Fuel Prices

Roger Williams Excerpts

Tuesday 15th February 2011 Westminster Hall

[Miss McIntosh]

I am mindful of the point made by the hon. Member for Upper Bann (David Simpson) about the land border between Northern Ireland and southern Ireland. In the European Union, the dream place to live as far as fuel duty is concerned is Luxembourg. I am reminded of the queues that I saw on a road in Luxembourg, which existed because the fuel duty is less in that country. So I am very mindful of what the hon. Member for Upper Bann has said and, as I said earlier, I hope that that is an issue that the Minister will respond to, because rural communities seem to be bearing the brunt.

RAC analysis of the survey “Family Spending 2010” shows that spending on transport for the average household was £58.40 out of a total weekly expenditure of £455. Transport is the biggest single item of expenditure, bigger even than food, rent, mortgage or entertainment. Obviously, ancillary services will suffer if transport costs continue to rise incrementally.

There are four options to discuss today. The first is not very realistic—it is the option to do nothing and maintain the status quo. Personally I do not believe that that is a sustainable or realistic option. Obviously, my preferred option is for the Government to pause on 1 April and not to impose the 1p rise in duty. Of course, that increase will be the eighth duty increase to have been proposed by the previous Labour Government since November 2008. I am mindful of the fact that if it is imposed, it would add at least 4p more to petrol and diesel pump prices, on top of the 1p increase in duty in January and the VAT increase as well.

The perhaps more controversial proposal to introduce a fuel duty stabiliser was first put forward by the present Chancellor when in opposition. As shadow Chancellor, he launched a fairly full consultation in July 2008 on a fair fuel stabiliser, a mechanism to ensure that when fuel prices go up fuel duty falls:

“So as the price of fuel rises, the amount of VAT charged also rises. This means that when the price of fuel goes up, the amount of tax charged on it also rises…The current system also makes the public finances more unstable. This is because, when oil prices rise, the Government receives an unexpected windfall from taxes on North Sea Oil production. And when oil prices fall, the Government suffers an unexpected shortfall in revenues.”

I take some comfort from the fact that the Chancellor, in his June Budget, said:

“We are examining the impact of sharp fluctuations in the price of oil on the public finances to see if pump prices can be stabilised, and we will also look at whether a rebate for remote rural areas could work.”—[Official Report, 22 June 2010; Vol. 512, c. 178.]

[Roger Williams (Brecon and Radnorshire) (LD)]

The hon. Lady has set out the virtues of a fuel tax stabiliser, but does she agree that that still does not address the differential between prices in rural and urban areas, which makes it so difficult for the small businesses that I represent?

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[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

I congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this important debate. I apologise to her, the Minister and yourself, Mr Turner, for possibly having to leave before the Minister has completed her wind-ups.

I shall try to bring together some of the comments made this morning by mentioning two examples from my constituency that illustrate the problem we have. The first issue is something we have not referred to this morning: the cost of domestic fuel for purposes other than simply driving. I thank my constituent Colin Keen for raising that matter. I shall give a quick example. Between Christmas eve and about the middle of January, people who were tied into domestic fuel contracts with a company called Flogas had a 46% increase in their fuel prices. That is an unsustainable and unjustifiable increase, which has a considerable indirect and direct effect on the rural community and the rural business network. It would be helpful for the Minister to address the problem experienced—at least in my part of the world—by a number of householders who are on large estates. They are tied into lengthy fuel contracts that they cannot reasonably or, in some cases, legally get out of. Their domestic fuel prices are apparently being adjusted without any reference being made to them and without them being able to do anything about it at all.

The second example I shall refer to is that of another constituent, Mr Barry Jones. He has studied local supermarkets and has pointed out that we are not necessarily getting a fair crack of the whip from them. He highlighted that Tesco in the rural town of Carmarthen is charging different prices from Tesco in the more urban setting of Llanelli down the road. There is up to 4p a litre difference. Tesco in Carmarthen argues that it is setting its prices in line with local suppliers. That is fundamentally untrue; it is not. It is setting its price at a rather different rate. I cannot help but think that such a situation is slightly ironic when I see a Tesco tanker with a slogan on it that reads: “Why pay more?” The answer is: because we have no choice. Perhaps we can address the grip that the five big supermarkets seem to have over every aspect of our lives, particularly in rural communities.

My hon. Friend the Member for Thirsk and Malton made a further point in her introductory comments about the overall inflationary effect of the issue on rural communities. What we are seeing—and what was being reported on the BBC this morning—is that there has been a much more profound increase in the price of things we need over and above the price of things we want. Fuel hikes have a very different downstream impact on the things we need compared with the things we occasionally want.

