Petrol and Dery (Hansard, 26 March 1981)

§ 12. Sir David Price
asked the Chancellor of the Exchequer what estimate he has made of the effect on industrial costs of increasing duties on petrol and derv by the equivalent, including value added tax, of 20p a gallon.

§ Mr. Lawson
The increased duties will probably add about 0.2 per cent. to business costs. This includes the increased cost of running company cars, whether on business or private use.

§ Sir David Price
In coming to that figure, has my right hon. Friend done any microeconomic studies—as opposed to macroeconomic studies—of individual companies? Is he satisfied that there is no knock-on effect of increased duties through the economy to the consumer?

§ Mr. Lawson
I cannot say that studies have been made of the effect on every company. It is our opinion that, in both the medium and long term, other factors will determine the rate of inflation, the rate of price increases and the rate of increases in industrial costs. It is only the immediate impact effect of the duty changes that comes out at 0.2 per cent.

§ Mr. Nicholas Winterton
Does my right hon. Friend accept that many companies involved in freight, transport and haulage are deeply concerned about the dramatic rise in the price of derv? One large national company believes that it will add about £½ million to its fuel bill each year. A haulier in Lincolnshire believes that it will add £70,000 to his bill, and a firm in my constituency will have to lay off drivers for the first time in 25 years because, due to the recession, its customers are not able to meet the increased cost, which it must pass on to the consumer.

§ Mr. Lawson
The increases in petrol and derv duties and in the vehicle excise duty represent an increased burden. That burden is felt particularly by the road haulage industry. To some extent, it will pass on that burden throughout the rest of industry. Therefore, the burden is not just on the road haulage industry. My hon. Friend must bear in mind—as I am sure he does—that that was an integral part of the Budget judgment. It was an integral and necessary means of achieving the borrowing requirement that my right hon. and learned Friend considered to be appropriate for the coming year and a borrowing requirement that enabled him to reduce interest rates, which was of great value to the whole of business, industry and commerce.