§ Mr. David Heathcoat-Amory (Wells)I beg to move amendment No. 40, in page 1, line 24, leave out '£0.5288', and insert '£0.499'.
§ Madam SpeakerWith this, it will be convenient to discuss the following amendments: No. 41, in page 1, line 26, leave out '£0.4721', and insert '£0.4355'.
No. 42, in page 2, line 2, leave out '£0.5021', and insert '£0.4557'.
§ Mr. Heathcoat-AmoryThe amendments seek to bring the massive increase in road fuel taxes back into line with the retail price index. Since the general election, the Government have increased the rate of annual increase in road fuel tax—the so-called escalator—from 5 per cent. above the rate of inflation to 6 per cent. above the rate of inflation. Additionally, they have sneaked in an extra Budget, and a further increase. Moreover, they have loaded further increases on to some fuels, above what one might have assumed to be the 6 per cent. limit.
Diesel fuel has been singled out. This year, VAT on diesel has been increased not by 6 per cent., but, in cash terms, by almost 12 per cent. That increase, in a single year, is simply staggering. It is a tremendous and enduring burden for all those driving diesel cars and, most particularly, for the road haulage industry, which relies almost entirely on diesel fuel.
The Government have replaced the environmental justification for fuel taxation—which does exist at lower levels and for more moderate increases—by a crude tax and cash grab. It is part of the relentless increase in business and personal taxation that we have seen in the past three Budgets. Annually, fuel duties now net a staggering £25 billion, and that is rising steeply.
The Government have ceased even to attempt to justify that huge annual tax escalator on environmental grounds. In the Budget debates, we asked Ministers how they justified the increase on grounds of global warming, or otherwise, but they simply backed away from the issue entirely. I am not surprised, because the Government's own publication on climate change shows that this is a ridiculously expensive and inefficient way of achieving moderate reductions in carbon dioxide emissions. Compared with other reductions which are attainable in the domestic sector and other business sectors, this is not the right way to go about reducing carbon dioxide. The same reductions could be achieved at a fraction of the cost.
Most remarkably, the Government seem entirely unaware of the scale of the increases that they have put through. The Chief Secretary told the House on 21 April: 838
The truth is that the price of a litre of diesel has risen by 7p since the general election."—[Official Report, 21 April 1999; Vol. 329. c. 929.]It was immediately pointed out that the Automobile Association had calculated that the increase in diesel prices since the election was not 7p, but more than 13p a litre—nearly twice what the Chief Secretary had admitted to.The figure was checked by "Energy Trends", an official index of the energy sector, and the House of Commons Library helpfully confirmed that the figure of 13p a litre was correct. The Library confirmed also that it had no idea how the Chief Secretary had calculated his figure.
We took this matter up with the Chief Secretary, but he failed or refused to admit his error, until a parliamentary answer from the ever-helpful Economic Secretary referred to the correct figure and the right source. It is now confirmed by the Treasury that the price of diesel rose between the election and that April date by 13p a litre.
In a sense, it does not matter that it took so long for the Government to admit the truth, because everyone else knew the truth. Motorists, particularly rural motorists, all knew the truth. Ministers in their Government cars may be insulated from the increases. They do not have to fill up their own tanks, and they are becoming increasingly out of touch with the needs of motorists, particularly those in isolated areas. Now, about 85 per cent. of the cost of fuel is represented by taxation. A forecourt or petrol station is now a massive tax office for the Government.
It is not just the private motorist who knows the truth and must bear the daily burden—the road haulage industry knows it. The industry warned the Government before the Budget. Its representatives gave the Government the facts and figures, explained their case with great patience and showed the Government that the industry would be made uncompetitive in European terms by the annual increase. Their case was dismissed and entirely ignored by the Government.
We now have the most expensive diesel in Europe, with a cost that is far higher than our continental neighbours. There is no way that the haulage industry can avoid this tax. Lorries do not drive around for fun, and there is no way in which they can avoid using diesel or avoid the tax. The haulage industry either has to absorb this extra tax burden, or pass it on. The burden is enormous. Nearly a third of the costs of running a heavy goods vehicle is represented by fuel costs. If a company has to absorb those costs, it could be put out of business—or certainly be made uncompetitive. If it passes on the costs, that raises the price of all goods which must be transported by road.
Yet the Government say that they are in favour of industrial competitiveness. They have had seminars and meetings to lecture industry about the benefits of American-style management, competition and productivity. If that is their message, they could start by giving us American fuel tax levels.
§ Mr. Christopher Leslie (Shipley)Is the right hon. Gentleman making a pledge that the Conservative party 839 manifesto for the next general election will include the aim to work towards reducing fuel duty to American levels?
§ Mr. Heathcoat-AmoryI am making the point that if the Government are so keen on American business practices they should start introducing some American-style costs. The European Union has to put up with the spectacle of the Prime Minister telling it to adopt American business regulation, or the lack of it, while at the same time he is converging on European costs or, as in the case of fuel duties, increasing them above European levels. As usual with him, it is very much a case of, Do as "I say, not as I do". Our pledge to the British people is to get off the fuel escalator, which is damaging and uncompetitive.
It is crass hypocrisy for the Government to talk about competitiveness and productivity while undermining them through their tax policies. It is the economics of the madhouse. There was a time when the Labour party knew something about industry, but these days very few Labour Back Benchers know anything about manufacturing. I do not think that a single Treasury Minister has ever had hands-on experience of that sector, so perhaps we should not be surprised at Ministers' not understanding the case put to them by the haulage industry, but that does not entirely excuse them.
The Government are penalising the industry not only by higher fuel taxes but by higher vehicle excise duty. Anyone can understand that raising British vehicle excise duty to make it not only the highest, but almost twice as high as the next highest in Europe, is tantamount to delivering a body blow to the industry.
For the 40-tonne articulated lorry—the workhorse of international haulage—our hauliers have to pay £5,750 a year. The figure for France is £486; for Italy, £634; and for the Netherlands, £670. The duty that the Government have imposed on the industry, in addition to the fuel escalator, is staggeringly higher.
The forum with which the industry was fobbed off at the time of the Budget has met only once, and despite what the Government said, there is no independent study on which we can rely to give an accurate comparison of costs here and on the continent.
It is wrong to say that no one will benefit from the Government's road tax policy, however: foreign hauliers certainly will. About 1 million foreign lorries will visit the United Kingdom this year and their operators cannot believe their luck. They are puzzled, amazed and in many ways delighted at the spectacle of a United Kingdom Government who are signed up to a code of conduct on unfair tax competition but create unfair competition against one of their own industries. They have created and are widening a gap that renders the British road haulage industry uncompetitive in Europe.
§ Mr. John Bercow (Buckingham)Does my right hon. Friend agree that in describing the Government's policies on these matters as "crackpot, cock-eyed and ridiculous" on 19 March 1999, the president of the Freight Transport Association, Mr. Lawrence Christensen, might conceivably have been guilty of understatement?
§ Mr. Heathcoat-AmoryYes. The gentleman concerned was in fact being rather restrained: he is a great 840 deal ruder about the Government in private. I am sure that he will return to the subject next year if the Government persist with this lunatic tax policy, which is rendering an important British industry uncompetitive in the way that I have described.
I said that several people and sectors will benefit from the policy. I mentioned foreign hauliers, but we must not overlook foreign Treasuries. The Treasuries of France and Belgium, in particular, are massive beneficiaries, as British lorries go overseas to fill up with foreign diesel. When they make trips abroad, drivers leave the United Kingdom with empty tanks and fill up on the continent. Before they return to this country, they make sure that they fill up at foreign ports. There are five haulage firms of significant size in my constituency, one of which is Frampton's. Mr. Frampton tells me that more than half his diesel is now purchased abroad. That is a huge and continuing drain on the British Exchequer, but the Government either are unaware of it, or do not care about it.
Another group to benefit from the policy are the smugglers in Northern Ireland. The Province has a land border with another EU member state, so smugglers do not have to take a trip by ferry or the channel tunnel to reach it: they need only drive across the border and fill up their tanks. The association representing petrol retailers has estimated that the Government lose about £100 million a year through the smuggling of diesel and other fuels across that land border.
The Inland Revenue has not produced an estimate of the amount lost through that smuggling. I have asked the Government to make a stab at an estimate and to do something about what is a real problem, but to no effect. Given that much of the smuggling is done by paramilitaries, it is odd that the Government's tax policy should put illegal funds in their hands.
It has been reported that the Government are having second thoughts about the fuel escalator. Trailing changes of policy in the press instead of announcing them to the House is not unusual for the Government, but I hope that the Economic Secretary, when she replies to the debate, will confirm that the Government have changed their mind. That would be welcome, but it would be too late for many haulage firms. However, the House would have something to celebrate if the Government were to repent, even at this late stage.
Another fiasco is developing for next year—the possibility of a climate change tax. That threatens to do to the rest of industry what the fuel tax escalator has done to the haulage industry. Perhaps the Government have decided to attack only one sector of industry at a time, and will drop the fuel escalator to concentrate damage, through the climate change tax, on the rest of manufacturing industry.
The House would benefit from an explanation of the Government's intentions. One supposed virtue of the tax escalator has always been that it gives industry some warning of changes to duties and that car manufacturers and others can plan design and production. If the Government are having a rethink, as reported in the press, it should be made explicit and clear.
