Fuel Duty
Private Members’ Business
12:00 pm
William Hay (DUP)
: The Business Committee has agreed to allow up to one hour and 45 minutes for the debate on the devolution of fuel duty powers. Three amendments have been selected and published on the Marshalled List. The proposer of the motion will have 10 minutes to propose and 10 minutes to make a winding-up speech. The proposer of each amendment will have 10 minutes to propose and five minutes to make a winding-up speech. All other Members who are called to speak will have five minutes.
Daithí McKay (Sinn Féin)
: I beg to move
That this Assembly condemns the forthcoming 3p rise in the cost of fuel; notes that our people pay some of the highest fuel costs in Europe; and calls on the Executive to start negotiations with the British Government regarding the devolution of powers on fuel duty.
Go raibh maith agat, a Cheann Comhairle. I welcome not only the fact that we are debating the motion but that three other parties tabled amendments, a number of which I do not agree with. However, given the huge effect that fuel costs will have on the amount of money that families have to spend from day to day and week to week, it is important that we have a worthwhile debate. The North of Ireland has some of the highest fuel costs in Europe. Of course, taxation is the largest component of pump prices at present. It is a shocking fact that some families spend more on fuel than they do on food.
Businesses, particularly hauliers, are also struggling as a result of high fuel costs. My constituency, like those of many other Members, has a number of haulage businesses. At present, if the British Government go ahead with it, the 3p rise will place an extra £1,200 cost on each unit and trailer each year. That puts huge overheads on those businesses’ bills. Of course, the knock-on effect will be increased costs for products such as food, and that will hit the pockets of all families, regardless of their income.
According to the British Government, the 3p rise will go ahead in August. That will increase the difficulties that people face. It is to be welcomed that all parties in the House oppose it.
The 3p rise will cost local people more jobs, as it will increase overheads and push more businesses to the brink.
Five years ago, the price of petrol was just 89p a litre, but it is now more than 140p, which is a huge increase of 51·2p, or 60%. Of course, it has to be remembered that there are two different price ranges on this island. In the South, the price of petrol and diesel is lower, and it distorts the economy here. When I last checked, there was a 16p differential in excise duty, even though the rest of the island is in a much more difficult economic situation. Businesses in Tyrone, Derry and County Armagh are obviously affected, because trade is going to the likes of Donegal, Louth and elsewhere. The economy in those border areas is distorted, and it is unfair that those businesses are placed in that position.
It is quite clear that British Government policy on this matter is not set with the interests of people and businesses in the North as a priority. It is more about businesses in places such as the south of England than petrol station owners in Newry and Derry, and that will always be the way. Places such as the south of England, for example, have higher average incomes, and, in Britain in particular, more supermarket forecourts have deliberately low prices. We do not have that here, and, in fact, it results in the detrimental effect of these costs being multiplied. Rural communities are hit hardest, because although families are hit in places such as Belfast, people in rural areas need a car to take their children to school, go to work or get their groceries. The price of petrol in rural areas such as Ballymena, for example, stands at 149·9p a litre.
The DUP amendment recognises that we need to be treated differently from the island of Britain, but I do not think that the scheme that it outlines addresses that problem. Certainly, any reduction in duty would be welcome, but people here would still be at risk of suffering from a future fuel duty policy that is set in the interests of Britain rather than here.
Instead, why could we not negotiate a 5p reduction in fuel duty for here and have the power to review that position according to local needs? We could have a 5p reduction tomorrow, but then the British Treasury would put 3p on top of that in August and, perhaps, another 2p in the following year, leaving us back where we started. The relief scheme in Scotland, in parts of the Highlands and islands, has been criticised because it applies only to service station pumps and not to fuel delivered in bulk for hauliers, and that has been a bone of contention. The DUP amendment deals only with petrol pump prices and not the effect on hauliers and transport costs that, in turn, affect commodity prices.
