Tom Greatrex
Main Page: Tom Greatrex (Labour (Co-op) - Rutherglen and Hamilton West)Fuel Prices
Tom Greatrex Excerpts(11 years, 8 months ago)
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Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
It is a pleasure to take part in a debate on an issue that is important to motorists, families and businesses across the country, as the hon. Member for Bedford (Richard Fuller) just said. I congratulate the hon. Member for Harlow (Robert Halfon), who has worked assiduously on this issue and, as he said, built enough support across the House to get this debate through the Backbench Business Committee, and I congratulate the latter on allowing it to happen. I also welcome the Minister to his place. This is, I think, his first appearance at the Dispatch Box in his new role, although we have faced each other three times in a different capacity over the past week or so.
Families’ and businesses’ budgets are facing unprecedented pressures, as set out by the hon. Members for Harlow and for Bedford, but, as my hon. Friend the Member for East Lothian (Fiona O'Donnell) said, other issues, such as energy bills and rail fares, are also adding to them. As a result, people are struggling to keep their head above the water. The cost of fuel is one such pressure. As the hon. Member for Mid Norfolk (George Freeman) pointed out, that has an effect on the wider economy too.
For all those reasons, the OFT’s decision to issue a call for information on the UK petrol and diesel sector is welcome. I pay tribute to the hon. Member for Harlow, because he made the point, as too did my hon. Friend the Member for Dumfries and Galloway (Mr Brown), that were it not for the continual representation here, we probably would not have got to that stage—it certainly was not the message the hon. Gentleman was getting from the OFT earlier in the year.
There is a sense that when the price of oil rises, the cost of fuel is not far behind, but when the price of oil falls, reductions in fuel costs do not appear to follow on so quickly. As the OFT said,
“pump price may be failing to rise and fall in a way that reflects the underlying movements in crude oil prices”.
That is at the centre of this debate and explains the level of concern expressed across the House.
As the hon. Member for Harlow detailed, the media reported this morning that a City whistleblower has alleged that the oil market is rigged with daily price manipulations. The hon. Member for Rossendale and Darwen (Jake Berry) made the point very well that the alleged manipulation, if true, would have had a much greater direct impact on our constituents than some other instances of manipulation that quite rightly caused concern. We need a fuel market that works in the interests of motorists, small businesses and local communities, but there are genuine concerns that that is not what we have.
The OFT’s announcement is welcome, although I note that it is not the announcement of an inquiry. As the hon. Member for High Peak (Andrew Bingham) made clear, what has been announced is a pre-inquiry inquiry, which probably should lead to inquiry, as I hope it will, because there is a good case for one. The OFT has committed to publishing a summary of its findings in 2013 and will outline the next steps at that point. As hon. Members will know, if a full inquiry is to be held, it may take many months if not years, with no firm conclusions necessarily reached until that point. We have to face the fact that there is a widespread feeling that in the meantime motorists will continue to get a raw deal and face mounting pressure at the pump.
The hon. Members for Camborne and Redruth (George Eustice) and for Warrington South (David Mowat) referred to the previous Transport Secretary saying that she wanted to look at tracking the price that oil companies pay and how the reductions are passed on at the pump. That is something she said in her previous role, but when the Library contacted the Department for Transport yesterday to see what progress had been made, it was advised that nothing would happen until the OFT had reported its findings at the very earliest. If an OFT inquiry does flow from the call for evidence, that could take a considerable time, so perhaps the Minister can enlighten us as to why the Department cannot do that work now. Indeed, I am not clear why that should be the case, because those issues could be tracked now. I therefore hope that the Minister will respond to that point, which is a matter of concern for Members in all parts of the House.
As the hon. Member for Belfast East (Naomi Long) and my hon. Friend the Member for Dumfries and Galloway made clear, along with many Government Members, those living in remote areas face particular pressures. By and large, prices in remote parts of the country are higher than in urban areas, as the OFT reports. There is also less choice, leading to less competition and difficult decisions being made. As my hon. Friend said, in some cases people may be deciding that it is not even worth going to work, because of the costs associated with making those journeys. Rural motorists often have far further to travel to fill up their tanks. High prices in remote areas also have a severe impact on the road haulage industry. The OFT noted the generally detrimental impact of high fuel costs on the standard of living in remote areas.
In November last year, the Chief Secretary to the Treasury announced a pilot scheme to cut the price of fuel for some of the UK’s island communities in the Northern and Western Isles of Scotland, to come into effect in March this year. Although that might be welcome—even though it came into effect 18 months after the Chief Secretary had said it would happen within a few months—towards the end of February, shortly before the scheme was to be introduced, the price at the pumps on Orkney and Shetland increased by 5p per litre. I know that the right hon. Member for Orkney and Shetland (Mr Carmichael) is unable to take part in these debates because of his Government position, but at the time he made it clear through his local newspapers that it was a strange coincidence that prices should go up shortly before the scheme was introduced. That adds weight to the concerns expressed about the possible level of manipulation. It is vital that the OFT gets to the bottom of that, because those concerns are deep-seated, particularly at a time of economic pressure for so many people.
