HL Deb 25 October 2000 vol 618 cc320-2

2.45 p.m.

Lord Northbrook asked Her Majesty's Government:

What is their assessment of the additional revenue accruing to the Treasury in the current financial year as a result of recent increases in the price of crude oil, given that the Chancellor of the Exchequer's budgetary projections were based on an oil price of 20 dollars a barrel.

Lord McIntosh of Haringey

My Lords, updated revenue forecasts will be published in the Pre-Budget Report.

Lord Northbrook

My Lords, I thank the Minister for his reply. In view of the extra revenue, which may amount to £2 billion, arising from the increase in the price of oil from 22 to 30 dollars per barrel, will the Government consider cutting the high level of transport taxes generally and fuel tax and vehicle excise duties, which I understand for some heavy goods vehicles are eight times higher than in France?

Lord McIntosh of Haringey

My Lords, the noble Lord is entitled to speculate as he wishes on the revenue effects. I can only say that a number of factors affect revenue and work in different directions. For example, higher oil prices increase the profits of companies which operate in the North Sea and, therefore, the amount of corporation tax that they pay. However, they reduce the profits of others who pay more for their petrol and that decreases corporation tax. We gain VAT on oil but lose it on the products which people do not buy because they have to pay more for oil. The increase in price has no effect on fuel duty, which is a fixed amount per litre. These are complex considerations. If the noble Lord is able to make a quick calculation of their net effect he is a better man than I am.

Lord Jenkins of Putney

My Lords, in advance of any inquiry into this matter, can my noble friend tell the House what proportion of the average price of a gallon of petrol is made up of UK taxation?

Lord McIntosh of Haringey

My Lords, for petrol, ultra-low sulphur diesel and red diesel the figures are 75.3 per cent, 73.48 per cent and 27.2 per cent respectively.

Lord Ezra

My Lords, in view of the recent strong statement by the Prime Minister in favour of the environment, can one assume that a large part of the additional tax revenues earned from the increase in the oil price will be devoted to environmental purposes and particularly in the road transport sector to increase efficiency and reduce emissions?

Lord McIntosh of Haringey

My Lords, I read the Prime Minister's speech very carefully and did not see anywhere in it the word "hypothecation".

Lord Boardman

My Lords, does not the vast booty from these taxes, which the Minister is unable to disclose, result largely from problems in the Middle East" Does the Minister agree that the Government are accumulating a vast war chest which they will use in due course to promote themselves at the next election? Can the noble Lord take pride in that?

Lord McIntosh of Haringey

My Lords, I notice that the noble Lord, Lord Boardman, is more cautious than his noble friend Lord Northbrook, in that he refers only to a "vast booty" rather than an actual figure. I believe that he goes further than the evidence suggests and underestimates the extent to which taxes on petrol, both VAT and fuel duty, are only a very small part of the total revenue that is available to this country. Therefore, the conclusion that the noble Lord draws about war chests is not valid.

Baroness Platt of Writtle

My Lords, does the noble Lord agree that it is the tax on diesel fuel for lorries which is one of the biggest problems? All deliveries of retail goods to shops, whether of clothes, food or white goods, are made by lorry in the final resort. Does the Minister agree therefore that this is a tax on every citizen of this country, including hauliers and farmers, and it is very important that it should be reduced?

Lord McIntosh of Haringey

My Lords, the noble Baroness is quite right. That is why Ministers have been engaged in continuing, lengthy discussions with hauliers. The participants also include those who took part in the protests last month, although in the context of a clear understanding that we do not give way to pressure arising from protests.

We recognise that the price of diesel is a significant factor in the cost of many other goods sold in this country. However, although fuel tax may be higher, the total costs borne by haulage firms are very much less in the United Kingdom because of lower rates of corporation tax and the absence, for example, of motorway tolls.

Lord Newby

My Lords, we listened carefully to the noble Lord's original Answer. However, surely he must admit that, if the price of crude oil rises, the net effect on the UK Exchequer is an increase in revenues, although offsetting effects should also be considered? Perhaps I may press the noble Lord, as other noble Lords have done, on whether, in the light of events that have taken place over the past six weeks, it would be prudent for the Government to contemplate using at least part of that increased revenue to ease the burden on the travelling public.

Lord McIntosh of Haringey

My Lords, the noble Lord, Lord Newby, is more cautious than the noble Lord, Lord Boardman, who in turn was more cautious than the noble Lord, Lord Northbrook. I was asked to give an assessment of the additional revenue accruing to the Treasury. My response now, as then, is that that is a matter for the Chancellor to consider for the Pre-Budget Report on 8th November.

The Earl of Northesk

My Lords, following tangentially on the question put by the noble Lord, Lord Ezra, can the Minister confirm the view, widely touted in Government circles and one certainly implied by the Prime Minister, that any reduction in motoring taxes would give rise to a corresponding reduction in the availability of funds for spending on core items such as health and education?

Lord McIntosh of Haringey

My Lords, that must be the case. The noble Earl, Lord Northesk, will be aware that a reduction in fuel duty of the kind proposed by the Conservative Party; namely, around 3p per litre—after stating that they would not be influenced by the protests—would result in savings to the average motorist of approximately £3 per month.