HC Deb 07 July 2004 vol 423 cc844-57 12.40 pm
Mr. Andrew Tyrie (Chichester) (Con)

I beg to move amendment No. 16, in page 4, line 24, at beginning insert

'Subject to the provisions of subsection (7).'.

Mr. Speaker

With this it will be convenient to discuss amendment No. 17, in page 4, line 24, at end insert—

'(7) On any occasion when the average closing spot price of Brent crude oil has been at or above 37.84 US dollars per barrel for a period of fourteen days, the Chancellor of the Exchequer shall make regulations suspending the operation of subsections (1)(a) and (1)(c) of this section. (8) In this section

Brent crude oil" means oil from the Brent oilfield in the North Sea; and average closing spot price" means the mean of the closing spot prices for Brent crude oil quoted on the International Petroleum Exchange on each day on which that exchange is open for trading within the period of fourteen days.'.

Mr. Tyrie

The purpose of the amendment is to make sure that the Government implement their stated policy. The Prime Minister, the Chancellor and the Economic Secretary, who is with us today, have all promised that if oil prices remain high, they will remove in August their planned increase of tuppence—the increase they intend to put through, and have announced in the Budget they will put through, in September.

Unfortunately, instead of giving a clear statement in the House, or even an unambiguous press release, this review has been announced through some unattributable press briefings, whose status it is difficult to know. It is not difficult to work out what headlines the Government wanted, which is what they got. I have some here: for example, "Brown confirms plan to scrap rise in fuel duty", and, in The Daily Telegraph, "Brown plans to abandon fuel duty increase".

Our amendment would force the Government to deliver on the promises that they have made to the public. It will work in this way: if the average closing spot price of Brent crude, the leading benchmark, rises back to the price at the time that the Government did their press briefings, the duty hike will be suspended. On 3 June, the day of those briefings, the closing spot price was $37¾, as indicated in the amendment. Under the amendment, the oil price will have to remain high for a period of two weeks before it triggers the suspension of the duty rise; a blip for a day or two will not be sufficient. Incidentally, today's price is less than $1 away from the price at the time of that announcement; we are back in the danger zone for oil prices and duty hikes again.

The Economic Secretary may have some technical objection to my amendment. I have no doubt that he will have been heavily briefed on such things, but I should be grateful if he would address the principle. If oil prices return to the levels at which they stood when the Chancellor authorised those friendly noises for road users, will the Government suspend the duty hike? If the Economic Secretary cannot say yes, all those press briefings and reassurances that road users have heard will begin to look a bit hollow. People will be forgiven for thinking that they are just another ploy to acquire a few weeks' respite while prices were high.

We know the level of fuel prices that is needed to trigger friendly noises from the Government. What we really want to know is what increases are needed to trigger action. At the time of the Budget, the Brent crude spot price was over $34 a barrel. At the time of the press briefings, it was just over $37½. That tells us that when the Government set the rates, at the time of the Budget, they already knew that the price was at the very edge of what was tolerable. They knew that a mere 10 per cent. rise would be too much—hence their press briefings.

From the Government's response to the amendment, we will find out whether they really meant what they briefed or whether it was another case of media spin. We have had quite a bit of that. The Prime Minister has done the rounds, saying on several occasions that he sympathises with road users. Road users do not need sympathy from the Prime Minister. We would rather have firm commitments, which is what we would get from our amendment. If the Government will not accept it, the public will see that they are saying no to their own promises.

It is worth reflecting for a moment on how we got where we are. How did the Government get themselves into a position where a mere 10 per cent. rise in the oil price after a Budget can lead them to start briefing the press that they will reverse their policy of an increase in September? The short answer is that they are scared stiff of a repetition of the fuel protests that we saw during the last Parliament. The reason there might be protests is that petrol and diesel prices are already higher in Britain than in almost any other country. We have those levels because the Government took the price there. Under the Labour Government over the past seven years petrol prices at the pumps have risen from about 60p to 80p. Two thirds of that increase has been tax going to the Government.

The longer answer is that, in taking any decision, the Government are susceptible to opinion polls. I have no doubt that they have been doing their own private polling, which was subsequently supported by an ICM poll shortly after the Chancellor's press briefings. The Sunday Telegraph reported:

An ICM poll for The Telegraph reveals a high level of support for demonstrations similar to those that brought chaos to Britain four years ago. It also shows widespread public anger at plans by Gordon Brown, the Chancellor to add 2p to the duty on a litre of petrol in September.

It is clear that the Government were getting signals like that from their focus groups and private polling. That is the reason for their announcement in June.

Mr. Alex Salmond (Banff and Buchan) (SNP)

As I recall, there was some confusion a few weeks ago about whether the Leader of the Opposition supported such protests. Can the hon. Gentleman clarify the position of the Leader of the Opposition, as he was not able to do so?

12.45 pm
Mr. Tyrie

It is for the Government to decide what they intend to do about fuel duty, rather than for the Opposition to decide what they intend to do about fuel protests. I take the hon. Gentleman's point. By implication, he is just as concerned and upset as I am about the scale of the fuel price hikes.

The Economic Secretary and the Government have embarked on a substantial campaign to convince us that the price hikes are something to do with world oil prices, not anything to do with the rise in fuel duty. He said in Westminster Hall that high petrol and diesel prices are

a problem of world fuel prices, not UK fuel duty. That is clearly not true. The key cost to the motorist is the taxman, not OPEC. As the AA pointed out,

What Gordon Brown does is more important than what the world price does. What the Economic Secretary should have said is that high petrol prices at the pumps are a problem of UK fuel duty, not world fuel prices. That would have been a much more accurate statement.