In anticipation of the Government's belated change of heart, we have tabled amendments to this year's Finance Bill to end the fuel tax escalator. The destruction of the haulage industry and the campaign against the private 841 motorist—carried out under a bogus environmental justification—have gone on too long. The amendments would end that process, and I invite the House to support them.
§ Mr. Stephen Dorrell (Charnwood)I support the amendment, and I agree with every word that my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said about the way in which the Government have introduced their road fuel duty policy and its perverse effect on the environment and competitiveness.
Like my right hon. Friend, I seek from the Economic Secretary to the Treasury a clear statement of the Government's policy but I think that matters are even worse than he suggested. There is press speculation, presumably stimulated by loose talk in the Treasury, that the Government are rethinking their unpopular policy, but the Economic Secretary, at Treasury questions on 13 May, implied not that the policy was being rethought but that the Government intended to pursue it until 2010 if they were re-elected often enough. The price of unleaded petrol would then reach £6.90 a gallon, and diesel would be more than £7. Is that the Government's policy? Are we on an escalator from which there is no exit for a further 11 years if the electorate continue to elect the Government? Or should we believe the press speculation?
The Economic Secretary's first duty as a tax Minister is to set out clearly the Government's policy. The policy as last expounded by the Chancellor of the Exchequer—a commitment to the 6 per cent. ratchet—is misguided. It sits badly, to put it no stronger, with the implication that the Government want to reduce the tax burden, an impression that various Ministers, from the Prime Minister down, create, and that was the reason for the income tax rate cut on Budget day. The Government's rhetoric is about low tax, but they are piling on tax by stealth as fast as they dare in parts of the economy that they hope the public will not recognise or in ways that the public will tolerate without too much noise.
The Government's approach to taxation of petrol and diesel is a perfect example of stealth tax. The tax is deniable, and it need not be justified year after year because it has been pre-announced. The Government clothe themselves in the garments of tax cutting, but they have made a clear commitment to increasing the burden of taxation paid year after year by a section of the community. That is objectionable.
§ Mr. LeslieAs the right hon. Gentleman is talking of matters deniable, can he deny that he was in the Cabinet when the fuel duty escalator was his Government's policy? How does he reconcile the previous Government's view with his statements today?
§ Mr. DorrellI find no difficulty in reconciling the two things. To be on an escalator is not to deny the possibility of getting off. We announced a series of tax measures, but, in the present circumstances, we believe that the process has gone far enough, and I have no difficulty whatever in saying so. Presumably, the person who has gently speculated to the press that the Government may rethink the proposal equally finds no such difficulty.
842 My first objection to the Government's policy is that it relentlessly increases taxation on identified sections of the community. Secondly, it reveals a deep-seated prejudice against car ownership that runs right through the Government. I am not opposed to public transport, but I am vehemently against those who oppose in principle the development of private transport.
The motor car has been a huge source of wealth creation for those who build and sell cars and a huge source of freedom for those whose horizons have been widened by its flexibility. Surely the challenge to policy makers is not to dress the motor car up as a public enemy, but, through tax and regulation, to create circumstances that make it a good neighbour.
I do not understand how relentless increases in the tax on fuel redeem the obligation that rests on the Government. It is a form of intellectual slovenliness on the part of Ministers to think, "We can pander to a prejudice against the car" and that it is somehow a cost-free option. Ministers owe it to the House to be more direct and analytical and to discharge their responsibilities more seriously.
The third and perhaps the most immediate reason why I object to the Government's policy on road fuel duties is the reason that my right hon. Friend the shadow Chief Secretary emphasised in his remarks—the effect that the policy is having on the competitiveness of the British road haulage industry and of wider British industry as well. In that connection, I should probably declare an interest as a director and shareholder in a manufacturing business. The manufacturing sector perked up during my right hon. Friend's speech. It is true that all manufacturing businesses rely, at least to some degree, on the haulage sector, and I therefore have an indirect interest in the issue.
The tax policies that the Government are pursuing mean that every British road haulier is at a gradually increasing disadvantage compared with continental competitors. Year after year, the Government are creating a set of circumstances in which there is an increasing incentive for British hauliers to tank up and, in some cases, to register their vehicles overseas. Continental hauliers increasingly have the opportunity to undercut their British counterparts on journeys that involve transport between one British destination and another.
The British road haulage industry is being crucified by the Government's hostility to road transport and the use of the road vehicle is a key part of the British economy. Beyond that, it is not merely the road haulage industry but all those parts of British industry that rely on the transport of goods that are affected. In a modern economy, the link between one part of the supply chain and another is a key cost element in the build-up of total costs that is charged to the eventual consumer.
When the Government increase the cost of haulage between one plant and another within the United Kingdom, they put up not only the cost to British consumers but the price that the producer has to charge in Britain and abroad to compete against foreign competitors. It is not merely the competitiveness of the road haulage industry that is being undermined. The policy is an important source of lack of competitiveness throughout British industry and the Government are solely responsible. Therefore, it is incumbent on Ministers to explain to the House what greater good is being achieved 843 by that relentless and increasing burden on not only the road haulage industry but the whole fabric of British industry.
§ Mr. Michael Fabricant (Lichfield)Surely the answer to the question, "What is being achieved?" is that the Government can add taxes by subterfuge. If they tax through the Inland Revenue, the voter feels it. By doing it this way, they have achieved tax increases by stealth.
§ Mr. DorrellThat is why I said earlier that I object to the policy as it is an increase in the tax burden that allows the Government, year by year, to deny that it is a tax increase brought about by the Budget, as they did in this year's Red Book. In a narrow technical sense, they are right. It was not a tax increase brought about by the Budget, because it was previously announced. However, it means that the tables in the Red Book are misleading, if they are intended to show a change in the tax burden from one tax year to another.
§ Mr. BercowDoes my right hon. Friend think that, on 23 January 1995, when the hon. Member for Bristol, South (Dawn Primarolo), now the Paymaster General, complained in the Finance Bill Committee that 75 per cent. of the cost of a gallon of petrol or of diesel was accounted for by tax, it would have been helpful if she had explained that her intention, on becoming a Minister, was to increase the percentage to 85?
§ Mr. DorrellMy hon. Friend makes his own point; it is a good one, and might be developed if, in response to the debate, the Economic Secretary were to set out clearly the Government's long-term intention for the escalator. The 85 per cent. to which my hon. Friend refers applies only at present. How much further is the policy to be pursued before we reach Ministers' objective?
Before I conclude my remarks, I want to mention the broader impact of the Euro-argument—to use that shorthand. We discussed that issue in Standing Committee, to the great merriment of Labour Members, who felt that those of us who favour active and positive involvement in Europe would find it difficult to engage in the debate. However, the issue clearly illustrates the principle of tax competition that should underlie our tax policy—indeed, it would be difficult to think of a better illustration. What is at stake is the use of the tax system to seek competitive advantage for this country vis-a-vis our continental neighbours.
The Government are busy making Britain uncompetitive, while a competition is taking place to which they are not responding. I believe in tax competition and that is why I think the Government should examine what their competitors elsewhere in Europe are doing; they should respond to that competitive pressure—it should apply to Governments just as it applies to everyone else in the economy.
One of the great benefits of an open liberal economy is that Governments—like every other agent—should be responsive, and should be subject to competitive pressure. The Government are answerable to a competitive marketplace, but they are not responding to the pressures exerted by that marketplace. Until they respond, our economy and those who work in it will carry a 844 heavier and heavier burden; they will pay for the Government's inflexibility with their jobs and their living standards.
§ Dr. Vincent Cable (Twickenham)I shall speak about the broad principles of the escalator. Yesterday, the Liberal Democrats supported several Conservative amendments. The amendments were well made and well argued; we agreed with them on their merits. However, these amendments are opportunistic and cynical in the extreme. I fully intend to support the Government on the principle of the escalator. Some genuine problems have been raised—such as the international competitiveness of the road haulage industry—to which genuine solutions were proposed in Committee and during our debates in this place. I should be interested to know how far the discussions on the Brit disc proposal have advanced.
Before I get into the meat of the subject, perhaps I can tempt Ministers to tell us more about the press reports—especially the story by Messrs Brown and Grice in The Independent. I always read Messrs Brown and Grice, because they seem to have several days' advance notice of Treasury thinking—especially the Chancellor's thinking. By reading their column, one has been able to follow the debate on economic and monetary union several days ahead of public pronouncement. Their suggestions are more than interesting. They seem to suggest that the Government are considering withdrawing the escalator—by which I think they mean the petrol rather than the diesel escalator—and replacing it, in its environmental impact, by a series of congestion charges to be levied by local authorities. That might represent a considerable advance in policy, but I do not know that for sure, because I have not seen the details. I can see that such a policy has both positive and negative implications, but let us first think a little about the positive aspects.
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Such a regime would be far more targeted than the escalator. If the rumours are true, levies would fall most heavily on areas where congestion is worst. Instead of farmers or rural families in Caithness and Sutherland having to pay much higher petrol duty, the levies would fall most heavily on congested cities, which is where most pollution is generated and where there are extra social costs resulting from congestion. Therefore, the policy would appear to be sensible.
Another positive aspect would be that the Government had adopted an approach of decentralisation, as local authorities, especially the new mayors, would be able to make their own judgments. The reports also appear to suggest, although we do not know the details, that the Government are now committed fully to the principle of hypothecating revenue from taxation on transport. Yields from the congestion taxes would be fed back into either reduced vehicle excise duty or improved public transport.
