Fuel Duty (Hansard, 17 June 2004)

§ 1. Norman Baker (Lewes) (LD)
What account he takes of long-term trends in the cost of motoring in deciding his policy on fuel duty rates for private vehicles.[179122]

§ The Economic Secretary to the Treasury (John Healey)
As with all tax decisions, my right hon. Friend the Chancellor takes into account all relevant economic, social and environmental factors, including the cost of motoring, in deciding fuel duty rates.

§ Norman Baker
Has the Minister seen the information released by the Department for Transport yesterday, which confirmed that since 1974 the real-terms cost of travelling by rail has gone up by 84 per cent. and by bus by 70 per cent., but that the real cost of motoring has fallen by 5 per cent.? Those trends have continued under this Government. Is it not therefore true that bus users have more cause to complain than motorists? Is it not financially and environmentally irresponsible to argue that the normal upgrade in fuel price must be abandoned, as some on the Conservative Benches apparently want?

§ John Healey
The hon. Gentleman is right. The real cost of motoring has fallen by about 8 per cent. in the past 25 years and by 5 per cent. since 1997. I am surprised that he does not give due recognition to that and congratulate the Government on what we are putting in place to support the development of public transport. We are spending £250 million a week to improve transport to make up for decades of under- 892 investment. With all due respect to the hon. Gentleman—I know that he takes a close interest in these matters—the real choice is whether we see a continuation of that long overdue substantial investment in our transport infrastructure or a return to the cuts and freezes that the shadow Chancellor has promised.
I recognise, and I am sure that others will note, that the hon. Gentleman speaks for the Liberals on these matters and that he seems to have a policy of pricing people out of their cars and hauliers off the British roads.

§ Richard Burden (Birmingham, Northfield) (Lab)
I welcome what my hon. Friend has said. If we are to tackle emissions from vehicles, looking at price is one part of that, but only one part. We also need to encourage the development of environmentally friendly automotive technology, whether it be cleaner diesel or fuel cells. I welcome what the Government have already done in that respect, but is it not important to give greater incentives to British firms to develop such technology so that we reap the industrial as well as the environmental benefits?

§ John Healey
My hon. Friend has a well-established and strong local interest in the future of the automotive industry. He makes the right point that it is a mistake and too simplistic to focus on the main fuel duty rates. To do so misses many of the advances that we have been making, especially through the use of fiscal instruments and other support. The reform of vehicle excise duty and company car tax has had a beneficial impact on the environment. Support for, and voluntary agreements with, the motor industry are bringing forward the new technologies that my hon. Friend is concerned about and resulting in an improvement in the efficiency of engines.
By using duty differentials, we are able to create a shift in the fuels that are used on our roads towards greener fuels. We created a shift entirely to ultra-low sulphur fuels in 2001. We are set to do the same again in September this year with the incentive that we have planned for sulphur-free fuels.

§ Mr. Roy Beggs (East Antrim) (UUP)
I welcome the Government's investment to enhance public transport and long for the completion of the trans-European networks route between Cork, Dublin, Belfast and Larne. What encouragement is being given to the Irish Republic to narrow the gap between fuel prices in the Republic and those in Northern Ireland, with a view to helping to reduce the amount of smuggling?

§ John Healey
I welcome the hon. Gentleman's welcome for the increase in public investment. He will know that there is a specific public investment programme in transport in Northern Ireland. He draws attention to the real problem of oils fraud in Northern Ireland, which is the only part of the United Kingdom that shares a land border with another European Union state.
The answer is not to look at fuel duty, because the largest part of oils fraud is the laundering and misuse of rebated fuels, on which the duty rates are more than 40p 893 lower than the road fuel rate. That is why the programme of action to counter that smuggling, laundering and misuse of oils put in place by Customs is so important. Due to the tough action and the investment that we have put in place, in the past couple of years there has been an increase of 7 per cent. in the legitimate duty-paid market for road fuels in Northern Ireland. That reverses a steep five-year decline.

§ David Taylor (North-West Leicestershire) (Lab/Coop)
The whole House recognises and welcomes the progress that my hon. Friend has described in his answers so far. I note that the British motorist is taxed at about the average for EU countries, but does he acknowledge that much remains to be achieved on motoring taxation? Given the stabilisation of costs, does he accept that the alarums and excursions that are occasionally produced by some lobbies are driven more by politics than by economics or the environment?

§ John Healey
My hon. Friend points to the sort of factors that my right hon. Friend the Chancellor has to take into account when making duty rate decisions. In a sense, it is most important that we have the strength to take decisions for the British economy that balance the interests of motorists and hauliers, the needs of the public services, the stability of the economy and the responsibilities we have to the environment. That is exactly what we aim to do.