Research shows that in 2008-09, £921 million was generated through fuel duty here. I will put that in context: corporation tax that year garnered £711 million. If we can see the economic benefits of negotiating corporation tax powers, why can we not see the benefits of a parallel situation in which other economic powers, such as the power to set the amount of fuel duty, are devolved? At the moment, fuel duty revenue is apportioned here to the North according to its proportion of consumption. There is room to enter into negotiations to secure that further power.
A cut in fuel duty could generate higher tax revenues from across the economy. That has been debated at length across the water by a number of non-government groups. The increased economic growth and the business and consumer confidence that would result from fuel duty being lowered would compensate for the reduction and boost gross domestic product (GDP).
The Office of the First Minister and deputy First Minister and the Executive have already carried out work on devolving economic powers, and I agree wholeheartedly with that ongoing work. It is absolutely the same when it comes to fuel duty. The ministerial working group has worked on costs and benefits, administrative charges, the block grant adjustment and the economic impact of devolving corporation tax. The First Minister said that we are a unique case in respect of corporation tax because of the border and because the rest of the island has a better rate. That is quite a sound argument for the issue of fuel duty, because we have a border here and two separate rates and there is a better rate throughout the rest of the island. I think that there is a duty on us to try to ensure that there is competitiveness throughout the island so that businesses that are affected in places such as Tyrone and Derry have an opportunity to secure trade that is equal to that of people in Donegal, Louth and so on.
Alastair Ross (DUP)
: I thank the Member for giving way. I have listened attentively to him for almost eight minutes, and, although he has mentioned that a cost may be associated, he has not gone into any detail about the cost to the block grant of getting this power devolved and, indeed, the additional cost per pence of a reduction, which, I suggest, he is looking to achieve. Before he finishes, will he go into some detail on what the cost to the Executive will be to do this? How much will it cost us for even a reduction of one pence?
Daithí McKay (Sinn Féin)
: I thank the Member for raising that point. I come back to the ongoing work on corporation tax. There are costs there, and it changes regularly. We cannot put the cart before the horse. We have to secure the powers by having them devolved. There may then be an option should other Members wish to retain the present rate. The principle of having those powers is that we can respond accordingly to the needs of the local economy. It is quite clear that, if we are to reduce the rate, we should make calculations, as the Executive and the First Minister and deputy First Minister are working on calculations for the devolution of air passenger duty and corporation tax. That work is ongoing, and we should mirror that on fuel duty and work with the Department of Finance and Personnel to reduce it accordingly.
In my opinion, if we reduce it, we will see greater consumer confidence and fewer businesses going to the wall. The benefits are there for all to see. There is a duty on the Department of Finance and Personnel to do all those calculations and to move the issue forward. We need a locally tailored fuel duty rate, because it has to reflect the fact that we have different economic needs. We should take the same progressive approach that we have done on corporation tax and air passenger duty. A local approach can work better, and the Executive and the Minister of Finance and Personnel —
Daithí McKay (Sinn Féin)
: — have at least a duty to look at the issue and to provide us with all the statistics, so that the House can approach this in a mature way and come to an agreed way forward.
Simon Hamilton (DUP)
: I beg to move amendment No 1: Leave out all after ‘Europe;’ and insert
‘and calls on Her Majesty’s Government to halt their planned fuel duty increase and, due to Northern Ireland’s peripherality within the United Kingdom, to devise and implement a scheme for Northern Ireland similar to the rural fuel duty relief scheme which was recently introduced for the Inner and Outer Hebrides, the Northern Isles, the Islands of the Clyde and the Isles of Scilly.’
If I sound breathless, it is because I am. Business in the House seems to have motored along much quicker than any of us thought. I am very glad to be here to be able to propose the amendment that stands in my name and the name of Mr Ross.
First things first, there will be harmony across the Chamber on the argument that we are paying far too high a rate for fuel in Northern Ireland. That is indisputable. There are varying figures that suggest that we are the highest in the UK or the second highest in the UK, depending on how you look at it and when you measure it. It is undeniable that we are paying some of the highest prices per litre for petrol and diesel in the UK. Indeed, that is the case not only in the United Kingdom but in the whole of Europe. Clearly, that is having a stultifying effect on our economy.