All those would be positive developments, but we cannot have an intelligent debate until we know the details of the proposals. It could be—I suspect that it is—that the Chancellor is trailing a backdown from the whole principle of environmental taxation generally. We have already seen that trend in the abandonment of the policy of shifting from gas to coal, and the proposals might herald a continuation of it. Even if we get the information a little later than Brown and Grice, we would like to hear more from Ministers about where their thinking is leading.
845 Let me address a few comments to the Conservatives. My belief that their amendments are rather opportunistic is based on two reasons. First, there are the revenue implications of their proposal. As I understand it, the escalator is worth roughly £1.5 billion a year, which is a substantial sum. It is incumbent on those who attack the escalator and so break the cross-party consensus on its use to explain clearly and precisely how else that sum can be funded.
Secondly, and following on from that point, if the Conservatives want to lead opinion away from the concept of the escalator—which they promoted in office, with the support of the Liberal Democrats and the then Labour Opposition—do they intend to embrace the new philosophy, which the Government appear to be considering, of having road user charges? Support for the use of congestion taxes would seem to be compatible with the Conservatives' overall philosophy. Right-wing think tanks such as the Institute of Economic Affairs and the Social Market Foundation have long argued that such measures are the right way to deal with the problem, so will the Conservatives support their use? If would be helpful to all parties if we knew that, in London, controversial new taxes to deal with the problem would command all-party support.
If the Conservatives are leading us away from the escalator, what alternatives do they propose? To make that point slightly more general, if we do not have an escalator, how is the problem of pollution to be dealt with? There are two options, of which the first is to do nothing.
§ Mr. Tim Loughton (East Worthing and Shoreham)I am following the hon. Gentleman's arguments with great interest. Can he explain how congestion taxes would affect freight drivers, who have to be in the centre of towns rather than in the highlands of Scotland because that is where their customers are and where they have to deliver goods to shops and factories? How would the introduction of congestion charges help them, as opposed to removing the absurdly high escalator on diesel fuel?
§ Dr. CableThat is a good question. However, since we do not know whether the Chancellor's new thinking focuses on petrol duty, the diesel escalator, or both, I cannot answer it. The hon. Gentleman is quite right to say that the road haulage sector faces a set of problems that are completely different from that facing urban commuters, against whom congestion charging is primarily directed. We need to know where the Government's new thinking is leading.
To return to my basic theme, my justification for the escalator is twofold. First, it is a market-friendly way of changing policy. It sends a signal to consumers—whether road hauliers or motorists—and to industry that they should change their behaviour. It is a price signal; it is an economically efficient way of changing behaviour.
The other basic reason why the escalators—whether on road haulage or motorists—are justified is the simple "polluter pays" principle. Pollution is generated, particularly by road haulage. Most of the studies that I have seen suggest that the road haulage industry pays nothing like the social costs of its activities, which are extremely great, both in damage to the carriageway 846 system, especially by very heavy lorries, and in emissions, particularly of black smoke. I think that the industry accounts for about 40 per cent. of that particularly lethal emission. Social costs will not be covered unless there is a proper system of environmental taxation, which the escalator provides.
§ Mr. BercowThe hon. Gentleman said a few moments ago that the escalator was a sensible, market-friendly way of seeking to change behaviour. Does he accept that, in order for it to be such a mechanism, it is necessary for consumers to be able to choose from other products—if I may use the word broadly—that are capable of being purchased in the market? If, however, there is no credible alternative, as the Paymaster General poignantly observed on 23 January 1995 in saying that most motorists in rural areas were dependent on their cars, surely the hon. Gentleman's point about the market does not apply.
§ Dr. CableThe hon. Gentleman is of course exactly right: there must be an alternative. That is why I am hoping that the principle of hypothecation will emerge from new Government thinking and revenues will be returned to improve public transport, which I think meets his point. Of course, some money that goes to the Treasury comes back in order to improve provision, but the sums that have recently been allocated to rural public transport are derisory in relation to the revenue raised from it.
The other question to which the hon. Gentleman's remarks give rise is, this if we do not have a market mechanism such as taxation or congestion charges, what else can we do to change behaviour? One may do absolutely nothing, which may be what will happen. I do not know whether the Opposition are advocating merely letting taxes stagnate and trend motoring rise above the predicted rate, allowing all the pollution and greater congestion to flow from it. There is a laissez-faire solution: let us just see what happens. I hope that that would be unacceptable to most of us on environmental and broader social grounds.
Another approach is to use not the market but regulation. Instead of imposing higher taxes, we could force the motor industry to improve the standards of cars. In many respects, that is happening, and it could happen much more. I came to this House from the energy industry, in which we spent much time thinking about the future of the so-called supercar—cars built from very light materials, with much improved battery systems, fly-wheels and better engines. Enormous improvements could be made to reduce emissions and meet environmental objectives. Through regulation, the industry could be forced to advance production of such models. Of course, there is potentially a very large cost for such regulation, for which somebody must pay—probably not the industry, since it will pass the cost on to consumers.
If we want to achieve environmental objectives, we must do so either through market signals, which are taxation or congestion charges, or through regulation, for which someone must pay—or we do absolutely nothing. If the consensus between the three parties is to be broken, it is incumbent on all of us to make it absolutely clear which of those choices we will follow.
§ Mr. John Swinney (North Tayside)The hon. Member for Twickenham (Dr. Cable) made an interesting 847 contribution to the debate, as he did the last time that we discussed this issue on the Floor of the House in April. I am somewhat surprised and perplexed by the reasoning behind his intention to support the Government because, in April, the Liberal Democrats voted against clause 2 stand part.
When I sit in my constituency surgery, I am often aware—I suspect that I am not alone in this—that I never know what is coming when the next person steps through the door. However, when fuel taxation is being debated in the House, one knows what is coming next. In the short time for which I have been a Member, the issue has come before the House three times, in the three Budget rounds since the 1997 election. However, it is important that we consider it again today.
The difficulty in such a debate—on this point, I have some sympathy with the hon. Member for Twickenham—is that there is a slight whiff of hypocrisy about much of what is said by Conservative Members, because they invented the fuel duty escalator and applied it with vigour during their time in office. They managed to teach this Government another important trick—to tax by stealth. All the arguments that the Government use to hide behind a claim that they are lowering direct taxation while they increase indirect taxation, of which the fuel duty escalator is a strong and powerful example, were taught to them by the previous Conservative Government and their predecessors, so we need no lessons from Conservative Members on the ability to tax by stealth.
None of that, however, invalidates the substantial points that have been made. First, the fuel duty escalator represents a serious competitive impediment to many aspects of working life in this country, whether in the haulage sector or the sectors of the economy that particularly concern rural communities. Secondly, the increase in indirect and hidden taxation has a uniform and punishing effect on some of those who are least able to pay that taxation. It has already been said that we have the highest fuel prices in Europe. On current estimates, we shall be paying something like £4.30 for a gallon of petrol by the end of this Parliament if the Government continue with their plans.
Over the past few weeks, I have had the benefit of being on the campaign trail, where I have been very assiduous, in the Scottish parliamentary and European elections. I made many visits to individual companies, not only in my constituency, but in central Scotland, the south of Scotland and the highlands, and almost all the discussions that I had with them related to the increasing impediments to competitiveness caused by the increases in the fuel duty escalator. For example, a paper manufacturing company has found that its distribution costs have substantially escalated, and companies in the textiles sector are finding it difficult to get their products to market. There is a direct impact on companies' competitiveness and their ability to secure stable levels of employment.
In a debate in the House in late April, I gave the example of a company in my constituency which is emerging from difficult times. As a result of the fuel duty proposal, it faces an increase of about £10,000 in its annual costs, which is a serious burden for such a company when its employees are working very hard to improve its fortunes. That is the sharp end of the Government's proposals.
848 Another perspective that I want to bring to the debate is that of rural communities. I am becoming increasingly concerned about the impact of the fuel duty escalator on rural communities, particularly those that I represent. I should perhaps declare an interest because, over the summer, I shall embark on an extensive tour of my constituency which will involve lots of driving, so I should record that a lot of petrol will be put into the vehicles that I shall use.
It is important to consider the impact of the fuel duty escalator on rural communities. It has a direct impact on people who have no public transport alternative and who must own a car to go about their daily business, but I particularly want to draw to the attention of the House the impact that the fuel duty escalator has on public services.
In an area such as the one that I represent, key workers who are delivering public services—for example, home-care workers, those delivering education services and those providing health care services—are disproportionately affected by the level of fuel duty increases that we have experienced. Those increases are consequently disproportionately affecting the ability of public services to be effectively delivered and distributed in key rural areas of our community. This flows through into the prices of goods and services within the private sector and, inevitably, affects the weaker within our society. All those issues have been rather glibly thrown aside by the attachment to the fuel duty escalator that the Government have continued to display.
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One of the central issues raised by the right hon. Member for Wells (Mr. Heathcoat-Amory) and by other hon. Members, including the hon. Member for Twickenham, is the status of the Government's intention in this policy area. During the days before our previous debate on this subject, which took place on 27 April, it was suggested that the Government were going cool on the fuel duty escalator. That was before some of the substantial outbreaks of anger in the road haulage sector that we have experienced. The national transport forum has been thrown to that sector to address its concerns. The Government suggested then that they were going cold on the question of the escalator and we have heard little about it until the outbreak of the most recent speculation on the subject. The House deserves an explanation from the Government of where they stand.
