Fuel Prices and the Cost of Living

Nigel Mills Excerpts

Wednesday 16th March 2011 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to be invited to speak in the debate, and a pleasure to follow the hon. Member for Edinburgh South (Ian Murray), who made a passionate if somewhat partisan speech. The Opposition’s problem is that out there in the country no one believes a word that they say about this topic. We all know of their record during 13 years of government, but, just in case a reminder is needed, let me point out that when they took office in 1997 the price of a litre of unleaded petrol was about 56p, which included 43p of duty and VAT. When they left office nearly a year ago, the price was about £1.20 a litre, including tax amounting to about 75p. We hear talk of fuel duty rising “ahead of inflation” or “in real terms”, but if the price of petrol had risen in line with RPI throughout Labour’s term of office, it would have been 80p a litre at the last election rather than £1.20. That is the hike that we have all had to suffer.

As the contents of my inbox make very plain, fuel price rises are a real problem for people and businesses throughout my constituency. In many areas people have no alternative to driving a car if they want to go to work, but the fuel price rises are preventing them from being able to afford to go to work—let alone the damage that they are doing to all manner of small businesses all over the constituency. The Government must take action in next week’s Budget.

[Andrew Bingham]

As a fellow Derbyshire Member, I agree with everything that my hon. Friend is saying. Does not the rural character of both his constituency and mine, High Peak, exacerbate the pressures and difficulties experienced by small businesses, in particular?

[Nigel Mills]

I am grateful for that intervention from a fellow Derbyshire Member, and I entirely agree with him.

The hon. Member for Bassetlaw (John Mann), who is no longer in the Chamber, said that all Governments had chosen to increase fuel duty over the years. We must accept that it was our Government who, nearly 20 years ago, introduced the fuel duty escalator, but the aim then was to encourage people to improve their behaviour by driving smaller and more fuel-efficient cars and considering alternative means of transport. I think we can tell the Government that we have all got that message. Many of us have started using diesel and have bought cars with smaller engines in an attempt to cut our spending on fuel. I know that many of my constituents have done that. However, the scope for such measures is limited, as many people still cannot afford to drive a car. If the nudge is the order of the day, I think that we have got the message and do not need any more nudging.

[Fiona O'Donnell]

I can tell the hon. Gentleman that we too have got the message from the Government, who claim that they want to make work pay. Does the hon. Gentleman accept that for many working people, fuel price increases mean that work is not paying?

[Nigel Mills]

I am grateful for that intervention—I think. The cost incurred in driving to and from work is clearly a factor when people are deciding whether work pays, which is why the increase planned for 1 April really should not go ahead.

Let me return to the topic of nudging. I think we all accept that tax can influence behaviour, and that if we further increase the tax on driving we will see the changes in behaviour that we would expect. People will drive to work less, and businesses will not be able to survive, prosper and grow because they will not be able to cope with the increased cost base. We can all cite small haulage businesses in our constituencies that are struggling to deal with the duty rise. As has been pointed out, reversing the VAT rise will not help those businesses at all; it is the level of duty that we need to consider. If the Government want to find another way of raising some revenue from the haulage industry to help compensate for the loss of fuel duty, I urge them to accelerate their plan to charge foreign road hauliers for using our roads.

[Julie Hilling (Bolton West) (Lab)]

Will the hon. Gentleman give way?

[Nigel Mills]

I am afraid that I have already given way twice.

There is anecdotal evidence that foreign hauliers drive into our country with full tanks of petrol, which in many instances means that they can do all their work here without paying any fuel duty. We are making our haulage industry uncompetitive through the prices that we are charging hauliers to buy diesel in this country and the road taxes that they have to pay. Meanwhile, we are not charging foreign hauliers anything to use our roads. Let us collect that revenue as soon as possible, and use it to help support our own small businesses.

We have heard that, according to the review by the Office for Budget Responsibility, rising prices do not necessarily generate rising tax revenues. As was demonstrated by my hon. Friend the Member for Worcester (Mr Walker), that is because of the damage that increasing fuel prices do to the overall health of the economy, which depresses tax revenues. The Government are looking for tax cuts to try to enhance growth. We have plans to reduce corporation tax, but we should consider the damage that fuel tax rises do to growth. There must be some scope for a reduction in fuel tax. Even if it were not revenue-neutral, it might make a positive contribution to the growth that we need if we are to tackle the deficit.

I cannot support this Labour motion. The fact is that we could not reverse the impact of the VAT rise, because that would be illegal. Even if we could try, it might take six years. I urge the Front-Bench team, and the Chancellor when he delivers his Budget next week, not to go ahead with that planned fuel rise. We need some sort of fuel duty balance, to try to ensure that the shock of oil price rises does not do the real, serious and predictable damage to our economy that it could, and we must also bear in mind that if the middle east situation worsens, the shock could become much more severe than at present. We could be faced with the real damage to jobs that those significant price hikes could do.