for business and competitive. We need a tax regime that attracts inward investment. That is why I see the combination of the accelerated fall in corporation tax to 22% by April 2014 and the cut in the top rate of income tax to 45p as crucial to the opportunity that we offer to international companies and entrepreneurs looking to set up their businesses in the UK.

I cannot overstate the importance of that international competitiveness. Brintons carpets in my constituency has recently been reviewing its operations. It is absolutely committed to Kidderminster, but it has received overtures from the Portuguese Government, who are offering free loans and grants for it to move its carpet looms to Portugal to increase manufacturing there. This is a real threat to UK manufacturing and to my constituency, but that threat is significantly diminished when the corporation tax differential is increased to 7 percentage points. The top rate of income tax in Portugal is 46.5%. In other words, Brintons would have a 33% higher corporation tax bill by moving to Portugal. The managing director of Brintons assured me last night that this was absolutely a pro-business Budget.

Those two tax measures represent an important step towards achieving the relatively quick fix of attracting inward investment, and making it harder to justify leaving the country, but it is incredibly important that we support this with home-grown prosperity that will provide opportunities for local entrepreneurs. The Government have already introduced measures to help small and medium-sized enterprises, as well as announcing the business enterprise zones.

I must confess to being disappointed that my constituency was not granted such a zone, but it is a credit to the local enterprise partnership and Wyre Forest district council that the South Kidderminster business park continues to be a reality. We have just had a planning application submitted for a new development of 27 hectares of mixed use, including a 4 hectare employment development, retail, hotels, a restaurant and a café, care and crèche facilities, a railway halt for the Severn valley heritage railway, and up to 250 new homes. That planning application demonstrates a strong commitment to my constituency by a far-sighted investor, and follows on from two significant investments in local businesses— £36 million in Brintons carpets and £15 million in Sealine yachts—and precedes a further planning application to create a 250-room conference facility at the West Midlands Safari Park that will be the premier facility in the county. In addition, a brand new Premier Inn hotel is opening today in Kidderminster.

I am not trying to pretend that everything is entirely rosy, but it is important to balance negative news with all the positives, and there is a lot of positive news about. It is also worth remembering that unemployment, although too high in Wyre Forest, has remained flat since 2010, having doubled in the years between 2005 and 2010. A strong local will to make a difference is incredibly important and, if I may, I will use this opportunity to plug my jobs fair, which is being held in Kidderminster next Thursday. It will try to match those who are looking for jobs with businesses that are hoping to expand.

The key point, however, is that an enthusiasm to do well locally and to run with initiatives—from something as simple as a jobs fair to something as strategic as significant local investment—has to be balanced by support from the top. That can be illustrated by the fact that the recently announced Kidderminster college tie-up with Birmingham Metropolitan college to provide high-tech courses in the video, animation and gaming arena will benefit hugely from the announcement yesterday of tax reliefs in that industry. I should declare an interest as I am a governor of Kidderminster college. Cutting red tape for micro-businesses, giving research and development credits above the line, introducing measures to make the UK a centre for technology for Europe, and other measures will help to create opportunities for a whole raft of small businesses to start up and develop.

Mr Speaker, you will note that I am an enthusiast for this Budget. I am absolutely convinced of its pro-business credentials and I broadly welcome them, but I have one or two points that I would like to raise. I am pleased to see the Secretary of State for Transport in her place. The High Speed 2 project will certainly bring benefits to Birmingham, the main city of the west midlands and the second city of this country. I urge the Secretary of State to look into the possibility of building a new regional hub airport in Birmingham to reinforce the important link that HS2 will provide between Birmingham and London. A hub airport would certainly be of huge benefit to the economy of the west midlands, and indeed of the midlands as a whole.

I also want to sound a note of caution about the regionalisation of pay scales. I completely agree with the logic that the private sector will be unable to compete with the public sector on pay when the public sector pays as much as 18% more for equivalent jobs in the regions.

[Sheila Gilmore (Edinburgh East) (Lab)]

The areas in which public sector pay tends to be higher than that in the private sector also have extremely high unemployment. I am therefore puzzled by the idea that high public sector pay is preventing job vacancies from being filled, or that there are any such vacancies as a result of this so-called problem. That does not appear to be the case, given that there are so many people chasing each job.

[Mark Garnier]

If I may, I shall develop my point. I am not entirely unsympathetic to the hon. Lady’s point, but the important point is that private sector pay is not set on a national basis—

[Helen Goodman]

Some of it is.

[Mark Garnier]

Not all of it. Small businesses do not set their pay on a national basis. It makes complete sense that public sector pay should be treated likewise, and in the broadest sense I welcome the freeze on regional public sector pay awards, but I have one caveat. Moving public sector jobs around the country—especially in Government Departments such as vehicle licensing, which went to Swansea—brings cash to a local economy. That cash can provide economic activity and liquidity that supports jobs in the local private sector that might otherwise struggle. While the public sector regional pay adjustment is going on, I urge the Government to take careful note of what is going on locally, to ensure that the proper efforts to reduce the crowding-out of the private sector by the public sector do not unwittingly starve the private sector of much-needed local liquidity.