It is apparent from earlier discussions that are recorded in the Official Report that the Chief Secretary has made it clear that the contents of the Red Book reflect the insistence on the application of the escalator for the remainder of the Parliament. That remains a central part of the Government's argument. We require clarification from the Economic Secretary this evening.
One of the Labour candidates in the Scottish parliamentary elections—this is someone who will be known to those who run the Labour party in Scotland because he was the candidate for the Galloway and Upper Nithsdale constituency, which I am delighted to say was retained by my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Morgan) on 6 May—said that the application of the fuel duty escalator in rural areas was a poll tax on wheels, affecting people unfairly and unjustly in rural areas and having no relationship to ability to pay. All the damning criticisms that were made of the poll tax 849 are equally valid when made of the poll tax on wheels that the Labour candidate for Galloway and Upper Nithsdale thought was so iniquitous.
§ Mr. BercowTo the knowledge of the hon. Gentleman, is the individual concerned still a member of the official list of prospective Labour party candidates?
§ Mr. SwinneyThat is a pretty select list and I imagine that it is difficult to get on to it. I would not venture to go anywhere near the selection process that goes on there. I advise the hon. Gentleman that he should steer well clear of the issues that bear on access to the Labour party candidates' list in Scotland. It is a secret sect if ever there was one.
§ Mr. Malcolm Chisholm (Edinburgh, North and Leith)Will the hon. Gentleman give way?
§ Mr. SwinneyI must give way to someone who is—
§ Mr. Deputy Speaker (Sir Alan Haselhurst)Order. Before the hon. Member for North Tayside (Mr. Swinney) is so generous, I must tell him that this fascinating mini-argument that has crept into the debate is out of order.
§ Mr. SwinneyI apologise, Mr. Deputy Speaker, for taking the House along an inappropriate road, if I might use that pun.
I give way to the hon. Member for Edinburgh, North and Leith (Mr. Chisholm).
§ Mr. ChisholmDid the hon. Gentleman read the comment of a leading environmentalist that appears in a Scottish newspaper this morning? He says that for the Scottish National party to oppose both fuel duty increases and road user charges is the worst sort of populism and the worst sort of rubbish. What is the hon. Gentleman proposing for the environment? How can he justify the fact that SNP Members of the European Parliament are seeking to join the European Federation of Green Parties, which supports all those taxes and far more?
§ Mr. SwinneyIf I were to talk about surrounding issues the European Parliament, Mr. Deputy Speaker, you would rule me further out of order than I was earlier.
It is important that we put in place a credible alternative that will change people's behaviour, and that has not been offered by the Government in support for the rural transport fund or by investment in public transport infrastructure. It is important also that the Government respond constructively and positively to the genuine difficulties that are now being faced by rural communities in Scotland and other parts of the United Kingdom. Nothing has been said by the Government that addresses those difficulties. The sooner we hear an answer from the Government, the better the position will be for the rural communities that are suffering disproportionately as a result of this unfair taxation.
§ Mr. LoughtonI support the amendments moved by my right hon. Friend the Member for Wells 850 (Mr. Heathcoat-Amory). As a member of the Environmental Audit Committee, I am concerned with the issues of green taxation, achieving Kyoto targets and so forth. The Economic Secretary to the Treasury, who has appeared before our Committee many times, knows our commitment to those matters. In the next week, we shall publish a report on energy efficiency, which touches on many of the subjects that we are debating today.
The measure that the amendments seek to ameliorate has nothing to do with energy efficiency and environmental conservation. The crux of the matter is the absurdity of accelerating the fuel duty escalator and then trying to dress that up as an environmental gain. In our many debates on the subject, we never hear from the Government any mention of the change in the cabotage rules that came in last July, which has completely altered the game for the freight industry in Europe and the United Kingdom.
As from last July, there is no environmental gain whatever to be had from jacking up diesel fuel duties in this country. That can only result in British lorry drivers, driving British lorries on British roads and emitting British fumes, being replaced by Belgian, French and German lorry drivers, driving Belgian, French and German lorries on British roads and emitting Belgian, French and German emissions from their lorries. Moreover, those emissions tend to be a rather poorer grade, because of the lower standards of maintenance of those lorries and the poorer quality of the fuel sold on the continent. It is utter nonsense to suggest otherwise.
The Government cannot continue to refuse to believe the evidence in front of their eyes. My right hon. Friend said that there were about 1 million lorries from Europe travelling on British roads this year. For the past three or four years, there have been 100,000 extra lorry trips a year from the continent.
I recently visited lorry drivers up in Lincolnshire. One has only to visit ports around the Humber to see the collapse in the roll on/roll off business. In the old days, foreign lorries would deposit the sealed containers at continental ports, to be brought over to the UK on ferries and picked up by British tractor vehicles and carried on to their final destination. Now continental lorries take the containers all the way through to their final destination, such is the economy of scale.
The British lorry drivers who would normally charge £1 per mile for the journey find that they are competing with continental lorry drivers who are quoting just 60p per mile for such journeys. British lorry drivers cannot compete with such a gap in margins, and no reduction in margins is being achieved by their end customers. The British lorry drivers are suffering at every point.
Eurostar is offering cheap fares for cab drivers to take their tractor vehicles over to the continent to fill up with petrol. There are also special ferry charters taking lorry drivers over to the continent just to fill up. A cheap rate overnight on a Sunday of less than £20 per metre is economically very attractive. To fill up a 1,200 litre tractor unit can save more than £600, which is well above the cost of the fares. In addition, extra lorry-miles are being created on British roads by those tractor vehicles being driven to the ports to be taken to the continent. That is utterly absurd.
What is the net effect? An enormous net loss in revenue to the UK Treasury and a net increase in revenue for the Belgian, French and German Exchequer, as well as the 851 Irish situation, about which we have heard. That of course means less money for the Treasury, which supposedly will hypothecate in respect of more environmentally friendly measures to encourage greater use of liquified petroleum gas to help this country to achieve its Kyoto targets, which we all want to be met.
As we have heard from my right hon. Friend the Member for Wells, the Economic Secretary constantly gets her figures wrong, and, at long last, the admission was squeezed out of her that the price of diesel fuel has increased by 13p per litre since the election. However, there still seems to be no sign of the Government acknowledging the reality of what is going on. As one of my hon. Friends has said, at Treasury questions on 13 May, she envisaged the fuel escalator continuing for a further 10 years. As if to add insult to injury, on 24 June, at the next Treasury questions, those freight drivers who wanted an end to the escalator, which we were advocating, were accused of being extremist. They were called extremist for wanting to preserve their industry and their jobs and for wanting British trucks to continue to carry British goods on British roads rather than lose out to European competitors.
Even if we put on one side all the other additional costs that the freight industry has been facing, such as the selective increases in vehicle excise duty, and the fact that new tyres will cost about £278 per axle on an 18-tyre vehicle—
§ Mr. Andrew Love (Edmonton)I thank the hon. Gentleman for giving way in the midst of painting a picture of doom and gloom. Can he tell us the level of penetration of the British market by foreign lorries?
§ Mr. LoughtonI have already given the figures. There has been an increase of 100,000 lorry trips a year over the past three to four years. Those are the Treasury's figures. If only one Treasury Minister would stand on a motorway and carry out a survey—[Interruption.] To be generous, a Minister could stand at the side of a motorway.
Treasury Ministers should visit a service station on a major motorway and count up the number of foreign-flagged vehicles in the car park; then they would have to admit the truth. I cannot see why they cannot carry out some basic research. If they did, they would see that the number of foreign vehicles carrying freight on our roads has increased disproportionately.
These measures also hit the smaller operators—owner-operators in particular—disproportionately, because 85 per cent. of goods vehicles in this country operate in fleets of 10 vehicles or fewer. The cost of fuel constitutes at least 40 per cent. of the overall operating costs of such operators. Things would have been even worse had it not been for the weakness in the oil price over the past year to 18 months, although that advantage is disappearing very quickly. With yesterday's news that the oil price has returned to more than $18 a barrel, it will not be long before the small element in the cost of a gallon of fuel that represents the product itself is pushed up. The overall price of fuel will increase even more, let alone the tax on top of it.
Whenever we mention those matters and the real factors that are affecting many lorry drivers in this country, the Minister starts talking about special tax concessions for cleaner lorries, for installing catalytic converters and everything else. She should try driving a 852 38-tonne lorry fuelled by liquified petroleum gas. She might find that the tanker required to fuel it rather bigger than the vehicle itself was, and that a large amount of fuel to be dragged along behind it. Will she start to explore the economics of catalytic converters, which cost more than £2,500 to fit, although the tax break which is supposed to encourage drivers to fit them is very much less than that? They are guaranteed for 12 months only and account for a significant drop in the fuel economy of a vehicle, yet again threatening drivers' margins.
We debated road fuel gases last night and it was interesting that the Economic Secretary claimed that Government had broadened the differential between the duties on liquified petroleum gas and on hydrocarbon fuels. She said that it was important that the gap between the duty on those two fuels had been widened, because that would encourage more people to use LPG. Of course that gap will widen if the rate for diesel fuel is jacked up at the upper end. It is absurd.
