Fuel Prices

Debate between Robin Walker and Michael McCann

Tuesday 15th November 2011 Commons Chamber

[Mr Walker]

My hon. Friend brilliantly pre-empts my next point. I was going to say that most business users also use diesel, which, as my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) pointed out, is an important issue. One concern I particularly wanted to raise is the fact that diesel in this country is so much more expensive than anywhere else in Europe. I am told that this is not simply a matter of taxation as the rates of fuel duty are set equally for unleaded petrol and for diesel, but of refining capacity, which the hon. Member for Ynys Môn (Albert Owen), who is no longer in his place, also mentioned. Also relevant is the fact that North sea oil has traditionally been better suited for the production of unleaded petrol than for diesel. However, it does seem extraordinary that one can drive across most of Europe seeing prices for diesel consistently lower than those for unleaded, only to arrive in this country and find that there is a 7p differential in the other direction. In fact, we are one of the few countries that treats diesel and unleaded exactly the same for tax purposes, and many others, including France and Spain, tax diesel much less than we do.

Perhaps I should declare an interest at this point as the driver of a rather battered Y-registration diesel Golf with more than 150,000 miles on the clock, but my prime interest is that diesel tends to be the fuel of choice for business users and the freight and haulage industries. Its cost and the extent of taxation on it thus have a more direct impact on our economy and on prices in the shops than does unleaded petrol. Given the importance of diesel to business and the economy, will the Minister give special consideration to steps that could be taken to encourage the closure or reversal of that price differential, whether it be directly through fuel duty or indirectly through encouraging investment in refining capacity.

Like others, including my hon. Friend the Member for Wyre Forest (Mark Garnier), I am very concerned at the wide geographical price differentials within the UK. Although many have argued that this is a matter of rural sparsity and have put the case for a rural fuel derogation, which I accept, I want to put the case for urban centres such as Worcester that find themselves paying a higher price for fuel than their neighbours or competitors.

[Mr McCann]

Is the hon. Gentleman against a free market in the fuel industry?

[Mr Walker]

I was just coming on to that, but I am very much in favour of the free market and want to encourage competition.

A glance at petrolprices.com shows the average price for diesel in Worcester yesterday was 142p compared to 139p in Cheltenham or 140p in Birmingham—two cities that it sits between. For the lowest priced unleaded, however, the differential increases from that 2p or 3p to a staggering 5p, with Worcester drivers paying 134p compared to 129p in Birmingham or Cheltenham. My constituents regularly raise concerns about that. They fear that there is insufficient competition affecting prices in Worcester. I realise that it is not the Minister’s job to set prices everywhere in the country, but I would appreciate a reassurance from her that the Government are determined to see active competition between retailers, and are doing all they can to stimulate it.

Other Members have mentioned supermarkets. I have been led to believe by constituents that Tesco and Sainsbury have changed their policies, and that rather than trying to be the lowest-price retailers of petrol in any given area, they now aim to sell at the average price for the area. Their purpose may be to prevent accusations of predatory pricing, but this is a very counter-productive way of doing that. I hope that the arrival of a new Asda store in Worcester next year will increase competition in the area.

Like many other Members, I am worried about the fact that constituents who need their cars to travel to work, and businesses in my constituency that need to use road transport, are paying too much for their fuel, and that too much of that cost consists of tax. I welcome the steps that the Government have already taken to protect our economy from the previous Government’s planned increases, the fact that fuel is 6p cheaper now than it would have been otherwise, and the Chancellor’s declaration that he wants to

“put fuel into the tank of the British economy.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]

I believe that it has never been more important to do so, and I commend the motion to the House.