The Economic Secretary may say he needs the money. That is what he should say about the hikes. He came close to it in Westminster Hall when he said, rather revealingly:

It is important…that we have the strength to get the balance right between a fair deal for the motorist and the haulier and

the stability of public finances."—[Official Report, Westminster Hall, 8 June 2004; Vol. 422, c. 29-30WH.] The public finances are no longer stable. The Chancellor is faced with a rise in borrowing, even though the economy is doing well. Tax revenues are short, which they should not be in an upswing. Raising money from motorists and road hauliers is one way of filling that hole, which is a hole of the Chancellor's making. He cannot easily afford to make concessions on petrol prices, but in what may become an election year, he cannot afford another fuel protest either. I fear that that is why we have had all those press briefings.

All the same, the Minister can reassure us, as I hope he will. He can accept the amendment or table one of his own that will have a similar intended effect. He can back the promises of his own boss with a statutory requirement, and he can give the motorist and the road hauliers a little more certainty in the months ahead, at least for the second half of this year. I very much hope that he feels able to do so.

Mr. Alex Salmond (Banff and Buchan) (SNP)

I am rather sympathetic to the idea of trying to establish a link between the world oil price and uncertainty within it, and the tax position in relation to fuel; but I am not convinced that the amendment is the best way of doing that. In what purports to be a substantive amendment, the proposal that, on the basis of the date of a supposed spin or leak from the Chancellor or the Prime Minister, a device should kick in in response to a set international price of oil strikes me as rather on the light side. Front Benchers nod. Indeed, like crude oil, the amendment is extremely light.

I do not think that the argument behind the amendment has been advanced very powerfully, so I shall take the opportunity to advance it now. In fact, the argument in favour of such a link emanates from the Chancellor himself. As I recall, he delayed the duty increase until September as a result of instability in world oil markets. Presumably he is now considering carefully whether they are stable or unstable; any such consideration is, I think, likely to result in the conclusion that they are unstable, and subject to a variety of events. The Government's intervention in Iraq seems to have made things no better in that regard. According to the Chancellor's own logic, there is clearly a case for a review or assessment of the fuel increase that was due in September.

Another option would be to base the world oil price not on the date of leaks from the Government, but on the forecast in the Red Book, which, if I remember correctly, was $27.5 a barrel. The price has clearly exceeded that for some time. As the projection in the Red Book has been overtaken by events, I hope that Ministers will give us the latest projection for corporation tax and North sea revenues for the current financial year.

Mr. Tyrie

I am perplexed by the figure of $27.5. I should be grateful for sight of the SNP's heavier amendment; I should also like to know which marker crude the hon. Gentleman is referring to.

Mr. Salmond

I am speaking from memory, but I thought that $27.5 for Brent crude was the assumed price underlying the Treasury projection of oil revenues amounting to £3.6 billion in this financial year. Conservative Front Benchers shake their heads. I hope that Ministers can clarify the matter, but my recollection is that $27.5 was the underlying price assumption at the time of the Budget. Now Conservative Front Benchers are agreeing with me. That is terrific: I have managed to swing them round.

I am not talking about the price itself. I am talking about the price assumed by the Treasury for the coming year, on the basis of which it projected the corporation tax from oil and gas revenues. Is that now established in Conservative Members' minds? Surely that price is the key, because on the basis of that price the Government assumed that there would be £3.6 billion of corporation tax revenues from North sea oil. The take will clearly be substantially higher. We may argue about whether it will be £500 million higher, £1 billion higher or even more, but it will be substantially higher almost regardless of any foreseeable change in the price for the rest of the year. Most of this year's corporation tax has already been set on the basis of current and past oil prices.

The Government ought now to be able to judge whether that additional windfall justifies a move to stop the increase in duty this September. Given the Chancellor's own argument that he delayed the increases in order to judge the extent of instability in the world markets; given the acknowledged instability and high prices that prevailed; and given that the Government are due for a windfall over and above Treasury expectations at the time of this year's Budget, they should now be in a position to come up with not a leak, suggestion or assumption, but a firm assessment and some sort of decision. With respect to Conservative Front Benchers, I feel that that is a better benchmark than the prevailing price of Brent crude on a day when the newspapers suggested that the Chancellor was trying to leak the fact that he was about to do something.

The Government have implicitly acknowledged that there should be some relationship between the prevailing level of duty and the world oil price. If that were not the case, the Chancellor would not have postponed his announcement until September. The Government should now be able to estimate the amount of the expected windfall, and should be able to give the information to us and our hard-pressed constituents—especially in Scotland, which suffers the double whammy of receiving no benefit from the additional oil and gas revenues flowing from our sector of the North sea, and being the part of the UK most exposed to rising fuel costs affecting not just consumers but industry and the retail and distribution chain.

On behalf of the people of Scotland and of Members of Parliament, let me ask Ministers whether they are in a position to tell us that they will negate this year's planned rise in fuel duty.

Dr. Vincent Cable (Twickenham) (LD)

The amendment is useful if it helps to persuade the Minister to clarify his intentions. I rather agree with the hon. Member for Banff and Buchan (Mr. Salmond) that this is not the most helpful way of framing legislative change, but the exercise itself has been useful.

We should not, however, lose sight of the fundamentals. Putting aside the question of an oil price spike and how the Government might respond to it, I think it eminently sensible for the Government to introduce the basic principle of a duty price increase. In normal circumstances that would have been unexceptionable, and I doubt that we would have been dealing with amendments like this had there not been an oil price spike.