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Unless the Government accept the amendments at the last minute, the proposed measures will result in an overall loss in revenue to the Treasury without any concomitant reductions in CO2 emissions from freight traffic. Business will go to continental lorry drivers at the expense of British jobs, and UK companies will either relocate their fleets or part of their fleets to the continent or flag out to continental operators. British companies are already doing that. Indeed, firms are springing up on the back of the advice given to British lorry drivers on how to take advantage of flagging out or relocating to the continent.
As the hon. Member for North Tayside (Mr. Swinney) said, the rural community is affected, and especially community bus services in the countryside. Some months ago, the Economic Secretary talked out a private Member's Bill that would have exempted community buses from bus fuel duty. They currently have no exemption, and pay 100 per cent. of the excise duty charged on diesel fuel. I thought that we were trying to promote such bus services yet, they, along with the commercial freight drivers, will be one of the biggest victims of the proposed increase in excise duty. Those services are often run by charities and volunteers. The disabled, who rely wholly on their cars and disabled bus and taxi services in the country and town alike, will also be victims.
The Government must wake up to reality. The amendments send a clear signal that enough is enough. We need a drastic reversal of policy. It may have been appropriate five or six years ago, but it is now time to get off the escalator. If not, the measures will be self-defeating in terms of revenue raised and environmental gain. It is about time that this madness stopped.
§ Mr. Robert Syms (Poole)I intend to make a brief contribution.
I support amendments Nos. 40, 41 and 42. The fuel escalator raises £25 billion. It raises so much money because it is a regressive form of taxation. When designing a tax system, one should take into account not only how to raise revenue, but how to make that fair. The effect of these tax measures will be substantially different in each constituency.
853 In large rural areas the car is a necessity. People have to use it to maintain their quality of life—to take the children to school, to go to hospital, to go to church and to do all the basic things. In many urban areas, especially London, there are transport alternatives, but for constituents who live in villages out in the wilds of England, Wales and Scotland there is no alternative to the car. This tax will be determined more by people's postcode than by their choice of transport. It is unlikely to affect wealthier people, but it will hit poorer people in rural areas.
I was a rural county councillor. One should not presume that because people live in pretty villages they have high disposable incomes and are well off. Many people who live in villages struggle to bring up a family and keep a home together. The imposition of fuel duty year on year makes that very difficult. The Government's taxation policies are driving poorer people out of rural areas: that is happening more now than in the past 20 or 30 years. That is a pity, because many villages will end up with unbalanced communities.
I welcome the amendments. At least they have given rise to a debate, and at least they take into account the fact that a policy that is sane when it relates to one year can become insane when it is implemented year after year, and when it impacts on only certain people in certain constituencies. Some of those people may not have the largest incomes, or, indeed, the largest cars; they simply need to use the car to do basic things.
As one who represents a port, and a port that is used by road hauliers, I am very aware of the burden that the clause imposes on the road haulage industry. Road hauliers carry the vast majority of the goods that appear in our shops and supermarkets. There is no such thing as a painless tax increase, and at some point people must pay for the amount that the Government are raising—in this instance, £25 billion. The cost must be paid either by consumers through higher prices, or by road hauliers, who must try to contain their costs. They may be able to squeeze efficiency for one or two years, but that will become increasingly difficult after a period of several years, when fuel prices are constantly rising.
The road haulage industry is very competitive. Most hauliers survive on small margins. It is a problem if they have to jack up prices every year in such a competitive industry: many businesses are likely to go bust as a result, and many drivers are likely to lose their jobs. Continental hauliers have an impact on Britain. Many have 100-gallon tanks, which they fill up on the other side of the channel. They come here and unload, and look for business. Because they bought their fuel on the other side of the channel and they do not have to fill their tanks here, they can undercut British road hauliers.
As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) pointed out, hauliers are not only contributing a great deal in fuel tax; they are contributing a great deal in vehicle excise duty. The more road hauliers go out of business on this side of the channel, the less revenue the Treasury will receive. We should take account of what happens across the channel, and I think that the amendments are at least a step in the right direction.
854 The hon. Member for Twickenham (Dr. Cable) described our policy as opportunistic, but I do not consider it opportunistic to stand up for country dwellers who need cars. I do not consider it opportunistic to stand up for road hauliers who carry the goods that we all want to buy, and who provide a good service for this country—efficiently, we hope—but on whom the Government's policy will impose a considerable burden.
I hope that the Economic Secretary will make clear where the Government see their policy going. I believe that, if we continue in this way, anger will erupt, people will go out of business, jobs will be lost, and people who are struggling to remain in rural villages in which they may have been born and grown up will be forced into urban areas.
§ Mr. Desmond Swayne (New Forest, West)I support the amendments.
I am indebted to my hon. Friend the Member for Poole (Mr. Syms), who drew attention to the small margins on which the haulage industry is based. I wish to stress the plight of the industry in south-west Hampshire. I believe that the relationship between the environment and haulage mileage is entirely different there: indeed, its impact may be perverse in comparison with that in the rest of the country.
The difficulty is that, in south-west Hampshire, the need for haulage services is concentrated along the A31—which is in effect an extension of the M3 and M27 motorway network—down the Southampton waterside, particularly in Totton and the oil-refining area of Fawley, and along the southern strip, where population growth and the growth of enterprise are greatest.
It will no doubt have occurred to some people that the New forest lies bang in the centre of the localities to which I have drawn attention. It is the policy of Hampshire county council—many of my constituents would say that it is properly so—to prevent hauliers from travelling through the New forest. Therefore, any haulage firm that wishes to pick up business, for example, in Ringwood or on the waterside, but which is located along the southern strip must make a considerable detour, entailing much more mileage. They feel that they have made their contribution to the environment by travelling more miles than would ordinarily be the case were they not restricted by the county council's environmental policy. Now they find themselves penalised disproportionately by the escalator that has been imposed on them.
Equally, the greater mileage that hauliers are required to travel has had an effect on many of my constituents. My hon. Friend the Member for Christchurch (Mr. Chope) will be aware of the complaints of his constituents in Highcliffe and Walkford about lorries that would otherwise have travelled through Lyndhurst and Burley, but which make a large detour to avoid the New forest. His constituents, and my constituents in Sopley and along the A31, would undoubtedly welcome the extra revenue that such taxes might yield if it were invested in the road network to provide them with relief from the additional haulage traffic to which they are subjected. The legitimacy of the tax is completely undermined, however, because the prospect of bypasses, particularly around Lyndhurst, and of noise abatement measures along the A31 to allay the misery of many of the local residents, has receded.
855 It is precisely because of the current tax's perverse effects, and its disproportionate effect on my constituents, that I am in favour of the amendments.
§ Mr. Michael Jack (Fylde)First, I apologise to you, and to the House, Mr. Deputy Speaker, for not being here at the start of the debate. I was following it in another part of the Palace estate and heard some of the arguments.
If I were in the Government's position and faced with a nice little earner that would yield nearly £1.7 billion extra year on year, I would sit on the Treasury Bench, try not to catch the eye of Opposition Members, and try not to look embarrassed or in any way discomfited that so much additional money was being lifted yet again from motorists.
It is almost as though the Government were trying to outdo the previous Government's efforts in their tax approach. They have looked at the escalator and thought, "That is a good idea. Let's double it. Let's really go for it," but, as always, the shoe has begun to pinch tightly. Let us look at the real-world effect of the fuel duty escalator. At one of my local garages, the price was 58p a litre before the last Budget; now, 69p or 70p is the norm. At a modest consumption of 10 gallons a week, the citizen is now paying about £225 a year more for his fuel.
I ask the Economic Secretary, if she is to reply to the debate, whether she will initiate a study of the escalator's distributional effects. For all the reasons that other right hon. and hon. Members have mentioned, many of our constituents find it impossible to adjust their motoring habits overnight. They are not financially able to buy the latest and most fuel-efficient cars to overcome the effect of extra fuel duty. They are perhaps wedded to an older and less efficient car, which may be a necessity—perhaps even a tool of the trade—for them. None the less, the Government seem disinclined to measure the regressive effect of the tax, particularly on those who are at the lower end of the salary or wage spectrum.
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Will Ministers therefore conduct an exercise examining the tax's full impact? If they continue operating the escalator as they have been, many low-income people will be very adversely affected—which perhaps should, if there is still a vestige of socialism among Labour Members, touch their conscience. I do not think that many people drive many frivolous miles. Most people use their cars of necessity, particularly in rural areas, about which hon. Members have already spoken.
Although the oil price may drop to $10 a barrel, the Government ensure that motorists do not receive the decrease's full benefit. I appreciate that there is a relationship between fuel price and fuel use, but, if the Government want to achieve their environmental objectives, other levers should be used rather than simply hiding behind the fuel escalator. What will happen as the oil price increases? I presume that Ministers will be happy to let motorists not only feel the full force of the fuel duty escalator but bear the full weight of any oil price increase.
Ministers cannot have their cake and eat it. Yesterday we debated the implications of vehicle excise duties and future applications—perhaps to be announced in the next Budget—of the graduated scale, which is the Government's big idea to meet their Kyoto targets. However, to achieve 856 the same targets, they want also to use the fuel duty escalator. Why do we need two economic measures to achieve the same target, when one will do?