Traditionally, we have had an added problem here in Northern Ireland because of the land border with another jurisdiction, although there seems to be a coming together in the prices of fuel between ourselves and the Republic of Ireland. Especially in border counties, people have gone from here to buy their fuel across the border legally, which has deprived Northern Ireland and, indeed, the Exchequer of large amounts of revenue from fuel duty. I see the Speaker nodding away; he is a man who understands what I am saying.
We have also seen, sadly, a growth industry in illegal fuel trading, smuggling and fuel laundering. I think that the Treasury will need to bear those issues in mind when we make these arguments to it. I will come to that later.
To use the old phrase that you hear in many phone-in programmes, “Something must be done”. We have a very high rate and are a very peripheral part of the United Kingdom, and I think that the Treasury also needs to bear those points in mind. Something needs to be done. It is too easy to come into this Chamber as we have in the past and say things such as, “The Treasury needs to cut this rate.”. We can certainly argue that point, but it does not hold a terrible lot of water. Indeed, in recent times, the Finance Minister has made those very points. I am sure that, along with other Executive colleagues, he has made the very point that the rate is too high and, indeed, that the planned increase that is scheduled for August will exacerbate all the existing problems. That argument has not carried any weight, because the Treasury has not listened and is proceeding, as we heard in the recent Budget, with the planned increase in fuel duty. So, this is a reality that is bad now and that will get worse. Something has to be done, and it is a matter now of debating and discussing what ought to be done.
I had thought that, up to this point, we had got used to some of the ill-thought-out and ill-informed economic policy suggestions of the Sinn Féin Members, who are on the opposite Benches. However, this has taken it to another level altogether. If we come from the basic starting point that we all agree that we are paying too much for petrol and diesel in Northern Ireland, I can understand that people would want to explore options. However, the option that those Members put forward will have a detrimental impact. It might help motorists if they reduce the duty, but it will have a negative impact on everybody in Northern Ireland, because it will reduce public spending levels. The Member who proposed the motion, and, indeed, his party, will have ample opportunity later in the debate to outline where they would take the money. I assume that the argument from Sinn Féin is that we want to take this power to reduce the levels of fuel duty. We are not talking about increasing it, and we are not talking about keeping it where it is. There is no point in taking it if we do not reduce it. However, reducing it comes at a cost.
We take in around £1 billion a year in fuel duty in Northern Ireland. That is our contribution to the £27·5 billion that the Treasury raises overall from fuel duty across the United Kingdom. Our contribution is £1 billion, and it is one of the few taxes where we pay more than our population share in the United Kingdom. That is probably a reason why, even if we discuss it with Treasury, it would not want to give it up. We more than pay our way in a UK context through this tax. However, if we took the power and reduced it, for every penny that we reduced it, it would cost our Executive and our budget £17·5 million. So, if you want to make some sort of a meaningful dent in fuel duty and in what people pay at the pumps, you will have to reduce the duty by around 5p, and, if you add on administration costs, that is a £100 million bill for Northern Ireland and our Budget.
Daithí McKay (Sinn Féin)
: I thank the Member for giving way. Does he not agree that that principle also applies to devolving corporation tax and air passenger duty, because those also have to have an impact on the block grant? Will he not also agree that, if we can reduce the rate so that it is closer to that in the South, more people will buy fuel in the North, meaning that that will increase revenue for us?
Simon Hamilton (DUP)
: The Member has had another opportunity to outline how he would pay for it. I will give way again in future if he wants to come forward with how he would pay for the £100 million reduction in our block grant.
Simon Hamilton (DUP)
: I will give way on the basis that you promise that you will explain where you will take the money from. If he does that, I will give way.
Daithí McKay (Sinn Féin)
: I will not promise anything. I am saying that the same applies to corporation tax and air passenger duty, because, before we spell those out or come to any rushed decisions, they will have to be considered in the round in the same way as we are looking at corporation tax and air passenger duty.