It is worth reiterating the underlying reasons. The cost of motoring has fallen considerably below the cost of using other modes of transport, as the Government's own transport advisers have been pointing out since 1997. The cost of motoring—admittedly, that includes vehicles as well as fuels—has fallen by about 5 per cent. in real terms, while the cost of bus travel has risen by 8 per cent. and household incomes by about 20 per cent. During the much longer period since the first oil shock about 30 years ago, the cost of motoring has fallen in real terms while the cost of public transport has risen by between 70 and 80 per cent., depending on the mode of transport involved. The system of price incentives is heavily skewed against public transport.

The proposed arrangement for duty increases makes perfect sense in terms of both transport and environmental policy, and I do not criticise it on those grounds. There is, however, a problem over how that is handled in the event of sudden oil price shocks. There are a couple of reasons why the Government must respond in such circumstances. First, as the hon. Member for Banff and Buchan pointed out, at such times the Government enjoy a windfall, partly from a rise in VAT in proportion to the price and partly from the taxation of the upstream. I think the sense of injustice at the revenue windfall enjoyed by the Government, which prompted the original oil price protests, led to a cross-party consensus that we must move away from the escalator.

The other problem at times of high oil prices is that they feed directly into inflation. If inflation goes up, even on a once-and-for-all basis, interest rates rise with all the attendant consequences for the British economy. So when the oil price shock occurred a few weeks ago, I took the view that the Government would be wise to announce a postponement of the duty increase, were such conditions likely to continue. I still take the view that that is the right policy.

1 pm

The international oil market conditions suggest that we may well experience a much worse shock in the coming weeks; indeed, that is entirely plausible. As of today, prices are back above $40, and the basic conditions are very serious. There is hardly any spare capacity in the system. Saudi Arabia—a country that is potentially highly unstable and vulnerable to sabotage in various ways—has a spare capacity of some 1 million barrels a day. The situation is quite different from that which pertained 10 years ago. As a result of the war, Iraq's own production has fallen rather than risen since the days of Saddam Hussein, and the conditions for increasing it are not promising.

So the world oil economy is poised on a very difficult knife edge. Demand is rising and there is very little spare capacity. It is easy to see how prices could simply go through the roof in such circumstances. If that happens, it is obviously right that the Government withdraw the tax increase until the market stabilises. I am not arguing for a cancellation—that would be irresponsible—but that the increase should be postponed until conditions are more stable.

It would be useful if the Minister explained a little more precisely what the Chancellor of the Exchequer actually meant by a postponement. What would be the conditions under which a postponement would take place, and when will he announce it? If the amendment succeeds in getting a little clarity in that regard, it will have been worth tabling. That said, in the light of the way in which it is phrased, my colleagues and I would not want to vote for it.

Mr. Christopher Chope (Christchurch) (Con)

I congratulate my hon. Friend the Member for Chichester (Mr. Tyrie) on his ingenuity in tabling this amendment and thereby putting the Government on the spot. Their policy on this issue is very confused. For years, they have been telling us that, in order to restrict demand for fuel in this country, they have to raise the price, and that such increases are being implemented for environmental reasons. We then had the spectacle of the Chancellor pleading with the countries of the Organisation of Petroleum Exporting Countries to increase the volume of fuel that they produce. To a simple soul such as me, that seemed incompatible with the Government's earlier approach.

We must remember that we are fortunate in having a petroleum industry that delivers incredibly efficient services, which is why we have the cheapest pre-tax fuel prices in Europe. But because of the Government's taxation policy, we have by far the most expensive post-tax fuel prices in Europe. The amendment tabled by my hon. Friend amounts to relatively small beer; none the less, when motorists feel that they are being put upon by the Government, it is the straw that breaks the camel's back. As has been pointed out, the Government are gaining both from increased taxation and from the windfall resulting from the increase in the raw material price. As the hon. Member for Banff and Buchan (Mr. Salmond) rightly said, the Government will receive a windfall from North sea oil revenues and, as the hon. Member for Twickenham (Dr. Cable) pointed out, we should also consider the big windfall arising from the payment of VAT on the pump price.

If the Government accepted the amendment, there would be no overall loss of revenue because they will in any case be making those windfall gains. Perhaps that is why the Chancellor was able to suggest that the Government might think again about increasing the price of fuel in the autumn. However, as with most things that this Government are doing, I suspect that it has more to do with the possible situation in the autumn. The Prime Minister has made it clear that he might want to run for cover and have an early general election, if he thinks that he can get away with it. He has instructed the Cabinet to clear the decks and one way to avoid the embarrassment associated with imposing a fuel price hike during a general election campaign is for the Government to make the announcement that they suggested they might make. The amendment enables us to get the Government to come clean on this issue. Instead of giving off-the-record briefings to sympathetic journalists, they should be up-front and tell the House exactly what they have in mind.

We should remind our constituents of the very high fuel taxes and overall taxes on motorists, which have gone up from some £31 billion when this Government took office to some £44 billion. Precious little of that is actually being spent on the road infrastructure. Yesterday's feeble announcement, which was grandly entitled "Roads Policy", amounted merely to a consultation document on the possible widening of the M6, using private finance rather than taxpayers' money, and extra lanes for those with chauffeurs, so that they can gain an advantage over the ordinary motorist who cannot afford a chauffeur. The announcement covered up the fact that, while raising these extra revenues from the motorist, this Government are failing to deliver improved services.