That brings me neatly to a further comment about the definition of rurality, which has been touched on in different ways by a number of hon. Members this morning. Several years ago, I tried to get a proper definition of rurality and, perhaps rashly, I asked the pollsters Ipsos MORI for one. It did not have a definition of rural and the people I asked simply said to me, “Well, it’s anything that isn’t urban.” If I may respectfully say so, that is a particularly unhelpful suggestion. Rurality comes in very different forms: isolated, very isolated, fairly isolated and, simply, rural. We need a clearer indication from the Minister and perhaps other interested bodies of what rurality and isolation really mean. I can foresee that some difficult choices and decisions will have to be taken and that they will be based on a line on a map that might mean everything to a bureaucrat, but that will mean absolutely nothing to those of us who live and breathe rurality every day. We might have constituents who fall the wrong side of a line and are prejudiced against—I accept that that might be unintentionally—as a consequence. That definition is important.

We have been told that up to 600 filling stations are closing every year, which means that people have to travel that much further to get their essential fuel. We are told that local authorities in certain parts of the country are cutting back on their rural bus services because of the increase in fuel prices and the downstream effect of that. However, we cannot lose sight of the direct and indirect effects of the issues discussed in this morning’s debate. The matter is affecting directly and indirectly pensioners, care workers, volunteers and hauliers. I can think of two hauliers in my constituency that are based in isolated rural areas so that they can be close to the ports of Pembroke dock and Fishguard. They are in an ideal location, but they can pretty well do nothing about fuel prices. They cannot even go over to Ireland—the Republic—and get a better price. Such price increases are playing havoc with their cash flow.

[Roger Williams]

The hon. Gentleman’s hauliers, like my hauliers, suffer competition from people who come over the channel with a full tank of fuel and carry out transport business. That is a great disadvantage to our hauliers, who have to pay the full amount applicable in this country.

[Simon Hart]

That is a good point. I think I recently read a coalition announcement that a surcharge might be applied to those foreign hauliers. It is worth remembering that hauliers cannot function without three things: vehicles, drivers and fuel. We cannot simply turn around and say that they have to address their overheads in the way we might do so with other businesses. They cannot function without those three vital ingredients.

I shall finish by touching on the big society—I think I have read about that in the news in the past 24 hours—and the social mobility that will come as a result of that. Every hon. Member who has spoken this morning has mentioned the effect of fuel prices, whether domestic or for vehicles, on their daily lives and on how they conduct their businesses. Every one of those observations could have been a direct reference to the big society. We cannot deliver the big society in rural Wales or rural Britain under the current conditions. There are people out there for whom the big society has been a part of their daily life for years, but it is becoming increasingly difficult to be champions of the big society because of fuel duty.

I am not high enough up the political food chain—nor, indeed, are other hon. Members here—to make these decisions, but they need to be made and, as an hon. Member said, they need to be made urgently. Whether it is a rebate, whether it is a stabiliser, whether it is a freeze on duty, or whether it is a combination of those things, the most pressing need for rural Britain if it is to be able to remain in business and deliver the big society is clarity and urgency. I hope that the Minister can address them both this morning.

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[Glyn Davies (Montgomeryshire) (Con)]

Thank you, Mr Turner, for calling me to speak in this debate, which is of huge importance. I, too, congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. This issue is probably more important and relevant to the problems facing my constituency at present than any other that I can think of, and it dominates a lot of conversations.

I intend to make a fairly short speech because hon. Members have raised most of the points I wanted to raise; I do not want just to repeat them. However, fuel duty is particularly important where I live for two main reasons. One is the absolute cost. As with a lot of rural areas, fuel is essential to us. We cannot just pick up a newspaper in a local shop; we have to drive to the shop. We cannot access any services without having to drive to them. That point is more relevant in a sparsely populated area than anywhere else.

The second issue is competitiveness, about which my constituency neighbour, my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), made—twice, I think—an important point. Competitiveness is important because it affects not just transport hauliers from overseas but those in Britain. The position of small businesses and individuals where we live is incredibly difficult because of competition. The price of fuel is acting as an anti-regional policy that is persuading people to move out, simply because of cost. This is not about individual, large purchasing decisions; it is the accumulation of all the little things that everyone has to buy that makes living so much more expensive.