I also worry about the rising cost of fuel for our constituents. This is a huge burden on families and although the increase in tax-free allowances is welcome, the rising cost of fuel is an issue for rural and semi-rural constituencies such as mine. I welcome the help that the Government have given—we are 10p better off than we would otherwise have been—but there are two further issues to consider. The first is that fuel companies charge consumers what they can get away with locally. Prices in Kidderminster are around 5p dearer than they are in the constituency of my hon. Friend the Member for Bromsgrove (Sajid Javid), for example. On writing to the chief executives of Tesco, Sainsbury and Texaco, I was told that prices were set locally. When I contacted the local managers, they told me that the prices were set regionally. Whatever the method of price setting, the fuel companies are ripping off my constituents in Wyre Forest and I want them to stop.

When we compare the price of oil to pre-tax profits over the years, we see that the oil companies are simply not passing on extra profits to consumers. Indeed, they are making extra profits from consumers. Of course duty and VAT are part of the price of oil, as is the dollar-sterling exchange rate, but the underlying commodity price at the pump is the key component, and any means by which the Government could persuade the oil companies to pass on their profits to consumers would be gratefully received.

Oral Answers to Questions

Mark Garnier Excerpts

Thursday 12th January 2012 Commons Chamber

The Secretary of State was asked—

[Mark Garnier (Wyre Forest) (Con)]

1. What steps she is taking to improve road infrastructure.

[Gavin Barwell (Croydon Central) (Con)]

4. What steps she is taking to improve road infrastructure.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Transport (Mike Penning)]

The Government announced in 2010 that we were investing £2.1 billion to start 14 new road schemes over this spending review period and to complete eight existing schemes. A further £1 billion of new investment was also allocated in the autumn statement to tackle areas of congestion on the strategic road network.

[Mark Garnier]

As the Minister will be aware, a number of other projects can have specific local economic impacts. Two such projects are the Stourport relief road and Hoo Brook link road in Wyre Forest. Will the Minister meet me and the leaders of Wyre Forest district council and Worcestershire county council to discuss how his Department might assist in the progress of those two projects?

[Mike Penning]

I will be more than happy to meet my hon. Friend and those council leaders, but I think this is probably a matter for my colleague the Minister for local roads, the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker). If he can meet them, that will be fine, although, ultimately, these matters are for the local authorities.

High Speed 2

Mark Garnier Excerpts

Thursday 13th October 2011 Commons Chamber

[Andrea Leadsom]

I want to make a little more progress, if I may.

I hear arguments that lots of other countries have high-speed rail so we need it to be able to keep up and compete with them, but the truth is that France, Germany and China are very different from our country. They each have a far greater land mass and much longer distances between cities. Furthermore, their high-speed railways follow existing transport corridors, and their non-high speed trains are extremely slow, unlike our existing inter-city trains, which are technically high-speed, with a top speed of 125 mph.

I also hear arguments that we should replicate the fabulous experiment with HS1. Yet a wealth of evidence suggests that commuter services running parallel to the HS1 link have become more expensive, have far more stops and far fewer trains running along the line, in order to subsidise HS1. Even the chief engineer of HS2 Ltd told me that, as a Kent commuter, he has had to get used to more expensive train fares in order to subsidise those using the HS1 service.

If all else fails, we hear that killer argument, “This is about a vision for Britain. This is like the great Victorian railways. It is like the fabulous post second world war motorways.” I am sorry, but I just do not buy that argument. The Victorian railways were largely privately funded The motorways are fabulous, but they have benefited every town and village in this country, because they have junctions every few miles. By contrast, every family in Britain will pay £1,000 for HS2 but 99% of people in this country will use the service less than once a year, and the wealthiest will use it four times more often than the poorest. That is a massive skewing of scarce resources.

[Mark Garnier (Wyre Forest) (Con)]

Does my hon. Friend agree that although £32 billion is a great deal to spend on an infrastructure project, it is probably a welcome sum to spend on the supply side of our economy? Does she further agree, however, that it could be better spent on more local projects, such as the Stourport relief road in Kidderminster?

[Andrea Leadsom]

My hon. Friend makes a good point, and we could have a fabulous relief road for £32 billion. He makes the serious point that there is a huge opportunity cost to spending this amount of money on HS2.

Concessionary Travel

Mark Garnier Excerpts

Wednesday 24th November 2010 Westminster Hall

[Karen Lumley]

That is the point that I am making. The proposal could be devastating for district councils, as they stand to lose significantly more than they spend. The system has been described as a mess by the District Councils Network. Changes to the formula need to be clear, transparent and accurately carried out, but many councils are concerned that the implications have not been properly thought through.

[Mark Garnier (Wyre Forest) (Con)]

I congratulate my hon. Friend on securing this incredibly important debate. To give substance to her argument, I should say that the leader of Wyre Forest district council told me only this afternoon that the potential cost to that one council would be £1 million if the worst option is selected. That is £1 million a year on top of the expected cuts resulting from the comprehensive spending review.

[Karen Lumley]

I thank my hon. Friend for that. I know that Redditch is looking at similar figures.

It is most likely that the transfer will result in neither a fair nor a transparent funding deal, some councils being hit harder than others through losing a disproportionate amount of grant funding.