As I have said before in this House, one reason why more people are being killed on our roads under this Government is that they have failed to invest in engineering improvements on our highways. It has long been recognised that there are three elements to reducing accidents and increasing road safety: education, engineering and enforcement—

Mr. Speaker

Order. As the hon. Gentleman might know, the amendment is somewhat tighter than that. He is going wide of it.

Mr. Chope

I certainly accept, Mr. Speaker, that I am getting carried away in my enthusiasm for articulating the concerns of the motorist. Motorists have to pay these extra taxes, but they are getting nothing in return. My hon. Friend the Member for Chichester has suggested that the Government are being coy about this issue because they want to use the extra revenue to fund the black hole in their figures and their extra borrowing. But it is clear from what has been said that they will in any event make a windfall profit from the increase in the price of Brent crude, which is likely to stay high.

The amendment is modest, and in that regard I am attracted by much of the argument of the hon. Member for Banff and Buchan. There is indeed a case for going much further, but my hon. Friend the Member for Chichester is making a modest proposal in the hope that we can persuade the Government to accept it. My constituents and I will certainly be very disappointed if this modest amendment is not accepted.

Mr. Michael Weir (Angus) (SNP)

It will come as no great surprise to discover that I agree with the comments of my hon. Friend the Member for Banff and Buchan (Mr. Salmond). I have some reservations about amendment No. 17, which states that, if the price of Brent crude stays

above 37.84 US dollars…for a period of fourteen days, the Chancellor of the Exchequer shall make regulations". I wonder whether that is really strong enough, because when fuel prices start to rise, what is required is quick action.

The recent spike in fuel prices has had a devastating effect on many parts of the rural economy. In areas such as my own, petrol has gone up by well in excess of 20p a gallon in a very short time. Such an increase affects everything. It affects private motorists such as us, who need our cars to get about in rural areas because the alternative transport infrastructure simply is not there. It is all very well to argue on environmental grounds that we should take the train or the bus; that is fine if such transport exists and can get people to where they want to go, when they want to go there. I can take a train from Montrose to Arbroath, or a bus from Montrose to Brechin, but I cannot get from Brechin to the top of Glenisla. We need to travel all around our constituencies and many of our constituents have to do the same in the course of their occupations.

Worse still, the fuel price rise affects everything that has to be transported around our constituencies. For example, shop goods have to be transported by road because there is no alternative. A spike in the fuel price means that everything, including the loaf of bread in the local shop, goes up because such increases have to be passed on to the consumer.

We are told that this is an environmentally sound policy, but I am not sure what is environmentally sound about adding to rural depopulation. I read an interesting article in The Times during the oil price hike. I hope that it was tongue-in-cheek, but it argued that, if people living in rural areas could not afford the price of petrol, they should move to the cities. That is a terrible indictment of how rural areas are seen by some metropolitan areas. Rising oil prices affect us greatly.

Fuel tax is a huge part of the price of petrol. What interested me about the recent hike in oil prices was the speed at which the price at the pumps went up, following the increase in the price of oil in the international markets. I am no oil expert, but I imagine that there is a time gap between buying oil and the international market refining it and selling it on as petrol. I cannot help wondering whether there has been profiteering by some of the oil companies, which is a wider issue that the Government should examine.

The level of fuel duty is important. In my view, it must be brought down in rural areas. As pointed out to the Government on many occasions, provision exists under European law for derogations to allow lower fuel taxes in rural and remote areas where road travel is an essential service. That has been used very successfully in the Greek islands, but not in the islands or remote highland areas of Scotland. [Interruption.] My hon. Friend the Member for Banff and Buchan reminds me that Greece went on to win Euro 2004, so perhaps there is a huge impetus for Scotland to follow suit if we can revive our football team.

Joking aside, this is a serious issue, because the cost of transport in rural areas is so large. In the island areas of Scotland, it is even larger and derogations could be used to help overcome the problem. The Government should look further into using derogations from fuel duty in certain defined areas and deal with the activities of oil companies. I do not share the faith of the hon. Member for Christchurch (Mr. Chope), who spoke about the oil companies. There has been an element of profiteering, as the price has gone up instantly at the pumps when the oil price has increased in the international market. It could be argued that the point is to level up the prices over a period, but more should be done to examine what is going on.

Just a few oil companies govern petrol in this country and it was interesting to note that the supermarket chains were able to bring the price down again very quickly. Only then did the oil companies follow suit. It is a complex matter and fuel duty is at its heart. The Government should do more to look into what is going on, because the problem is a matter of huge concern in rural areas. That will continue, as oil prices are rising again. We were told that the last spike was the result of terrorist raids in Saudi Arabia. We are now told that the price could rise substantially because of the problems of the Yukos oil company in Russia and as a result of incidents in parts of the middle east. Our whole economy is affected and the Government must get it right if they are to avoid serious problems.

The Economic Secretary to the Treasury (John Healey)

Amendments Nos. 16 and 17 would remove the duty increase for ultra-low sulphur diesel and petrol planned for September this year at a time when the international price of Brent crude oil is at or above $37.84 per barrel. For the benefit of the hon. Member for Chichester (Mr. Tyrie), today's Brent crude price is almost $2 lower, not $1 lower, than his level. At noon today, it was $35.97 a barrel.

I have to tell the hon. Member for Christchurch (Mr. Chope) that this is not a modest amendment. On the contrary—[In terruption.]