The Government are using a very negative and blunt instrument to try to achieve their environmental targets, but they have also committed themselves to a different instrument. They should not have two bites at the same cherry. In trying to achieve their environmental targets, Ministers have taken a lazy approach to taxation. If they want to raise more money to meet the targets, they could do so in other ways—but they are frightened rigid of taxing anything else. Therefore, with a blunt instrument, they are going for the same old "winners", which is having a seriously regressive effect on lower-income groups. Ministers owe it to us to undertake a study to examine the policy's real impact.
I take modest comfort from thinking that Ministers may support amendment No. 40, as press reports state that the Chancellor is getting cold feet on the issue. However, I suppose that, being a Scot, he would rather have the money than show even a little generosity to hard-pressed motorists, many of whom are suffering from the Government's anti-road, anti-car policies. Motorists are stuck in traffic jams, spending even more money on fuel and adding to the Government's coffers. I suppose that that is the new stationary method of raising taxes.
The Government need very carefully to consider this sphere of taxation. I think that a report on the escalator's impact on individuals, compared with its impact on the environment, would help greatly to clarify Government policy.
§ Mr. Nick St. Aubyn (Guildford)I do not know whether the Economic Secretary is a fan of George Gershwin, but, judging by her previous statements on the escalator, I should not be surprised to see her standing at the Dispatch Box singing, "I'll build a stairway to paradise". Nevertheless, as we have heard in the debate, the truth is that the Government are building a treadmill to ruin for businesses across the United Kingdom.
We heard from the hon. Member for North Tayside (Mr. Swinney) how the previous Conservative Government's success in attracting funding for Scotland's infrastructure—thereby revitalising so many of its regions—is now being undermined by the ever-increasing cost of getting products made in Scotland to their markets. That is the extent of the damage being done by this serious increase in taxation.
§ Mr. SwinneyThe electorate's conclusions about the great success of the Conservative Administration were shown on 1 May 1997, when the Conservatives failed to win any seat within Scotland. Perhaps that little piece of information will be a part of the hon. Gentleman's recollections about Scottish politics.
§ Mr. St. AubynWe well know that the Conservative party bequeathed to the country, including Scotland, a golden economic legacy. There were other reasons why we lost that election, but the reasons for the legacy will be the reasons why we will win power again.
If the Government increase taxation without a thought-through strategy, they will hurt business and destroy jobs, and the tax increases will become self-defeating. That is the stage we are reaching with the so-called fuel escalator.
857 In my part of the country, people do not have a choice to whether or when to use their cars. They are busy people who have to get to work and who have to use the transport that is available and—as in many other parts of the country—that means the motor car. It is no good telling them to put all their freight on rail. They need to use the road transport network which has been built up over so many years.
I was struck by the way in which in a recent exchange with me, the Minister for Transport patted herself on the back for having announced a £5 million noise reduction fund—£5 million across the country to reduce noise is a paltry sum when the Government, as a result of their increments in taxation on the motorist, are raising an extra £12 billion from motorists during this Parliament.
If the Government were to use a modest increase in road duty to improve our road network by imaginative noise reduction measures, better surfaces or schemes to encourage road traffic to use main roads—and not to disrupt the lives of many people by driving heavy lorries through villages—at least some benefit would flow back to our constituents who are paying these high costs. The Government do not intend to do that. The reason why the Conservative party is opposed to high taxation in principle is that Governments who increase tax simply tend to hoard the money, and do not have the imagination to put it to good use. That is why we need to stop the increases in road fuel taxes. We need to stop and think before we use these extra taxes simply to force businesses into ruin. Any money must be put to good use for the real transport needs of our country.
§ The Economic Secretary to the Treasury (Ms Patricia Hewitt)This has been a lively and interesting debate—albeit one perhaps inevitably, has gone over familiar ground. It might help if I reminded the House of the origins of the fuel duty escalator, which was introduced by the Conservative Government in 1993. It was set initially at 3 per cent., but raised in the same year to 5 per cent. With the exception of some references in one or two speeches from Conservative Members, one would never have thought so.
The escalator was inherited by us, confirmed by us and increased to 6 per cent. in 1997. The fuel duty escalator was right when the Conservative Government introduced it—I am prepared on this occasion to give them the credit for it, even though they have since abandoned the policy—and it is still right today.
§ Mr. DorrellWill the Economic Secretary complete that statement of policy? For how long will it be right?
§ Ms HewittAs we said in the "Financial Statement and Budget Report" the escalator will be applied in future Budgets. Our environmental assessment is that if the road fuel duty escalator is continued until 2002, it will, by 2010, save between 2 million and 5 million tonnes of carbon—an extremely significant contribution towards our Kyoto targets.
§ Mr. JackWill the Economic Secretary give me an undertaking that she will publish the details of how that calculation was arrived at?
§ Ms HewittThe calculation was based on the models used by the Treasury and the Department of the 858 Environment, Transport and the Regions. We referred to that in the environmental impact assessment table in the Budget documentation. There is nothing further that I can add. However, if any further technical details will assist the right hon. Gentleman, I will let him have them.
The reduction in greenhouse gases was for the Conservative party and is for this Government the first and continuing justification for the fuel duty escalator. However, there is a second justification—the contribution that the fuel duty escalator makes, by constraining the growth in demand for road transport that would otherwise take place, to improving local air quality and thus people's health.
Last night, Conservative Members posed as the friends of health and the opponents of air pollution. The right hon. Member for Fylde (Mr. Jack) moved amendments on road fuel gases, and referred to the problems of
fine particulates PM10s, which have a demonstrated link with respiratory and cardiovascular disease, and to oxides of nitrogen, which can damage the lungs and play a part in summer smog episodes. These emissions currently result from the use of petrol engines".—[Official Report, 5 July 1999; Vol. 334, c. 770.]The right hon. Gentleman was absolutely right. He referred later to benzine emissions from petrol, which cause health risks.Let me remind the House of those health risks and the contribution to them from the emissions from cars and lorries. In 1996, airborne particulates in urban areas brought forward more than 8,000 deaths, and either caused or brought forward more than 10,000 hospital admissions for respiratory diseases. Road transport is one of the major sources of those particulates. Across the country, road transport contributes about a quarter of the total emissions of particulates. In London, where the problem is most severe, nearly 80 per cent. of those particulates—about which the right hon. Member for Fylde was so concerned last night—come from road transport.
Road transport is responsible for nearly half the emissions of nitrogen oxide. In London, where the problem is at its worst, it accounts for nearly three quarters of emissions.
§ Mr. St. AubynBy how much has traffic been reduced in London since the Government increased the amount of the escalator?
§ Ms HewittThe escalator has ensured that the demand for petrol, and therefore the emissions from petrol and diesel-powered engines, has reduced by 0.1 per cent. compared with a year ago, and is somewhat lower than it was more than 10 years ago. Compared with the scenarios that we could have anticipated in the absence of the escalator, that is an important constraint upon the increase in road transport and pollution.
Opposition Members were concerned last night about people's health. Today, they are concerned only about people driving cars and lorries. It is worth remembering that particulates from diesel engines are responsible for a large number of those premature deaths and hospital admissions for bronchial and respiratory diseases.
I remind the House of the remarks of the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who said—quite rightly—that hon. Members who sought to support the Kyoto targets 859 and to show concern for people's health and the impact on health of road transport-generated pollution, and who simultaneously opposed the fuel duty escalator, were sailing dangerously close to hypocrisy.
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Several hon. Members spoke about the road haulage industry. I commend the remarks of the hon. Member for Twickenham (Dr. Cable), who rightly referred to several studies that strongly suggest that the road haulage industry is contributing considerably less than the total cost of the social and environmental penalties that it imposes on this country. Of course, the industry's competitiveness is taken into account when the Government set diesel duty rates and vehicle excise duty, but the duty on diesel also reflects valid environmental and health concerns which I would have hoped by Conservative Members were shared.
My right hon. Friend the Chancellor and I have often stressed that, in considering the industry's competitiveness, we must take into account not only our fuel duty and VED, but our total package of business costs. Thanks to the Government, we now have the lowest rate of corporation tax of any major European Union country. Our non-wage labour costs are generally lower than those in our competitor countries. The small companies rate of corporation tax was cut to 20 per cent. in the Budget and a 10 per cent. rate was introduced for the smallest companies.
We have cut VED for the cleanest lorries by £1,000, and in response to a request from the industry we have made it easier for vehicles to change their licence category to become eligible for the lowest possible rate of VED to suit the loads that they bear.
In response to the industry's concerns, we set up the road haulage forum, which will meet again under the chairmanship of my right hon. Friend the Minister for Transport later this month. At the request of right hon. and hon. Members, we are considering the specific question of the Euro vignette scheme, although I stress again that the scope for such a scheme is severely constrained by a European directive to which the previous Government committed us.
There is considerable evidence of overcapacity in the haulage industry. A third of total mileage is run empty and the supermarkets have achieved enormous improvements in fuel efficiency and loadage, which shows that we are giving the industry absolutely the right incentive, partly through the road fuel duty escalator, to ensure that it makes much more efficient use of its fuel.
A recent study by the energy efficiency best practice programme shows that only a third of commercial fleet managers know how much they spend on fuel and only a third have active policies to improve fuel efficiency. The escalator should go some way towards the extremely necessary goal of improving that record.