§ Mr. Oliver Letwin (West Dorset) (Con)
Although the Chancellor has chosen to avoid answering this question himself, it would be churlish not to congratulate him on his long period in office. However, he has some way to go before he matches the record of Vasili Feodorovich Gurbazov, who was the Soviet finance Minister for 25 years and tragically died in office, without ever becoming Prime Minister.
One of the hallmarks of the Chancellor's long period in office has been increasing public resentment of the fact that his big Government have given us higher taxes without any commensurate improvements in public services. Does the Minister recognise that the outrage that forced the Chancellor into retreat on his proposed fuel duty increase was just part of a mounting feeling that people are being let down by Labour's big Government, big tax rises and big failures to deliver?

§ John Healey
Oh dear! I welcome the congratulations that the right hon. Gentleman offers to my right hon. Friend the Chancellor, but I remind him that during my right hon. Friend's period in office there have been five shadow Chancellors. I hope that we will not see a sixth too soon.
When we consider our decisions on fuel duties, we will not take any advice from the Tories. If we had followed the Tory policy that we inherited, of 5 per cent. increases in road fuel duty each year, the motorist and the haulier would now be paying 14p a litre more in duty than they are.

§ Mr. Letwin
I am afraid that that answer will not help people who feel let down by a Government who have given them the second highest fuel duties in Europe—not, as the hon. Member for North-West Leicestershire (David Taylor) said, somewhere near the average—and 894 an overall increase in tax of £34,000 for every minute of the Chancellor's tenure in office. Does not the Minister see that the reaction on fuel duty and the reaction on council tax are part of a pattern? Has it truly not begun to dawn on him that the taxes required to sustain the Chancellor's big, ineffective Government are now beginning to exceed the limits of what people will accept? As taxes tick up at a rate of £34,000 a minute, is it any wonder that the recent elections suggested that it might be five minutes before midnight for this Government?

§ John Healey
The right hon. Gentleman is somewhat inventive, but this a question about fuel duty rates, which he did mention briefly. We understand the cause of concern for the motorist and the haulier. It is in nobody's interest that oil prices are higher than expected, but the problem is caused by world oil prices, not UK fuel duty. That is why my right hon. Friend the Chancellor has been at the forefront of discussions internationally with OPEC about oil supplies and increased oil production. That is why both the Chancellor and the Prime Minister have said that in August we will consider the progress we have made in dealing with this period of high and unsustainable prices. However, rather than the short-term and opportunistic reactions to changing events that the right hon. Gentleman demonstrates, we will not put at risk the stability of the public finances or the economy—two things that my right hon. Friend the Chancellor has worked hard to put in place over the past seven years.

§ Mr. Letwin
I do not know what the Minister thought the Chancellor's retreat was if it was not short-term opportunism. I am afraid that that answer betrays a complete failure to learn the lessons of Labour's disastrous performance in the recent elections. Those elections revealed mounting concern, not only about fuel duty but about the rest of the 66 stealth tax increases. Since those elections, the Governor of the Bank of England has alerted people to the fact that the Chancellor's big Government and big borrowing are beginning—

§ Mr. Speaker
Order. The question is about fuel duty.

§ Mr. Letwin
Do the Chancellor and the Minister recognise that the undignified retreat on fuel duties, the recent rises in interest rates, the level of household indebtedness and the halving of the savings ratio all bear out—[Interruption.]

§ Mr. Speaker
Order. Members must let the Speaker chair the proceedings I expect the Minister's response to be brief, because we are only on Question 1—and at this rate we may only get to Question 4 before the hour is up.

§ John Healey
The right hon. Member for West Dorset (Mr. Letwin) quoted the Governor of the Bank of England, so let me, too, quote the Governor on the precise points that the right hon. Gentleman is trying to pray in aid against us. Last night, in his Mansion house speech, the Governor of the Bank of England said the improvement in the fiscal stance in recent years has been a key element in achieving macroeconomic stability". 895 Our public finances are in good shape. The economy is growing strongly. Unemployment has fallen again this week—

§ Mr. Speaker
Order. We will leave it at that.

§ Dr. Vincent Cable (Twickenham) (LD)
I, too, extend congratulations to the Chancellor for having exceeded the period in office of the last great Liberal Chancellor, Lloyd George, although not yet that of Gladstone, both of whom in fact became Prime Minister—unlike the Russian gentleman.
In the same positive spirit, I suggest that the Government were right not to have panicked at the political demands for the immediate cancellation of the oil price increase in the face of international market instability. Which does the Minister regard as the greatest threat to the stability of the British economy: an oil price shock caused by uncertainty in the middle east or, as the Governor of the Bank of England appears to believe, a house price shock generated domestically?

§ John Healey
It is neither; it is the re-election of the Conservatives.