Mr. Tyrie

I do not know what prices the Economic Secretary is using. It shows why we really need Bloomberg in the Library—I requested it, but it was turned down—to ensure that we have accurate and up-to-date market prices for debates. It would cost £5,000 a year, which I believe would be a good investment. I am glad to have been able to get that point on the record. I checked the prices at 11.45 am and unless something dramatic has happened, the Brent spot price is $36.7 a barrel and the forward price for August—when the Economic Secretary says he is going to conduct his review—is $37.1. That is less than a dollar away from the price stipulated in the amendment.

1.15 pm
John Healey

No doubt the House authorities will study closely the hon. Gentleman's remarks. On the apparent discrepancy, it may be something for Bloomberg to take up with Reuters. Those two market sources may have different figures.

My serious point is that the amendment is not modest, as the hon. Member for Christchurch claimed that it was. It is an extraordinary declaration of new policy from the shadow Chancellor and his team. I take it that Conservative Members will back it up by voting for the amendment this morning. They are seriously saying that, if the price of oil is above $37.84, they will not implement the usual inflation increase in fuel duty each year. The usual inflation increase simply ensures that fuel duty maintains its value and its contribution to the public purse. Let me tell the hon. Member for Chichester that that approach amounts to another hole in the Tory spending plans of at least £750 million a year and that many of his shadow colleagues who are responsible for sectors already facing deep cuts will not be best pleased with his arguments today.

Mr. Tyrie

The Economic Secretary knows that that will not wash. He knows perfectly well that the amendment will not take effect until the next Budget six months away. He also knows that, as the hon. Member for Banff and Buchan (Mr. Salmond) said, though I did not agree with all his points and I am not sure that he fully understood some of mine, that the net effect of the increase—

Mr. Speaker

Order. The hon. Gentleman will have a chance to reply and he is supposed to be making an intervention, which should be very brief and also about petrol duty.

Mr. Tyrie

The hon. Member for Banff and Buchan correctly said that the overall revenue effects of changes in oil prices over the last few months are highly favourable to the Government, who will benefit by a ratio of at least 2:1 and possibly 3:1 on my calculations. That is the ratio of increased revenue for every pound lost under the amendment.

John Healey

Clearly this is a six-month measure, not a serious one. It is simply a short-term reaction to complex current events and not a sensible way to make policy. The Tory plans mean that when the daily oil price goes up, the inflation increase is withdrawn. Presumably, when the oil price goes down, the duty increase will be reintroduced—though we are not told—that. It is a hopeless hokey-cokey provision. I must tell the hon. Member for Chichester that it is not possible to manage economic policy and the public finances on such a simplistic and unstable basis.

Mr. Salmond

It may well be a hokey-cokey amendment, but its weakness is not that it is too bold, but that it is far too modest. Will the Treasury Front Benchers address themselves to the question of how much additional revenue they now expect, given that international oil prices are way beyond the Budget assumptions? What do they intend to do about the windfall revenue in the light of the September rise?

John Healey

If the hon. Gentleman can be patient, I intend to come on to the points that he and the hon. Member for Angus (Mr. Weir) have raised.

We are conducting a serious debate on the amendment before the House and it is important to realise that there is no historical precedent for such an approach when the Conservatives were in government. There has, of course, been a precedent for higher oil prices. However, unlike during the periods when oil prices were high under the Conservative Government, the UK economy now has the strength and stability to withstand some of these difficulties.

In late 1980, for example, when oil prices reached $40 a barrel, inflation was above 15 per cent., interest rates 14 per cent., and gross domestic product had contracted by 4 per cent. over the year. In 1990, when oil prices reached $40 a barrel, UK inflation was almost 11 per cent., interest rates 14 per cent., and the British economy had once again entered recession. Today, as a result of Labour's management of the economy, the UK enjoys the longest continuous growth on record, the lowest sustained inflation for 40 years and unemployment at its lowest level in a generation.

Turning to the points raised by the hon. Member for Banff and Buchan, if he consults the Red Book and my right hon. Friend the Chancellor's Budget statement, he will see that the delay in the usual increase in inflation is designed to coincide with the differential that we determined to introduce on 1 September to encourage the switch to sulphur-free road fuels.

The hon. Gentleman asked about revenue projections. He has been in this House a long time—a very long time, in some people's books—and will know that such projections are updated and published at the time of every pre-Budget report and Budget. We do not do those calculations or publish the projections on a day-to-day basis.

Based on assumptions audited by the National Audit Office and published at the time of the Budget, the crude oil price from which the 2004 figures were derived was 27.40p a barrel. The hon. Members for Banff and Buchan and for Twickenham (Dr. Cable) both talked about a windfall for the British economy resulting from the rise in oil prices. While it is true that North sea revenues increase as the oil price rises, the broader effect on public finances is much more complex.

Mr. Salmond

I think that the Economic Secretary meant to say that the oil price was $27.40 a barrel. However, it was suggested that the matter was under review. If so, that review must include the Treasury's new expectations of what would be a reasonable assumption for corporation tax and other oil receipts for this year. With respect to the Economic Secretary, I maintain that any responsible Treasury must do those calculations if an assessment has to be made soon about whether to go ahead with the duty increase. So where are they?

John Healey

The review by my right hon. Friend the Chancellor, and the decision that he takes, will take into account all the economic, social and environmental factors in such a complex decision. North sea revenues may rise with the oil price, but the broader effect on the public finances is much more complex. The overall effect in respect of the economy, business profitability and Government expenditure is broadly neutral.

Mr. Chope

On 3 June, a few days before the European and local government elections, the Chancellor of the Exchequer led us to believe that he was thinking seriously about not increasing fuel duty this autumn. Was he speaking through his hat?