I do not live on an island, but Montgomeryshire, and Brecon and Radnorshire, are very sparsely populated. Most of the sparsely populated parts of Britain are probably represented here by hon. Members who have made interventions. We want something to be done, but I know perfectly well that that is much easier said than done. There are two issues that must be dealt with: we have to face up to the world market that has caused fuel prices to rise, and which we do not have any great control over; and there is the state of our public finances, which the Treasury has to deal with. We are in huge debt and massive interest payments must be repaid—that cannot be denied. To ask the Chancellor of the Exchequer to reduce taxation anywhere in the Budget is a difficult request, and a balance must be struck. However, we also know from what he has said previously that he is sympathetic on this issue. He has spoken about a fair fuel stabiliser in the past, and that is certainly one way to address it. I can see the question of the use of a fair fuel stabiliser giving rise to great difficulties, and I am certain that the advisers working for the Chancellor are looking at how those difficulties could be ironed out. I can see that there are problems.

The second issue, which interests me more because it is getting a lot of coverage, is one that many Members have spoken about today and which I would favour: giving some form of concession to the parts of the country that are deemed to be sparsely populated or rural, where the impact of the price of fuel is greatest. It is said that we are talking about a figure of only 5p per litre, and that the concession would apply only to the remotest parts of Britain. In that regard, I, like others who are present today, want to make a pitch for where I live. Rural Wales is sparsely populated, and if we are to start this initiative in the remotest parts of Britain—that is what is being discussed—and if the Chancellor has to negotiate with the European Union on how a pilot scheme might be introduced, I hope there will be an early roll-out to constituencies such as mine, where it might make a difference.

[Roger Williams]

My hon. Friend does not need my help—he speaks with great experience and passion on this matter—but some people consider Cumbria the most sparsely populated area in England, although, as he and I know, Powys is four times more sparsely populated. That may add some strength to his bid.

[Glyn Davies]

I am hugely grateful to my honourable neighbour, if that is a proper parliamentary term to use. No, I did not know that it was four times more sparsely populated. As he started to speak, I was intending to go straight to Google to find out the relative levels, but I accept the figure he gives. We know that Powys is sparsely populated. In the past, there would have been Government initiatives to address the problem, but I cannot think of any current great initiative. We need one, and we need to be added to the list of places where fuel price alleviation might be provided.

I wanted to make this contribution, first, because the issue is hugely important to my constituents, and, secondly, to encourage the Chancellor to recognise in his Budget that it is one of the greatest problems facing the remotest parts of rural Britain. The insidious impact is, as I described earlier, an anti-regional policy that makes it far more difficult to bring development to the remotest parts of our country.

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[Mr Hanson]

The issues are real. Again, in response, can the Minister tell me why the pilot areas were chosen? What is the assessment of rolling out a rural derogation throughout the United Kingdom? What are the cost assessments for the pilot areas and, indeed, for the other areas bidding today? How do we change the current scheme of taxing oil when it leaves the refinery, rather than at point of sale?

[Roger Williams]

On people travelling to get cheaper fuel, the idea of a derogation is to equalise the price between areas, not that it is cheaper in rural areas than in urban areas.

[Mr Hanson]

As the hon. Gentleman knows, that still involves a cost. We have already seen great bids from a number of parts of the United Kingdom for the derogation to be applied.

Currently, tax on oil is levied on leaving the refinery, rather than at point of sale. The complex issues of a derogation involve not just fairness but also applicability and how to achieve the aims wanted on the ground. The Government must reconsider the real issues.

Finally, one of the big issues in the Chamber that has not been explored was touched on briefly by the hon. Member for Montgomeryshire: the role of the oil companies in the price of petrol. Shell will have made £1.6 million in profit during the hour and 10 minutes of today’s debate. Even after the cost of the Mexican gulf oil spill—£7.7 billion—British Petroleum made £1.8 billion in profit in the third quarter of 2010.

The Government have their responsibility for the price of petrol, but I am also interested to know what steps they are taking internationally about oil company profits—made, quite rightly, in part, from the cost of petrol. Are steps being taken to look at such levels of profit and at whether we can take action among Governments to make a difference? The issue has no easy solutions. We took action as a Government to reduce the price of fuel when it was under pressure. In the Budget, the Government have the opportunity to do the same with the proposed rise. I am interested in what the Minister has to say. The solutions proposed today are not all simple, applicable or desirable. We need to have cross-party consensus, and I appreciate that the Minister has a difficult job. She must now know what we knew in government: none of the issues are easy, without real pain to communities at large. I welcome hearing what she has to say.