HYDROCARBON OIL ETC. (Hansard, 14 July 1977)

§ Mr. Joel Barnett
I beg to move Amendment No. 3, in page 6, line 6, leave out "5th August" and insert "8th August".

Mr. Deputy Speaker
With this we may also take Government Amendment No. 4.

§ Mr. Barnett
Amendment No. 3 provides that the removal of the increase in the duty on light oil of 5p a gallon is postponed from 6 pm on Friday 5th August until 6 pm on Monday 8th August.
Amendment No. 4 empowers the Commissioners of Customs and Excise to make repayments of the duty increase of 5p a gallon under arrangements made by them. I want to say something on that 971 matter because it might be helpful to those concerned.
When we discussed the matter in Committee on the Floor of the House, I said that I would consult the trade interests about the suitability of the date, and, indeed about the whole problem relating to the change in respect of the 5p. I have taken that course, and these amendments relate to those discussions.
The Petroleum Industry Advisory Committee, which represents the major oil companies, and the Motor Agents Association, representing garage interests, were unanimous that the date 5th August would not be suitable. It is a Friday preceeding one of the busiest holiday weekends. It is suggested therefore, that the date should be changed to Monday 8th August. That is what is contained in Amendment No. 3. Both bodies consulted were also unanimous that a change in the date would not in itself be enough to avert the risk of a petrol shortage. They advised that some repayments should be made on duty-paid stocks as an inducement to garages to maintain reasonable stocks.
12.15 a.m.
There is no precedent for repaying excise duty on duty-paid stocks when the duty is reduced. I. do not regard the relief for duty-paid stocks held on the introduction of VAT as a general precedent for compensation when excise duties are reduced. However, I recognise that the timing of the reduction of the petrol duty presents exceptional problems. That is why I have sought to meet the problem, following the discussions that have been held.
We considered that we must take steps to prevent a possible shortage of petrol at certain garages. We concluded, therefore, that this matter called exceptionally for some compensation. Bearing in mind that this is a once-for-all exercise and that to be effective it must work quickly, I decided on a scheme that would enable a measure of relief to be channelled through the oil companies to distributors and garages. This scheme will be embodied in the arrangements to be made by the Commissioners of Customs and Excise, to which the amendment refers.
The finer details of these arrangements are still being worked out between the Commissioners and the oil industry, but 972 the essential principles are decided. I am sure that the House would like me to outline them briefly.
In the first place, those oil companies which are members of the Petroleum Industry Advisory Committee—that includes all the major companies—have undertaken to calculate and make the repayments to distributors and garages. They will, of course, be reimbursed by Customs and Excise. I think that I should express the Government's gratitude to the PIAC for undertaking to play such a major part in the scheme.
The scheme is based on the maintenance of the normal pattern of petrol supplies and on the estimate that the minimum stock of petrol normally held by a garage is broadly equivalent to four days' deliveries, though this will not apply in the case of some garages which have an abnormal pattern of supplies.

§ Mr. Freud
Will the right hon. Gentleman give way?

§ Mr. Barnett
Perhaps I may finish this point. I shall then gladly give way to the hon. Gentleman.
To qualify for a payment by its supplier, a garage must have had a delivery of petrol between 1st and 8th August if it received 8,500 gallons or more during June. If it received less in that period, it must, in order to qualify, have had a delivery between 25th July and 8th August. A garage will then be credited with 5p a gallon either on all its deliveries in the qualifying period up to a maximum equivalent to four days' average deliveries during June or on the quantity of the last load delivered to it in the qualifying period, whichever is the greater.

§ Mr. Freud
In view of the Chief Secretary's careful computation of giving money back to the garages, will he explain what happened in the many instances where garages implemented the tax change overnight on existing stocks? In what way were the Government repaid?

§ Mr. Barnett
I should not wish to join the hon. Gentleman in suggesting that garages somehow or other have been taking money from motorists in quite the way that he implied. No doubt some garages may have done that, but, in the main, garages work on small margins, 973 and they have problems with these matters.
I am proposing a scheme to deal with an exceptional problem. In some cases it would create real hardship, particularly for some of the small—and even medium-sized garages, if some such scheme were not introduced. It is a rough and ready scheme. It was bound to be. However, I believe that a scheme of this kind represents what I hope will be seen as a substantial gesture to meet a special difficulty that genuinely applies to many garages. Is the hon. Gentleman not happy about that?

§ Mr. Freud
In many instances it was announced that the duty on petrol would go up "from midnight tonight". In those cases there seems to be a good argument for saying that the Customs and Excise should be reimbursed.

§ Mr. Barnett
The hon. Gentleman may be right in some instances. However, in the circumstances with which we are concerned, if something along these lines had not been done there would be a serious problem for motorists, because garages would have run their tanks very low—sometimes totally empty—and motorists would have been left without petrol. That is the only reason for the amendments and the elaborate scheme that we have entered into, which I hope will be found generally helpful.

§ Mr. Newton
Is it not simply that it is unprecedented for a change of this kind to be signalled in advance? It is a one-off operation and it does not help to have analogies drawn with occasions in which the price goes up or down at midnight.

§ Mr. Barnett
The hon. Gentleman is right. I have outlined the details of the scheme because I thought that they might be helpful for those who will be involved —the oil companies, garages and motorists. This is an unusual situation, and an unusual answer was necessary.
There is something in the point made by the hon. Member for the Isle of Ely (Mr. Freud) about when it works the other way, but doing nothing in those special circumstances would have created considerable difficulties.
We expect prices to be reduced to reflect the reduction in duty. I am sure that the vast majority of garages will play fair with the motorist. If they do not, my 974 right hon. Friend the Secretary of State for Prices and Consumer Protection assures me that he will vigilantly investigate any complaints that unfair advantage has been taken of the motorist.
Some garages may have difficulty in adjusting their prices at precisely 6 p.m. on 8th August, which is the exact time that the duty payable on deliveries from bonded warehouses is reduced. Garages are free to anticipate the reduction by a day or more if they wish, but motorists should not expect the lower prices to be introduced generally until 9th August. It may be that some garages will feel that they should charge the new prices on 7th August, and perhaps those near the home of the hon. Member for Blaby (Mr. Lawson) will wish to reduce prices on 6th August in order to give him a positive advantage.
This is a rule-of-thumb scheme which it is right to introduce in order to ensure the maximum help for garages and motorists.

§ Mr. David Howell
As the Chief Secretary said, this is an elaborate, unsual, exceptional, rough and ready, rule-ofthumb scheme to meet special circumstances.
Will there be a paper issued by the Commissioners to explain the arrangements, how long it will last, for how long the repayments will be made, and so on? Where should recipients look for instructions on how the repayments are to be made? For how long will the Commissioners have the power to make repayments? The admendment does not make clear when they will cease to have the power. How much will the scheme cost, and what effect will it have on the Index of Retail Prices in August?

§ Mr. Barnett
The hon. Gentleman has asked some interesting questions. There are to be discussions on the detailed arrangements, and the results will be published to garages by the oil companies which are making the repayments.
There is no time limit, and there is no real cost involved because, although it is difficult to know what would have happened if such a scheme had not been introduced, the odds are that the amount lost in revenue would have been the equivalent of the sum lost in the repayments. The answer to the hon. Gentleman's question is that the real cost is 975 likely to be negligible, and there may even be some gain if there is an increase in the amount of petrol used.