John Healey

My right hon. Friend was not speaking through his hat. In fact, I do not think that I have ever seen him wearing one.

The hon. Member for Angus (Mr. Weir) described vividly the journeys that he can and cannot make across his constituency. I was almost there with him, but derogations for road fuel duty based on regions are, basically, prevented by European law. To get them, we would need the agreement of all 25 EU member states. That is not a viable policy proposition.

The amendments are flawed in both principle and practice. They do not recognise that, if duty on ultra-low sulphur diesel and petrol were reduced because of increases in the Brent price, the duty on sulphur-free diesel and petrol would be higher than that on the ultra-low sulphur fuels. That would wreck our aim to introduce those fuels at the earliest possible point and our plans to get the environmental benefits that would follow.

The amendments adopt the wrong approach. The right approach is the one pursued by the Chancellor. It has not been set out in private briefings, but placed on the public record by the Chancellor and the Prime Minister. The problem that we face is the world oil price, not UK duty rates. Therefore, it is right that we concentrate on oil supplies and on ensuring that OPEC meets its targets for sustainable prices.

The Chancellor has been at the forefront of those discussions. He and other Finance Ministers will continue to press OPEC to meet the increased production targets that have been set and to argue that we should go further still.

We have said that we will review progress in reducing oil prices and that we will make a judgment on the planned duty change due on 1 September. I urge the House to reject the amendments.

Mr. Tyrie

As my hon. Friend the Member for Christchurch (Mr. Chope) said, my amendment is modest. The hon. Member for Banff and Buchan (Mr. Salmond) was less charitable, and called it light. The amendment is short, but its clarity seems to have elicited some information from the Government. I shall come to that in a moment. The hon. Gentleman did not offer a clear alternative, only general suggestions for a more rigorous approach.

Mr. Salmond

The clear alternative is for the Government to say how much of a windfall they expect. I am concerned by what the Economic Secretary said about the effect being neutral and I presume that that is based on an assumption of lower economic growth. If so, he should tell us how much of a direct windfall the Government expect and the size of the fall in economic growth that they now forecast. The Economic Secretary's message was very negative.

Mr. Tyrie

The hon. Gentleman and I seem to be working together more closely than a moment ago.

Mr. Salmond indicated dissent.

Mr. Tyrie

I do not want to wreck his party's prospects, but I agree with what the hon. Gentleman just said. It would be extremely helpful if the Government made a clear statement, perhaps in a letter, of the overall effect of oil price rises on the public finances. I should be grateful if the Economic Secretary would publish the detailed calculations on which his remarks were based.

John Healey

I made it clear in my remarks that our main assumptions are audited by the NAO. We publish them in the pre-Budget report and the Budget. That is the time scale to which we work and when the information is made available. A broadly neutral effect is more likely than the large windfall that Opposition Members seem to think will benefit the British economy.

Mr. Tyrie

The Economic Secretary has alluded to some publications with which I am familiar, but I would not feel able easily to draw the same conclusions. I do not want to linger on this point, but I hope that he will help us by sending a letter pointing out where we can find numbers that are clear and unambiguous. The point at issue is valuable, and the House and the country should have deeper knowledge of it.

The hon. Member for Twickenham (Dr. Cable) delivered a typically elegant and interesting speech. He is always thoughtful, but today he seemed almost to be pointing in two directions at once. [Interruption.] It is rare for Liberal Democrat Members to do that, but occasionally it can happen inadvertently. Initially, he seemed to support the principle behind the amendment, even if he did not accept the detail. Those were more or less the words that he used, but almost in the same breath he quoted figures that implied that motorists are undertaxed and that they should pay more in tax.

Dr. Cable indicated assent.

Mr. Tyrie

The hon. Gentleman is nodding in agreement. Motorists should therefore know that the Liberal Democrat party's policy is to increase taxation and to impose higher levels of duty on diesel and motor spirit. That message will not be lost on people in the months ahead.

The Economic Secretary said that my amendment was a short-term measure and could not be supported. If that is so, why have the Government briefed the press about their willingness to introduce just such a short-term measure—to suspend the duty rise for six months? Why are they doing exactly what they say should not be done? They are considering a measure along the lines of the amendment, or at least they are trying to get the best publicity that they can for doing so.

The Economic Secretary called the amendment hokey-cokey. I am not sure what he meant, but the only hokey-cokey activity going on here has been the Government's briefing of the press, when they should have explained their policy to the House. We still do not know exactly what their policy is.

I come back to my central point and give the Economic Secretary one last opportunity. Will the Government give us a clear commitment that, if prices rise and stay at the level that they were when the Chancellor gave his friendly press briefings, they will set aside the September increase in fuel duty? Will they give us a clear answer to that question? If they will not, we will be forced to divide the House on the issue.

Question put, That the amendment be made:—

The House divided: Ayes 109, Noes 250.