The hon. Member for Brecon and Radnorshire (Roger Williams) made some points about independent retailers—I will not attempt to pronounce the name of the village where the filling station he referred to is. That is also an issue in urban areas, as I know from my constituency. Unlike the hon. Member for High Peak, I have not quite reached the point of taking my wife out to a petrol station—I am not sure I am that brave—but over a year ago I was contacted by an independent retailer operating in my constituency. The company’s main concern was that it was unable to compete with large supermarkets, which have the ability to use petrol prices as loss leaders and, further, manipulate prices in those areas. My hon. Friend the Member for Inverclyde (Mr McKenzie) made that point in relation to the situation in his constituency, as opposed to neighbouring constituencies, as did the hon. Member for Rossendale and Darwen.
A further complaint by that company was about the practices of oil firms and the impact on smaller retailers. That complaint has in large part been supported by the findings of the International Organisation of Securities Commissions, a body that has, as the OFT noted, highlighted many areas of concern, including the way in which oil prices are reported. The OFT expressed its concern that if oil prices are being inflated, that could be
“leading to higher pump prices because wholesale road fuels prices may be based on the prices reported by oil price reporting agencies.”
That is another important aspect of this debate.
I am sorry to have to report that the local petrol retailer in my constituency that contacted me a year ago is no longer operating, and its situation is not unique. That is happening to many others as well. My constituency is largely urban and suburban, and the number of empty petrol retail outlets has increased massively. Some, ironically, are now being used as car-washes. There has also been a reduction in the opportunities available to people and an increase in the dominance of some of the big companies. All those factors underline the importance of making the case to the OFT that it needs to get to grips with this issue as quickly as possible. It must collect and analyse the evidence in order to make a decision on whether there should be a full inquiry.
Earlier this week, the president of the AA, Edmund King, expressed his concern about the high price of petrol at this time of year. He made the point that although increases are normally lower and pump prices come down at this time of year, we have seen an increase of about 10p since July even though there has been no appreciable increase in the price of oil. That is despite the Government’s introducing a fair fuel stabiliser. My reading of the Red Book tells me that it was introduced at a level of $75 a barrel equivalent. If that is correct, it has not made a difference, and the suggestion that the stabiliser was the answer to the problem has not been borne out. Perhaps this is because of other market manipulations that have been at the heart of the debate, and if so, that too lends weight to the case for the inquiry to happen as soon as possible. We need to get to the bottom of these issues, so that other Government interventions that could make a difference can be introduced rather than being offset by other changes and behaviours that are inherent in the market.
We have had an informed and interesting debate this afternoon. Members on both sides of the House have expressed the concerns raised by their constituents. This vital issue has a significant impact on their standard of living, and even on their ability to go about their daily business. The information in Members’ speeches showed the strength of feeling across the House. Motorists are feeling the squeeze. Families and businesses are feeling the pinch. That is why it is essential that any manipulation, collusion or shady practices in the market are properly exposed, and the OFT has a duty to get on and do that as soon as possible.
Mr Hayes
That is a typically incisive and insightful contribution from my hon. Friend. I will say a little more about volatility, but the House will have heard his argument. It seems to me to be as impressive as his arguments usually are, and I shall certainly give further consideration to the matter.
In the spirit of being open-minded—this is, of course, an immensely open-minded Government—let me mention the Wheatley review into LIBOR, which is considering whether benchmarks or indices in other markets also need to be looked at. It will, of course, include this market and it aims to publish its conclusions by the end of September. I look forward, too, to the recommendations from the International Organisation of Securities Commissions, and the Government will consider how to take those forward in the G20 and how to implement them in the UK to ensure oil price benchmarks are not open to manipulation. As a result of this debate, however, and of the arguments made by my hon. Friends and others, I will write to the Financial Services Authority about the concerns raised here today. There is no point in our having these sorts of debates if they do not inform and inspire Government policy. In the case of this Minister, they will do just that.
It is absolutely right that we enhance transparency in the oil and commodity markets. The Government continue work to improve the functioning of the global market and to reduce price volatility through engaging with key oil-producing countries to promote investment in oil production and responsible behaviour in the market—the matter raised by my hon. Friend the Member for Wycombe (Steve Baker) a few moments ago. To that end, we have also championed a new charter for the International Energy Forum, and we will continue to monitor closely the impact of initiatives being taken in several other G20 countries, including Germany and Austria, to improve fuel price transparency.
Demand is another issue, and reducing the UK’s long-term dependency on oil and petroleum products is a Government priority. This includes developing ultra-low-carbon vehicles, high-speed rail networks and renewable heat incentives. We are working within the G20 to reduce oil demand globally—for example, through the work to reduce fossil fuel subsidies. At the same time, it is important to ensure that the market is well supplied, and we are working with the International Energy Agency, including on post-Libya stock release.
