Petrol and Diesel

Stewart Hosie Excerpts

Wednesday 23rd May 2012 Westminster Hall

[Robert Halfon]

The Minister will have heard what my hon. Friend says. I am sure that the fact that so many people are here today making similar points will not be lost on the ears of a Minister who we know listens.

[Stewart Hosie (Dundee East) (SNP)]

Before the hon. Gentleman moves off rurality, can I make the issue real? A 10p difference per litre is nearly 50p a gallon or £5 a tank. For someone commuting and filling their tank twice a week, that is hundreds of pounds a year. I hope that he will take the opportunity to reinforce to the Minister that for ordinary working families who are struggling in this austerity period, that extra few hundred pounds makes a huge difference.

[Robert Halfon]

I thank the hon. Gentleman for his remarks. As I will say in my conclusion, statistics show that motorists in my constituency on average earnings pay one tenth of their income just filling up the family car. The Government say that people face fuel poverty if they spend one tenth of their income on fuel. People are forced to use their cars, and in my constituency—and, I am sure, elsewhere—they are paying one tenth of their income to fill up the family car.

I will make a brief point about the banks; I am nearly done. Last year, western Governments tried to release oil to cut pump prices, but banks bought up at least £1.6 billion of it. There is evidence that a lot of it was stored in silos at sea rather than entering the market, keeping prices high. America is introducing tough new penalties for market manipulation. I urge the Government to do the same in Britain. If Governments around the world do the right thing and release oil stocks, we cannot allow banks to buy it up, keep it at sea and hurt the struggling motorist.

What is to be done? I am a realist. I do not believe in “Charge of the Light Brigade” politics; I much prefer the battle of Agincourt. I accept that we do not have a magic money tree, but the big oil companies are not struggling. In the first quarter of this year, Shell had profits of $7.6 billion, BP $5.9 billion and Exxon Mobil $9.4 billion. It is a similar story at Chevron and ConocoPhillips. At the end of 2011, those firms had $58 billion in cash reserves. In order to find the money to stop price rises and help hard-pressed motorists, the Government could consider a windfall tax to fund cheaper petrol at the pumps. A windfall tax was imposed before, but on North sea oil in particular. I am asking the Government to consider a windfall tax on oil companies in general.

We must remember that motorists are not a lobby group. They are mums driving to school, children on buses and pensioners hit by inflation. When the cost of road haulage rises, the price of everything else rises too.

--- Later in debate ---

[Miss Smith]

My hon. Friend is right to highlight the complexity of the global market and its relevance to this debate. I suspect that there is a much broader debate to be had about where we might look for energy security and breadth of supply in the future, but he is right to raise that point.

On the impact of what the Government have been able to do, duty at the pump has been frozen for 16 months and pump prices are now 10p lower thanks to this Government’s actions. To put that into pounds, as other hon. Members have endeavoured to do in their contributions, a typical Ford Focus driver will be £144 better off as a result of those actions, and a haulier will benefit by £4,400 on average.

I understand why the August duty increase is one of the main points that has been raised. I am well aware of the burden caused by the rise in the international oil price and the concern it creates for businesses and families. This is, after all, a time of real uncertainty and instability from which no country can be immune. Britain has been comparatively stable in recent weeks. Only yesterday, the International Monetary Fund said that our approach is right and that we have earned Britain credibility again in our economy. Families and businesses benefit from that earned credibility, through lower interest rates.

Calls for the August increase to be scrapped raise an important question, because we would need to consider how to replace the £1.5 billion it would cost. That money would need to come from higher taxes or lower spending elsewhere.

The Centre for Economics and Business Research report that has been cited today has a couple of weaknesses. Its analysis is not straightforward. For example, it makes no mention of the relationship between oil prices and pump prices. It does not recognise the range of factors that go into pump prices. As such, its proposed fuel duty cuts could be totally offset by increased oil prices, which means that there may not be any reallocation of spending elsewhere in the economy. It is important to place that point about this frequently cited report on the record. We really need to consider the volatility of global oil prices. Any Government action would have to be taken against that backdrop. It is not certain that cutting fuel duty would have a positive effect on families or businesses.

Instead, the Government have taken action to help in areas in which we can be sure of a positive impact: supporting businesses through cuts in corporation tax and helping families through increases in the personal allowance threshold, which means pounds back in the pocket.

[Stewart Hosie]

On the CEBR report, the Minister is right that there are multiple inputs into the pump price, but surely she is not saying that that is a reason for doing nothing.

[Miss Smith]

The hon. Gentleman will have heard me explain over the past few minutes that the Government have done something and that there are many other ways in which this Government need to consider what they do through the economy.

On the recent Royal Automobile Club report, which has also been raised today and in which my hon. Friend the Member for Harlow is interested, the Government announced in the Budget that they will consider whether vehicle excise duty should be reformed to support the sustainability of public finances and to reflect the improvements in vehicle fuel efficiency. The Government will, of course, seek the views of motoring groups before taking any decisions.

My hon. Friend also asked questions about the competitiveness of the oil market. As I think he knows, the Office of Fair Trading is undertaking research on pump prices on the Scottish islands, which are no doubt of interest to the hon. Member for Dundee East (Stewart Hosie). That work will help inform what further action, if any, may be appropriate elsewhere in the UK.

Several Members have asked whether other island and mainland areas could be included in the rural fuel rebate pilot scheme. It is a pilot scheme and nothing beyond its boundaries has been ruled in or out, but I have listened to what Members have had to say.