Division No. 218] [1:30 pm
Amess, David Hague, rh William
Ancram, rh Michael Hammond, Philip
Arbuthnot, rh James Hawkins, Nick
Atkinson, David (Bour'mth E) Hayes, John (S Holland)
Bacon, Richard Heald, Oliver
Baron, John (Billericay) Heathcoat-Amory, rh David
Beggs, Roy (E Antrim) Hendry, Charles
Beresford, Sir Paul Hermon, Lady
Bottomley, Peter (Worthing W) Horam, John (Orpington)
Brady, Graham Howarth, Gerald (Aldershot)
Brazier, Julian Jackson, Robert (Wantage)
Burns, Simon Jenkin, Bernard
Burt, Alistair Key, Robert (Salisbury)
Cameron, David Knight, rh Greg (E Yorkshire)
Cash, William Laing, Mrs Eleanor
Chapman, Sir Sydney (Chipping Lait, Mrs Jacqui
Barnet) Leigh, Edward
Chope, Christopher Letwin, rh Oliver
Clappison, James Liddell-Grainger, Ian
Conway, Derek Lidington, David
Cormack, Sir Patrick Lilley, rh Peter
Curry, rh David Loughton, Tim
Davis, rh David (Haltemprice & McIntosh, Miss Anne
Howden) McLoucifilin, Patrick
Donaldson, Jeffrey M. Malins, Humfrey
Duncan, Alan (Rutland) Maples, John
Evans, Nigel Mawhinney, rh Sir Brian
Ewing, Annabelle May, Mrs Theresa
Fallon, Michael Mercer, Patrick
Field, Mark (Cities of London & Mitchell, Andrew (Sutton
Westminster) Coldtield)
Flight, Howard Moss, Malcolm
Flook, Adrian Murrison, Dr. Andrew
Forth, rh Eric Norman, Archie
Gibb, Nick (Bognor Regis) O'Brien Stephen (Eddisbury)
Goodman, Paul Osborne, George (Tattoo)
Greenway, John Page, Richard
Gummer, rh John Paice, James
Paterson, Owen Taylor, John (Solihull)
Prisk, Mark (Hertford) Taylor, Dr. Richard (Wyre F)
Randall, John Taylor, Sir Teddy
Robathan, Andrew Tredinnick, David
Robertson, Angus (Moray) Trimble, rh David
Ruffley, David Turner, Andrew (Isle of Wight)
Salmond, Alex Tyrie, Andrew
Sayeed, Jonathan Walter, Robert
Selous, Andrew Waterson, Nigel
Shepherd, rh Mrs Gillian Weir, Michael
Shepherd, Richard Whittingdale, John
Simpson, Keith (M-Norfolk) Widdecombe, rh Miss Ann
Smyth, Rev. Martin (Belfast S) Wiggin, Bill
Spelman, Mrs Caroline Wilshire, David
Spink, Bob (Castle Point) Winterton, Sir Nicholas
Spring, Richard (Macclesfield)
Stanley, rh Sir John Wishart, Pete
Steen, Anthony
Streeter, Gary Tellers for the Ayes:
Swayne, Desmond Gregory Barker and
Swire, Hugo (E Devon) Mr. Peter Atkinson
Abbott, Ms Diane Colman, Tony
Adams, Irene (Paisley N) Corbyn, Jeremy
Ainger, Nick Corston, Jean
Ainsworth, Bob (Cov'try NE) Cousins, Jim
Alexander, Douglas Cranston, Ross
Allen, Graham Crausby, David
Anderson, rh Donald (Swansea E) Cryer, John (Hornchurch)
Anderson, Janet (Rossendale & Cummings, John
Darwen) Cunningham, Jim (Coventry S)
Armstrong, rh Ms Hilary Cunningham, Tony (Workington)
Atherton, Ms Candy Curtis-Thomas, Mrs Claire
Atkins, Charlotte Darling, rh Alistair
Baird, Vera Davey, Valerie (Bristol W)
Banks, Tony Davies, rh Denzil (Llanelli)
Barnes, Harry Davies, Geraint (Croydon C)
Battle, John Dawson, Hilton
Beard, Nigel Dean, Mrs Janet
Beckett, rh Margaret Dhanda, Parmjit
Begg, Miss Anne Dismore, Andrew
Bennett, Andrew Dobbin, Jim (Heywood)
Benton, Joe (Bootle) Dobson, rh Frank
Berry, Roger Doran, Frank
Best, Harold Dowd, Jim (Lewisham W)
Blackman, Liz Drew, David (Stroud)
Blair, rh Tony Drown, Ms Julia
Blizzard, Bob Dunwoody, Mrs Gwyneth
Borrow, David Eagle, Angela (Wallasey)
Bradley, rh Keith (Withington) Eagle, Maria (L'pool Garston)
Bradley, Peter (The Wrekin) Edwards, Huw
Brennan, Kevin Efford, Clive
Bryant Chris Ennis, Jeff (Barnsley E)
Buck, Ms Karen Farrelly, Paul
Burgon, Cohn Field, rh Frank (Birkenhead)
Byers, rh Stephen Fisher, Mark
Cairns, David Fitzpatrick, Jim
Campbell, Mrs Anne (C'bridge) Fitzsimons, Mrs Lorna
Campbell, Ronnie (Blyth V) Flint, Caroline
Caplin, Ivor Flynn, Paul (Newport W)
Casale, Roger Follett, Barbara
Chapman, Ben (Wirral S) Foster, Michael Jabez (Hastings
Clapham, Michael & Rye)
Clark, Mrs Helen (Peterborough) Foulkes, rh George
Clark, Dr. Lynda (Edinburgh Gapes, Mike (Ilford S)
Pentlands) Gerrard, Neil
Clark, Paul (Gillingham) Gibson, Dr. Ian
Clarke, rh Tom (Coatbridge & Goggins, Paul