Simon Hamilton (DUP)
: I was going to address that point. The record will show, and people will notice, that he did not answer the question that was asked of him. That question is fundamental when we are debating this issue. I suggest that the difference between this and the other matters is that, with air passenger duty, the bill for the Northern Ireland Executive is about £3 million to maintain a strategically important air route that is bringing more investment than it will cost us. Clearly, corporation tax will be much more significant than that, but there is agreement across all the major parties in this Assembly that the economic multiplier effect that that would have will, potentially, be much greater for Northern Ireland in the longer term than what we will pay out. However, it does have an impact. We are all agreed in this Chamber about reducing corporation tax, and, yes, it does have an effect on —
Simon Hamilton (DUP)
: I did say all major parties. Of course, the Member could never be considered to be a member of a major party.
Simon Hamilton (DUP)
: We made it twice, I think. There is clearly a major cost involved in that, and it will hit our Budget, but there is broad agreement — let me say that — that it is in the best interests of Northern Ireland in rebalancing our economy, and we are going to have to do that. However, taking on another £100 million shortfall, on top of whatever the price of the devolution of corporation tax is, would simply be unaffordable, never mind unachievable.
I also want to make the point that the shortfall may get worse in the longer term, because, if we take the power, this Executive and Assembly would come under continued pressure. I do not think there is anybody here who believes that the price of oil is going to fall in the long term. It is going to continue to rise, so the pressure then comes on the Executive, or the Finance Minister, or whoever, to reduce the rate that we take on fuel duty more and more. So, the cost will go up, and the shortfall to us will be significant. It will not just be £100 million. It could be £120 million, £130 million or £140 million, and could continue to rise if we come under that pressure to keep reducing it to maintain the cost of a litre of petrol or diesel at an affordable rate.
The point is worth making that it is a fluctuating tax take. Over recent years, no doubt because of the downturn, there were some years when we took less than we did the year before. If we take less, that is a shortfall that we would have to make up in reductions elsewhere in our expenditure as an Executive and an Assembly. There may be years when you take more than you anticipate and budget for. It might seem like a bumper year, a bumper harvest, and we can spend the money, but the Member should know — he was a former Chair of the Finance Committee — that we are under restrictions on what we can carry forward from one year to another. If we do not spend it in-year on programmes, it goes back to the Treasury. They would be laughing —
Jim Allister (Traditional Unionist Voice)
: Does the Member agree that there is also another cost, which could be very substantial? The more we open the door to diversifying our tax base in Northern Ireland, the more we leave ourselves without an answer to arguments like those that would be mounted for regional pay. Once you regionalise taxation, you have very little opportunity to resist such folly as regional pay.
Simon Hamilton (DUP)
: I do not disagree with the Member. He is right, and I think it hampers that argument. As imperfect as the funding arrangements that we have through the Barnett formula have sometimes proven to be — they do not reflect the need that there is in Northern Ireland — we are much better with the certainty of the situation that we have at the moment than with the gambling that the Members opposite are proposing.
There is a potential solution, which I think is more realistic and more viable, and that is the scheme that has been introduced for the Inner and Outer Hebrides and the Northern Isles, which is included in our amendment. It is a 5p reduction that goes directly to the motorist who is using it at the pumps. That is something that is happening in Scotland and in the Isles of Scilly, and which is not coming with a reduction to the Scottish Executive’s Budget. If it was introduced here, as I think the Treasury should, recognising the peripherality of Northern Ireland and the revenue that we lose in smuggling, it would not hit our Budget.
Simon Hamilton (DUP)
: It is therefore much more sensible and much more achievable, because the Treasury has already accepted the principle elsewhere.
William Hay (DUP)
: The Business Committee has arranged to meet immediately upon the lunchtime suspension. I propose, by leave of the Assembly, to suspend the sitting until 2.00 pm. The first item of business when we return will be Question Time.
The debate stood suspended.
The sitting was suspended at 12.28 pm.
On resuming (Mr Principal speaker is in charge of proceedings of the House of Commons in..." class="glossary">Deputy Speaker [Mr Molloy] in the Chair) —