One damaging effect of the amendments is that they would reduce the duty incentive for clean ultra-low sulphur diesel to just over 2p a litre. We have seen clearly that the trade needed the 3p differential that we introduced in the March Budget, as it enables ultra-low sulphur diesel to be offered at the same pump price as conventional diesel. In February, clean diesel was only 41 per cent. of the diesel market; by June, that had already increased to 96 per cent. We have put in place the right duty 860 differential and ensured that virtually all diesel now sold in this country is environmentally friendly. That has been a resounding success, and the amendments would go back on our promise to the oil industry to maintain the differential.
The amendments would backdate the reduction in rates to Budget day on 9 March, which would necessitate our repaying about £300 million to the oil industry. I am not sure that the Opposition have begun to think about how that could be administered or how one could insist that the reduction was passed back to the motorists on whom the increase was imposed.
As we have come to expect from the Conservatives, their refusal to abide by the policy that they rightly adopted in government and their opportunistic decision to abandon it, as the hon. Member for Twickenham said, mean that there is a black hole of about £5 billion in their spending plans.
Perhaps the right hon. Member for Wells (Mr. Heathcoat-Amory) will tell us how he proposes to fill that hole and whether he believes that the resultant cuts should fall on the health service, on schools or on some other part of public spending. I hope that he will tell us how he would achieve the Kyoto and other greenhouse gas targets and the improvements in people's health, of which many Conservative Members have spoken, in the absence of this highly effective and well-justified policy. I urge my hon. Friends to oppose the amendment unless, as I hope, the right hon. Gentleman decides to withdraw it.
§ Mr. Heathcoat-AmoryThe facts of the issue are not seriously in dispute. The road fuel duty escalator is now well past the point at which it had an environmental justification and is doing severe damage to the private motorist and the road haulage industry. It is part of the Government's totally unnecessary war on the private motorist and it is making an important industry uncompetitive in Europe.
The Government first chose to deny those facts and they now choose to ignore them. We do not ignore them and we will now vote to reverse the damage by supporting the amendment, which would cut the escalator back to the rate of the retail prices index.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 135, Noes 355.
864| Division No. 224] | [6.8 pm |
| AYES | |
| Ainsworth, Peter (E Surrey) | Bums, Simon |
| Amess, David | Cash, William |
| Ancram, Rt Hon Michael | Chapman, Sir Sydney (Chipping Barnet) |
| Arbuthnot, Rt Hon James | Chope, Christopher |
| Atkinson, Peter (Hexham) | Clappison, James |
| Beggs, Roy | Clark, Dr Michael (Rayleigh) |
| Bercow, John | Clifton—Brown, Geoffrey |
| Beresford, Sir Paul | Collins, Tim |
| Blunt, Crispin | Colvin, Michael |
| Body, Sir Richard | Cormack, Sir Patrick |
| Boswell, Tim | Gran, James |
| Bottomley, Peter (Worthing VV) | Curry, Rt Hon David |
| Bottomley, Rt Hon Mrs Virginia | Davies, Quentin (Grantham) |
| Brazier, Julian | Davis, Rt Hon David (Haltempdce) |
| Brooke, Rt Hon Peter | Dorrell, Rt Hon Stephen |
| Browning, Mrs Angela | Duncan, Alan |
| Bruce, Ian (S Dorset) |
| Duncan Smith, Iain | May, Mrs Teresa |
| Evens, Nigel | Morgan, Alasdair (Galloway) |
| Faber, David | Moss, Malcolm |
| Fabricant, Michael | Nicholls, Patrick |
| Fallon, Michael | Norman, Archie |
| Flight, Howard | Ottaway, Richard |
| Forsythe, Clifford | Page, Richard |
| Forth, Rt Hon Eric | Paice, James |
| Fowler, Rt Hon Sir Norman | Prior, David |
| Fox, Dr Liam | Randall, John |
| Fraser, Christopher | Redwood, Rt Hon John |
| Gale, Roger | Robathan, Andrew |
| Gamier, Edward | Robertson, Lauerence (Tewk'b'ry) |
| Gibb, Nick | Roe, Mrs Marion (Broxboume) |
| Gillan, Mrs Cheryl | Ross, William (E Lond'y) |
| Gorman, Mrs Teresa | Ruffley, David |
| Gary, James | St Audyn, Nick |
| Green, Damian | Shepherd, Richard |
| Greenway, John | Simpson, Keith (Mid—Norfolk) |
| Gummer, Rt Hon John | Soames, Nicholas |
| Hague, Rt Hon William | Spelman, Mrs Caroline |
| Hamilton, Rt Hon Sir Archie | Spicer, Sir Michael |
| Hammond, Philip | Spring, Richard |
| Hawkins, Nick | Stanley, Rt Hon Sir John |
| Heald, Oliver | Steen, Anthony |
| Heathcoat—Amory, Rt Hon David | Streeter, Gary |
| Hogg, Rt Hon Douglas | Swayne, Desmond |
| Horam, John | Swinney, John |
| Howard, Rt Hon Michael | Syms, Robert |
| Howarth, Gerald (Aldershot) | Tapsell, Sir Peter |
| Jack, Rt Hon Michael | Taylor, Iain (Esher & Walton) |
| Jackson, Robert (Wantage) | Taylor, John M (Solihull) |
| Jenkin, Bemard | Tylor, Sir Teddy |
| Jones, leuan Wyn (Ynys Môn) | Townend, John |
| Key, Robert | Tredinnick, David |
| King, Rt Hon Tom (Bridgwater) | Trend, Michael |
| Kirkbride, Miss Julie | Viggers, Peter |
| Leigh, Edward | Wardle, Charles |
| Letwin, Oliver | Wells, Bowen |
| Lewis, Dr Julian (New Forest E) | Welsh, Andrew |
| Livsey, Richard | Whitney, Sir Raymond |
| Lloyd, Rt Hon Sir Peter (Fareham) | Whittingdale, John |
| Lloyd, Elfyn | Wigley, Rt Hon Dafydd |
| Loughton, Tim | Willetts, David |
| Luff, Peter | Wilshire, David |
| MacKay, Rt Hon Andrew | Winterton, Mrs Ann (Congleton) |
| Maclean, Rt Hon David | Winterton, Nicholas (Macclesfield) |
| McLoughlin, Patrick | Woodward, Shaun |
| Madel, Sir David | Young, Rt Hon Sir George |
| Malins, Humfrey | |
| Maples, John | Tellers for the Ayes: |
| Mates, Michael | Mrs, Jacqui Lait and |
| Maude, Rt Hon Franics | Mrs, Eleanor Laing. |
| NOES | |
| Abbott, Ms Diane | Bell, Stuart (Middlesbrough) |
| Adams, Mrs Irene Paisley N) | Benn, Hilary (Leeds C) |
| Ainger, Nick | Benn, Rt Hon Tony (Chesterfield) |
| Ainsworth, Robert (Cov'try NE) | Bennett, Andreew F |
| Alexander, Douglas | Benton, Joe |
| Allan, Richard | Bermingham, Gerald |
| Allen, Graham | Berry, Roger |
| Anderson, Janet (Rossendale) | Best, Harold |
| Ashton, Joe | Betts, Clive |
| Atherton, Ms Candy | Blackman, Liz |
| Atkins, Charlotte | Blears, Ms Hazel |
| Austin, John | Blizzard, Bob |
| Baker, Norman | Bradley, Peter (The Wrekin) |
| Bames, Harry | Brake, Tom |
| Barron, Kevin | Brand, Dr Peter |
| Battle, John | Breed, Colin |
| Bayley, Hugh | Brinton, Mrs Helen |
| Beard, Nigel | Brown, Rt Hon Nick (Newcastle E) |
| Beckett, Rt Hon Mrs Margaret | Brown, Russell (Dumfries) |
| Begg, Miss Anne | Browne, Desmond |
| Beith, Rt Hon A J | Bruce, Malcolm (Gordon) |
| Buck, Ms Karen | Foster, Michael J (Worcester) |
| Burden, Richard | Fyfe, Maria |
| Burgon, Colin | |
| Burstow, Paul | Galloway, George |
| Butler, Mrs Christine | Gapes, Mike |
| Byers, Rt Hon Stephen | |