Chryston) Griffiths, Jane (Reading E)
Clarke, Tony (Northampton S) Griffiths, Nigel (Edinburgh S)
Clelland, David Grogan, John
Clwyd, Ann (Cynon V) Hain, rh Peter
Coaker, Vernon Hall, Mike (Weaver Vale)
Coffey, Ms Ann Hamilton, David (Midlothian)
Cohen, Harry Hamilton, Fabian (Leeds NE)
Hanson, David Moffatt, Laura
Havard, Dai (Merthyr Tydfil & Mole, Chris
Rhymney) Moran, Margaret
Healey, John Morgan, Julie
Henderson, Doug (Newcastle N) Mountford, Kali
Hendrick, Mark Munn, Ms Meg
Hesford, Stephen Murphy, Jim (Eastwood)
Heyes, David Naysmith, Dr. Doug
Hinchliffe, David O'Brien, Bill (Normanton)
Hoey, Kate (Vauxhall) O'Hara, Edward
Hood, Jimmy (Clydesdale) Diner, Bill
Hoon, rh Geoffrey O'Neill, Martin
Hope, Phil (Corby) Osborne, Sandra (Ayr)
Hopkins, Kelvin Owen, Albert
Howarth, George (Knowsley N & Perham, Linda
Sefton E) Picking, Anne
Hughes, Beverley (Stretford & Pickthall, Colin
Urmston) Pike, Peter (Burnley)
Hughes, Kevin (Doncaster N) Plaskitt, James
Hutton, rh John Pollard, Kerry
Iddon, Dr. Brian Pond, Chris (Gravesham)
Illsley, Eric Pope, Greg (Hyndburn)
Jackson, Glenda (Hampstead & Pound, Stephen
Highgate) Primarolo, rh Dawn
Jackson, Helen (Hillsborough) Purnell, James
Johnson, Miss Melanie (Welwyn Quinn, Lawrie
Hatfield) Robertson, John (Glasgow
Jones, Jon Owen (Cardiff C) Anniesland)
Jones, Kevan (N Durham) Ruane, Chris
Jones, Lynne (Selly Oak) Russell, Ms Christine (City of
Jowell, rh Tessa Chester)
Kaufman, rh Sir Gerald Ryan, Joan (Enfield N)
Keeble, Ms Sally Sarwar, Mohammad
Keen, Alan (Feltham) Savidge, Malcolm
Keen, Ann (Brentford) Sawford, Phil
Kelly, Ruth (Bolton W) Sedgemore, Brian
Kennedy, Jane (Wavertree) Sheerman, Barry
Khabra, Piara S. Sheridan, Jim
Kidney, David Skinner, Dennis
King, Andy (Rugby) Smith, rh Andrew (Oxford E)
Kumar, Dr. Ashok Smith, Geraldine (Morecambe &
Ladyman, Dr. Stephen Lunesdale)
Lammy, David Smith, Jacqui (Redditch)
Lawrence, Mrs Jackie Smith, Llew (Blaenau Gwent)
Lepper, David Soley, Clive
Leslie, Christopher Southworth, Helen
Levitt, Tom (High Peak) Starkey, Dr. Phyllis
Lewis, Terry (Worsley) Stevenson, George
Liddell, rh Mrs Helen Stewart, David (Inverness E &
Linton, Martin Lochaber)
Lloyd, Tony (Manchester C) Stewart, Ian (Eccles)
Love, Andrew Stinchcombe, Paul
Lucas, Ian (Wrexham) Stoate, Dr. Howard
Luke, lain (Dundee E) Strang, rh Dr. Gavin
Lyons, John (Strathkelvin) Stringer, Graham
McCafferty, Chris Stuart, Ms Gisela
McDonnell, John Sutcliffe, Gerry
MacDougall, John Taylor, Dari (Stockton S)
McFall, rh John Thomas, Gareth (Clwyd W)
McGuire, Mrs Anne Todd, Mark (S Derbyshire)
Mclsaac, Shona Touhig, Don (Islwyn)
McKechin, Ann Trickett, Jon
McKenna, Rosemary Truswell, Paul
McNamara, Kevin Turner, Dennis (Wolverh'ton SE)
McWalter, Tony Turner, Dr. Desmond (Brighton
Mahon, Mrs Alice Kemptown)
Mendelson, rh Peter Turner, Neil (Wigan)
Marris, Rob (Wolverh'ton SW) Tynan, Bill (Hamilton S)
Marsden, Gordon (Blackpool S) Walley, Ms Joan
Marshall-Andrews, Robert Ward, Claire
Martlew, Eric Wareing, Robert N.
Meale, Alan (Mansfield) White, Brian
Michael, rh Alun Whitehead, Dr. Alan
Milburn, rh Alan Wicks, Malcolm
Miliband, David Williams, rh Alan (Swansea W)
Miller, Andrew Williams, Betty (Conwy)
Wills, Michael Wright, Tony (Cannock)
Winnick, David
Wood, Mike (Batley)
Woodward, Shaun Tellers for the Noes:
Wright, Anthony D. (Gt Derek Twigg and
Yarmouth) Gillian Merron

Question accordingly negatived.

Mr. Peter Kilfoyle (Liverpool, Walton) (Lab)

On a point of order, Madam Deputy Speaker. When the last vote was taken, a number of right hon. and hon. Members were in the Marquee. No bell rang down there. May I ask you to ensure that the bells are put into effect? It is obviously rather disconcerting to hear that there is a vote when the information on that vote does not extend throughout the Palace.

Madam Deputy Speaker (Sylvia Heal)

I thank the hon. Gentleman for bringing that matter to the attention of the occupant of the Chair, and I will ensure that the Serjeant at Arms is aware of his comments.

Back to
Forward to