Road Fuel Duties

Debate between Angus Brendan MacNeil and Graeme Morrice

Tuesday 13th September 2011 Westminster Hall

[Graeme Morrice (Livingston) (Lab)]

I thank my hon. Friend the Member for Central Ayrshire (Mr Donohoe) for securing the debate on what is clearly an important issue for all our constituents and the future of our economy. All right hon. and hon. Members will have had constituents approaching us and expressing their concerns about the current high cost of fuel. Individual constituents and local businesses have certainly raised it with me.

Fuel costs in West Lothian, where my constituency of Livingston is, are currently almost exactly in line with the national average: about £1.35 or a little more for a litre of unleaded, and £1.38 a litre for diesel—[Interruption.] The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) confirms that from a sedentary position.

High fuel costs form an important element of the general increase in household outgoings currently experienced by so many families, in many cases coupled with frozen or reduced household incomes. A constituent recently contacted me to describe her own circumstances: she has not had a pay increase for two years, yet she is having to pay an extra £10 to fill up her car with petrol, meaning that she must now prioritise her journeys to remain within her budget.

Interestingly, recent AA research found that one in four of its members is now in the position of having to restrict the amount spent when refuelling and to prioritise car use. Alarmingly, that figure rises to 40% among those on lower incomes. Edmund King, the AA’s president, commented:

“Members tell us that driving to work represents the priority use of their car and that other trips have to suffer to make financial ends meet.”

With the Institute for Fiscal Studies warning recently that household budgets are set to be squeezed for a decade, it is vital that we get a grip on the issue of fuel costs now, so that consumers do not continue to suffer misery year after year.

Other constituents have expressed their frustration at being told that they should use public transport when they live in areas where public transport links are simply inadequate, or the costs are as high as for using their own vehicle. We touched on that earlier in the debate, and I do not want to go into the detail. The impact of high fuel costs is also seriously hurting businesses, however, and I want to focus the remainder of my remarks on that aspect of today’s debate.

We have seen some welcome, if limited, respite for consumers in the past few weeks, with pump prices in supermarket forecourts falling in response to a reduction in wholesale costs. Even if that is of some small assistance to individual consumers, it does little to help businesses and, in particular, haulage and transport companies. Speaking about that recent round of price cuts, the Road Haulage Association chief executive, Geoff Dunning, said:

“These price cuts can only ever be short term. What is desperately needed and would help everyone would be a reduction in the actual rate of fuel duty.”

He went on:

“However, January’s planned duty rise, combined with the proposed August increase will drive up fuel duty by a massive 10.4%. This will suck more money out of the economy and further undermine efforts to regenerate growth.”

Only last week, the Freight Transport Association revealed research showing that, on average, vehicle operating costs for rigid, articulated and drawbar vehicles had risen by 5.6% in the year to 1 July 2011 and that they have remained close to record, all-time highs since April this year. The largest contribution to the rise is the 12% increase for diesel over the same period. The FTA said that, while hauliers could ride out the recession by reducing margins and delaying vehicle replacements, they continue to feel the pinch and that it is likely that some hauliers might not be able to sustain their businesses in such circumstances.

That is of particular concern in my Livingston constituency because of its central position in Scotland, which makes it a popular location for businesses that need to transport goods throughout Scotland and often to other parts of the United Kingdom. Before the previous Budget, Dave McDougall, the chief executive of the West Lothian chamber of commerce, highlighted that point and the importance of getting the cost of fuel down for businesses in West Lothian. He said:

“Fuel prices are crippling all types of business. West Lothian is a location of choice for many companies because of its access to all of central Scotland. But this means that the effects are even worse for our Chamber members.”

He urged the Chancellor to take action to reduce the costs but, of course, we know that the 1p cut in fuel duty announced in the Budget was wiped out within weeks by soaring world oil prices.

Also speaking before the Budget, in March, the Federation of Small Business’s Scottish policy convener, Andy Willox, said:

“Scotland is suffering disproportionately due to the spiralling cost at the pumps.”

[Mr MacNeil]

The hon. Gentleman has just said that Scotland is suffering disproportionately. Would he prefer those powers to be held by the most democratic forum representing Scotland, the Scottish Parliament, or to be controlled by the Tory and Liberal Government here in London?

[Graeme Morrice]

I do not want to get bogged down in a debate on the constitution or the whole question of more powers for the Scottish Parliament. I certainly support the Scotland Bill, which we have been discussing, and fiscal autonomy for Scotland—but not independence, of course.

[Jim Dobbin in the Chair]

The impact has also been felt by retailers, with Asda stating last month that its customers were cutting back on trips to its stores because of high fuel prices. It estimated that families have, on average, £9 less disposable income each week compared with this time last year, largely due to increased petrol costs. So there is absolute agreement about businesses needing more help with high and rising fuel costs.

The all-important question is what can be done with road fuel duties to reduce the pressure on businesses and individuals and to bring about a halt to spiralling price rises. Fuel duty accounts for more than 60% of the pump price of petrol and just less than 60% for diesel, with VAT on top of that—the highest percentage of duty in the European Union. While the anger and frustration of individuals at suffering such high duties are understandable, once again the major concerns that business has are also clear. How can we expect businesses to compete on a level playing field with European competitors when they face such high taxes and duties?

When the Government increased VAT to 20% in January, they contributed to a further hike in fuel costs. It was the wrong tax at the wrong time, hitting families and businesses hard, just when they were least able to absorb such an increase. I support the calls to look at reversing the VAT increase for road fuel. We know it is feasible to obtain approval at the EU level for such a cut, but the Government refuse to entertain the idea because it is politically inconvenient for them to do so.

In a debate on motoring fuel costs here in Westminster Hall back in June, the hon. Member for Harlow (Robert Halfon) called for a commitment to no more petrol tax rises in this Parliament. He urged the Government to consider abolishing even inflationary rises on fuel duty during the Parliament. Such calls have largely come about as a result of the work of Fair Fuel UK, which is a broadly representative body and is making a strong case for reducing fuel costs for both motorists and businesses.

How do such calls square with the Government’s position? In opposition, the Conservatives made much of plans to “slash fuel duty”, as the headlines screamed at the time, with their fair fuel stabiliser. The concept of fuel duty falling when fuel prices go up and rising when prices fall, seems, on the surface at least, like a winningly simple and effective idea. Many of my constituents certainly believed so and contacted me about supporting it. However, the Office for Budget Responsibility, the Institute for Fiscal Studies and others have raised problems with that approach. It remains to be seen whether the fair fuel stabiliser will deliver what businesses and individual motorists want.