| Cable, Dr Vincent | Gardiner, Barry |
| Campbell, Alan (Tynemouth) | Gerrard, Neil |
| Campbell, Mrs Anne (C'bndge) | Gibson, Dr Ian |
| Campbell, Ronnie (Blyth V) | |
| Campbell—Savours, Dale | Gilroy, Mrs Linda |
| Cann, Jamie | Godman, Dr Norman A |
| Caplin, Ivor | Godsiff, Roger |
| Casale, Roger | |
| Caton, Martin | Goggins, Paul |
| Cawsey, Ian | Golding, Mrs Llin |
| Chapman, Ben (Wirral S) | Gordon, Mrs Eileen |
| Chaytor, David | |
| Chisholm, Malcolm | Gorrie, Donald |
| Clapham, Michael | Griffiths, Jane (Reading E) |
| Clark, Rt Hon Dr David (S Shields) | |
| Clark, Paul (Gillingham) | Griffiths, Nigel (Edinburgh S) |
| Clarke, Charles (Norwich S) | Griffiths, Win (Bndgend) |
| Clarke, Rt Hon Tom (Coatbndge) | Grogan, John |
| Clarke, Tony (Northampton S) | |
| Clelland, David | Gunnell, John |
| Coaker, Vernon | Hain, Peter |
| Coffey, Ms Ann | Hall, Mike (Weaver Vale) |
| Coleman, lain | |
| Colman, Tony | Hall, Patrick (Bedford) |
| Connarty, Michael | Hamilton, Fabian (Leeds NE) |
| Cooper, Yvette | Hancock, Mike |
| Corbett, Robin | |
| Corbyn, Jeremy | Hanson, David |
| Cotter, Brian | Harman, Rt Hon Ms Harriet |
| Cousins, Jim | |
| Cryer, Mrs Ann (Keighley) | Harvey, Nick |
| Cryer, John (Hornchurch) | Heal, Mrs Sylvia |
| Cummings, John | Healey, John |
| Cunliffe, Lawrence | |
| Cunningham, Jim (Cov'try S) | Hepburn, Stephen |
| Curtis—Thomas, Mrs Claire | Hesford, Stephen |
| Dalyell, Tam | Hewitt, Ms Patricia |
| Darling, Rt Hon Alistair | |
| Darvill, Keith | Hill, Keith |
| Davey, Edward (Kingston) | Hinchliffe, David |
| Davey, Valerie (Bristol W) | Hodge, Ms Margaret |
| Davies, Geraint (Croydon C) | |
| Davis, Terry (B'ham Hodge H) | Hoey, Kate |
| Dawson, Hilton | Home Robertson, John |
| Dean, Mrs Janet | Hope, Phil |
| Denham, John | |
| Dismore, Andrew | Hopkins, Kelvin |
| Dobbin, Jim | Howarth, Alan (Newport E) |
| Dobson, Rt Hon Frank | |
| Doran, Frank | Howarth, George (Knowsley N) |
| Dowd, Jim | Hoyle, Lindsay |
| Drew, David | Hughes, Ms Beverley (Stretford) |
| Dunwoody, Mrs Gwyneth | Humble, Mrs Joan |
| Eagle, Angela (Wallasey) | |
| Eagle, Maria (L'pool Garston) | Hurst, Alan |
| Edwards, Huw | Hutton, John |
| Efford, Clive | |
| Ellman, Mrs Louise | Iddon, Dr Brian |
| Ennis, Jeff | Illsley, Eric |
| Etherington, Bill | Jackson, Ms Glenda (Hampstead) |
| Fearn, Ronnie | |
| Field, Rt Hon Frank | Jackson, Helen (Hillsborough) |
| Fisher, Mark | Jamieson, David |
| Fitzpatrick, Jim | |
| Flint, Caroline | Jenkins, Brian |
| Flynn, Paul | Johnson, Alan (Hull W & Hessle) |
| Follett, Barbara | Johnson, Miss Melanie |
| Foster, Rt Hon Derek | |
| Foster, Don (Bath) | (Welwyn Hatfield) |
| Foster, Michael Jabez (Hastings) | Jones, Barry (Alyn & Deeside) |
| Jones, Mrs Fiona (Newark) | Olner, Bill |
| Jones, Ms Jenny (Wolverh'ton SW) | O'Neill, Martin |
| Jones, Jon Owen (Cardiff C) | Öpik, Lembit |
| Jones, Dr Lynne (Selly Oak) | Organ, Mrs Diana |
| Jones, Martyn (Clwyd S) | Osborne, Ms Sandra |
| Jowell, Rt Hon Ms Tessa | Palmer, Dr Nick |
| Kaufman, Rt Hon Gerald | Pearson, Ian |
| Keen, Alan (Feltham & Heston) | Pendry, Tom |
| Keen, Ann (Brentford & lsleworth) | Perham, Ms Linda |
| Keetch, Paul | Pickthall, Colin |
| Kelly, Ms Ruth | Pike, Peter L |
| Kemp, Fraser | Plaskitt, James |
| Khabra, Piara S | Pollard, Kerry |
| Kidney, David | Pope, Greg |
| King, Andy (Rugby & Kenilworth) | Pound, Stephen |
| King, Ms Oona (Bethnal Green) | Prentice, Ms Bridget (Lewisham E) |
| Kingham, Ms Tess | Prentice, Gordon (Pendle |
| Kumar, Dr Ashok | Primarolo, Dawn |
| Ladyman, Dr Stephen | Prosser, Gwyn |
| Lawrence, Ms Jackie | Purchase, Ken |
| Laxton, Bob | Quin, Rt Hon Ms Joyce |
| Lepper, David | Quinn, Lawrie |
| Leslie, Christopher | Radice, Giles |
| Levitt, Tom | Rapson, Syd |
| Lewis, Ivan (Bury S) | Reed, Andrew (Loughborough) |
| Lewis, Terry (Worsley) | Reid, Rt Hon Dr John (Hamilton N) |
| Liddell, Rt Hon Mrs Helen | Robinson, Geoffrey (Cov'try NW) |
| Linton, Martin | Roche, Mrs Barbara |
| Lloyd, Tony (Manchester C) | Rooker, Jeff |
| Lock, David | Rooney, Terry |
| Love, Andrew | Rowlands, Ted |
| McAllion, John | Roy, Frank |
| McAvoy, Thomas | Ruane, Chris |
| McCabe, Steve | Ruddock, Joan |
| McCafferty, Ms Chris | Russell, Bob (Colchester) |
| McCartney, Rt Hon Ian (Makerfield) | Russell, Ms Christine (Chester) |
| Macdonald, Calum | Ryan, Ms Joan |
| McDonnell, John | Salter, Martin |
| McGuire, Mrs Anne | Sanders, Adrian |
| Mclsaac, Shona | Sarwar, Mohammad |
| McNamara, Kevin | Savidge, Malcolm |
| McNulty, Tony | Sawford, Phil |
| MacShane, Denis | Sedgemore, Brian |
| Mactaggart, Fiona | Shaw, Jonathan |
| McWalter, Tony | Sheerman, Barry |
| McWilliam, John | Sheldon, Rt Hon Robert |
| Mahon, Mrs Alice | Shipley, Ms Debra |
| Mallaber, Judy | Simpson, Alan (Nottingham S) |
| Mandelson, Rt Hon Peter | Singh, Marsha |
| Marsden, Gordon (Blackpool S) | Skinner, Dennis |
| Marsden, Paul (Shrewsbury) | Smith, Angela (Basildon) |
| Marshall, Jim (Leicester S) | Smith, Miss Geraldine (Morecambe & Lunesdale) |
| Martlew, Eric | Smith, Jacqui (Redditch) |
| Maxton, John | Smith, Llew (Blaenau Gwent) |
| Meacher, Rt Hon Michael | Snape, Peter |
| Meale, Alan | Soley, Clive |
| Merron, Gillian | Southworth, Ms Helen |
| Michie, Bill (Shef'ld Heeley) | Spellar, John |
| Milburn, Rt Hon Alan | Squire, Ms Rachel |
| Mitchell, Austin | Starkey, Dr Phyllis |
| Moffatt, Laura | Steinberg, Gerry |
| Moonie, Dr Lewis | Stevenson, George |
| Moran, Ms Margaret | Stewart, David (Inverness E) |
| Morgan, Ms Julie (Cardiff N) | Stewart, Ian (Eccles) |
| Morley, Elliot | Stoate, Dr Howard |
| Morris, Rt Hon John (Aberavon) | Strang, Rt Hon Dr Gavin |
| Mullin, Chris | Straw, Rt Hon Jack |
| Murphy, Denis (Wansbeck) | Stringer, Graham |
| Murphy, Jim (Eastwood) | Stuart, Ms Gisela |
| Naysmith, Dr Doug | Stunell, Andrew |
| Oaten, Mark | Sutcliffe, Gerry |
| O'Brien, Bill (Normanton | Taylor, Rt Hon Mrs Ann (Dewsbury) |
| O'Brien, Mike (N Warks) | Taylor, Ms Dad (Stockton S) |
| O'Hara, Eddie | Taylor, David (NW Leics) |
| Taylor, Matthew (Truro) | White, Brian |
| Temple—Morris, Peter | Whitehead, Dr Alan |
| Thomas, Gareth (Clwyd W) | Wicks, Malcolm |
| Thomas, Gareth R (Harrow W) | Williams, Rt Hon Alan (Swansea W) |
| Timms, Stephen | Williams, Alan W (E Carmarthen) |
| Tipping, Paddy | Williams, Mrs Betty (Conwy) |
| Todd, Mark | Wills, Michael |
| Tonge, Dr Jenny | Wilson, Brian |
| Trickett, Jon | Winnick, David |
| Turner, Dennis (Wolverh'ton SE | Winterton,Ms Rosie (Doncaster C) |
| Turner, Dr Desmond (Kemptown) | Wise,Audrey |
| Turner, Dr George (NW Norfolk) | Wood Mike |
| Twigg, Stephen (Enfield) | Wray, James |
| Vaz, Keith | Wright, Anthony D (Gt Yarmouth) |
| Vis, Dr Rudi | Wright, Dr Tony (Cannock) |
| Walley, Ms Joan | |
| Wareing, Robert N | Tellers for the Noes: |
| Watts, David | Jane Kennedy and |
| Webb, Steve | Mr. Kevin Hughes. |
§ Question accordingly negatived.