The Office of Fair Trading call for evidence is central to our considerations today. I encourage all Members to submit evidence to the OFT, and I know that many who have spoken in the debate will do just that. Of course we must not intervene until that call for evidence is complete. My Department believes that changes in the price of crude are indeed passed on to the pumps, although, as is clear from the data, there is a considerable time lag. There is certainly a case for greater transparency, about which, as my hon. Friend the Member for Harlow will know, the OFT has specifically asked for evidence.
In summary—this is not my final summary, Mr Deputy Speaker, but merely my preliminary summary: I did not want to dampen the enthusiasm with which my speech was being met—I strongly welcome the OFT’s decision to call for more information about the way in which the petrol retail market works.
As has been said, the OFT has said that it will consider whether reductions in the price of crude oil are being reflected in falling pump prices; whether the practices of supermarkets, which have been mentioned by a number of Members today, and major oil companies may be making it more difficult for independent retailers to compete with them—I shall say more about that in a moment; whether there is a lack of competition between fuel retailers in some remote communities in the UK; and whether the concern about price co-ordination and the structure of road fuels markets that has been expressed by other national competition authorities is relevant in the UK. That is a first step, and reflects the fact that, to date—as was pointed out by my hon. Friend the Member for Warrington South—no clear evidence has yet been provided to demonstrate that there is reason for concern about competition in the market. Nevertheless, the inquiry is welcome: I want to make that absolutely clear.
I ask my hon. Friend the Member for Harlow, and other Members with an interest in the subject, to engage with the OFT’s study—I have no doubt that my hon. Friend was going to do so anyway, but I wanted to place that on the record—and to participate fully, as my Department will: I commit myself today to ensuring that that happens. What is important at this stage is for Members or their constituents who have evidence relevant to the scope of the OFT's call for information to make it available before 17 October.
As I have said, my Department’s analysis shows that changes in the wholesale price of crude, both increases and decreases, are passed on, but I shall nevertheless ask my officials to look at the matter again and revisit their analysis, as a direct result of the debate and my hon. Friend’s wider contribution to discussions on this subject.
The important issue of what might be called “fuel deserts” was also raised today. The OFT is seeking evidence relating to the decline in the number of independent petrol stations and the rise of hypermarkets. That too has been mentioned by a number of Members, including my hon. Friend the Member for Warrington South and my hon. Friend the Member for Bedford. The Government have taken tough action in the past to address the potential of local monopolies. For example, this summer, following an OFT investigation, Shell gave undertakings to sell a number of its petrol stations because of concerns of this kind.
Some Members mentioned the problems of rurality. The hon. Member for Inverclyde (Mr McKenzie) and my hon. Friend the Member for Camborne and Redruth (George Eustice) represent rural constituencies, and I am quite deeply affected by the problems myself. I know from my own experience in Lincolnshire that rural communities can be disadvantaged when the number of petrol retailers falls and journeys to obtain petrol and diesel become longer. I will also ask my officials to look at the relationship between storage capacity and the declining number of retailers; the picture is mixed because of the size of tanks that are kept in different places, but I am interested in the issue.
Independent petrol stations are often located in more rural areas, and can provide a valuable service for local communities. As was mentioned by the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), there is concern about the effect on rural resilience in the event of further closures of such petrol stations. As I said earlier, the OFT has signalled that it is seeking evidence relating to the decline in the number of independent petrol stations and the rise of the hypermarket retailers, to which the hon. Gentleman and others referred. I particularly thank my hon. Friend the Member for High Peak (Andrew Bingham) for emphasising the effect that that has on his constituents. I must make it clear again that the Government have not been reluctant to take action in the past, and would be happy to do so again if the evidence legitimised such action.
Earlier this year, my Department commissioned a study of the retail market for road fuels, to develop further our evidence base on the size and shape of the market and our knowledge of the impact of the structural change to the market over recent years. I will write to interested Members with details of the findings in due course and share them with the OFT. That is what it says in my script, but I will do more than that: I will write to all Members of the House, because I know that all Members are interested in these matters. We will keep the whole House fully informed of the steps the Government are taking.
As a result of the arguments my hon. Friend the Member for Harlow has made today, I will also instruct my officials to ensure that this study should include detailed analysis of how far people have to travel to reach their nearest petrol station, and how this has changed over time. He may count that as a significant victory for him and a tribute to the work he has done.
In conclusion—
Tom Greatrex
While the Minister is in the mood to instruct his officials to do various things in response to this debate, may I reiterate my point about the work the previous Transport Secretary said would happen, but which it appears the Department is now saying will not happen until after an OFT inquiry? Will the Minister look into that, and see whether it could happen sooner rather than later?
Mr Hayes
I thought that was the best point among many that the shadow Minister made in his speech. The OFT plans to report in January 2013. As the hon. Gentleman knows, it is looking specifically at the issue of transparency, and we want to feed its findings into our work. I will certainly take a look at the timing issue he describes, however, to make sure we are acting in a coherent and consistent way.