Motoring Fuel Costs

Russell Brown Excerpts

Tuesday 14th June 2011 Westminster Hall

[Robert Halfon]

I do not want to unveil all my secrets at once, and if the hon. Lady waits a bit, I will give her my proposal.

Total’s profit rose 34% year on year, and ExxonMobil saw a 69% profit jump to $10.5 billion. We must acknowledge that some companies make a good return for pension funds, but a balance must be struck. I remember the fuel protests in 2000, when we were seriously concerned about the threat of petrol at 80p a litre. According to PetrolPrices.com, the excellent price comparison website, the most expensive unleaded fuel in the UK is now £1.51 a litre.

I accept that 64% of the petrol price is taxation, and I welcome the Chancellor’s steps to slash some of the planned taxes, but the big oil companies must play their part. Why are prices so different at petrol stations, and why are they raking in such astronomical profits when small businesses are being forced into bankruptcy by fuel costs?

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

The hon. Gentleman rightly mentioned the oil companies. Did he witness the same thing as I did in my constituency eight or 10 weeks ago when some of the major supermarkets embarked on a price reduction of 5p a litre if customers spent a specific amount on goods, and at the same time raised the price of fuel by 4p or 5p a litre, which in turn forced the independents to put up their prices? The situation was contrived by some supermarkets.

[Robert Halfon]

The hon. Gentleman makes an important point, and that is why I am arguing for transparency. If supermarkets reduce prices, they must do so properly. We cannot have situations such as the one he describes. We often bash bankers, but oil barons are far worse, because they enjoy a semi-monopoly in the UK market, and most motorists have no alternative but to buy their products. We need transparency above all. Oil prices are falling, and we must ensure that the big companies cut their prices at the pump.

The green movement makes a case for expensive petrol, but modern vehicles have lower carbon emissions. Cars account for only 13% of our man-made carbon emissions. My argument—some hon. Members may say that it is controversial—is that environmentalism sometimes becomes a luxury for the rich, with no substantive answers, other than regressive taxes on energy. It is all too easy, in the cause of saving the planet, for the wealthy to insist that the poorest families should pay more in petrol taxes, and gas and electricity bills.

The impact of high fuel prices is particularly severe on road freight companies, and they are a major employer in Harlow. Road freight carries nearly 97% of everything we eat, wear or build with. High and rising fuel costs force the road freight companies to try to pass on the extra cost, and that stokes inflation. If they fail to pass on the increased costs, they go bust.

The road freight companies face a further cruel impact that the UK green lobby must consider. Fuel duty levels on the continent are about 24p a litre lower than in the UK, so hundreds of thousands of foreign lorries pour into the south-east of the UK and undercut UK hauliers. Foreign trucks pay no road tax here, and I welcome the Government’s plans to introduce a £9 a day charge, although I believe that it should be a lot higher. Those trucks pay no fuel tax in the UK as their tanks are big enough to last all week and all their fuel is bought abroad. They pay no employment taxes. They simply come into the UK, drive our UK freight companies out of business, and pay nothing to the Exchequer.

--- Later in debate ---

[Justine Greening]

The hon. Gentleman raises an interesting point, but the price of oil is a spot price driven by commodity markets. We are talking about a part of the industry that is different from the area in which we chose to raise tax. We are working with industry to ensure that we mitigate any risk of a lessening of investment in the North sea as a result of that tax. As my hon. Friend the Member for Harlow pointed out, we needed to strike a balance to take into account the overall effect of high oil prices as they fed through into the broader economy in petrol prices and energy prices more generally.

The hon. Gentleman will be aware of the report from the Office for Budget Responsibility. It showed clearly that, although the Exchequer has some growing tax receipts, the dampening effect of the rest of the economy is also significant. We felt that although there was an overall impact on the economy, one sector—the oil companies—was doing much better from a high oil price. It seemed fair and sensible to look at how we could balance some of the value that was being generated by the high oil price, and to create a fairer split between oil companies and those motorists and businesses that bear the brunt of the prices at the pump. We are working hard with industry to mitigate the impact of our policy on investment—the impact was analysed as being small by industry observers such as Wood Mackenzie. This is an important debate, and the Government recognise that motoring is an essential part of life for households and businesses. Fuel costs affect us all, and as the price of petrol continues to rise, those costs have become an evermore significant part of everyday life for people and companies. We were keen to look at what could be done.

The previous Government left us facing the introduction of a fuel escalator from the 2009 Budget that would have involved seven fuel duty increases. I realise that in this half-hour debate, only a Government Minister gets the chance to respond to the Member who secured it, but I am disappointed that a shadow Minister is not present to listen to some of the concerns raised. One of our biggest challenges concerned how to deal with the proposed above-inflation increase in fuel duty. That increase could have resulted in average prices at the pump being 6p per litre higher than they are currently. We would have seen above-inflation rises in 2012, 2013 and 2014. When we took office, no plan was in place to support motorists, and within the huge financial constraints in which we found ourselves, and with little room for manoeuvre, we had to see what we could do to address such an important issue.

[Mr Russell Brown]

I am sure that my colleagues will read Hansard tomorrow to see exactly what has been said. The Government inherited potential increases in fuel duty and the Chancellor has done the right thing by removing the fuel duty escalator, just as the previous Labour Government did. We also froze proposed increases in fuel duty on 11 occasions because of the increase in the price of crude oil.

[Justine Greening]

What was missing, however, was any kind of long-term plan for how to deal with changes in the price of oil feeding through to the pump. We wanted to look at how a stabiliser mechanism would work, which we felt would be in the interests of households, companies and the overall economy.