Rates of Duties And REBATES

Orders of the Day — Finance (No. 2) Bill – in the House of Commons at 5:30 pm on 28th April 1998.

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Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells 5:30 pm, 28th April 1998

I beg to move amendment No. 12, in page 3, line 39, leave out '£0.4926', and insert '£0.48'.

Even in the context of a tax-raising Budget, the impost on road fuels was particularly savage. The amendment seeks to moderate the increase to bring it back into line with the so-called escalator that we left behind when we lost office. The private motorist and commercial road users face steep increases, and, as ever, the Library has been helpful in working out the implications of the new transport fuels policy that was announced in the Budget.

The increase in the escalator from 5 to 6 per cent. in real terms, the fact that the Government have brought forward the implementation date, and an extra increase in the duty on diesel and super unleaded petrol, add up to an additional tax burden of £9 billion over this Parliament. By any standard, that is a huge additional burden, and it is an inefficient way to reduce car use, if that was the intention. Of course it has an effect on the private motorist and a most unfortunate effect on those in rural areas where many people must have cars—there is no realistic alternative to the car for getting to work or for use in the course of daily routine. Against the huge, almost staggering, increase in the overall tax burden, the £50 million that is to be allocated to rural bus services over three years is gesture politics at its worst. It is an insult to people who live in those areas. Mr. Dafydd Wigley (Caernarfon): Does the right hon. Gentleman agree that the burden will hit rural areas at a particularly inopportune time, in view of the severe decline in farm incomes? A reduction of 89 per cent. has been reported in a study in Wales in the past year. This is the worst time for such additional impositions to be placed on rural areas.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

I entirely agree. The right hon. Gentleman and I have rural constituencies. I represent the second main dairy county in Britain, and the hon. Gentleman's area has a marked concentration of agricultural and allied industries, both of which are suffering grievously from reduced prices and subsidies and the strength of the pound. The increase in fuel duty on top of those factors is a burden that people find hard to understand from a Government who talk much about their inclusiveness and their aim to help what they call rural communities.

Photo of Professor Ross Cranston Professor Ross Cranston Labour, Dudley North

I should like to draw the Committee's attention to what the right hon. Member for Wells (Mr. Heathcoat-Amory) said in January 1995 when this issue was being addressed:

I accept that some things are more expensive in rural areas. Some things are more expensive in urban areas. That is the interplay of a market and the inheritance of the past."—[Official Report, 23 January 1995; Vol. 253, c. 104.] Would the right hon. Gentleman like to comment on that?

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

That was an entirely different debate. I conceded at that time—and I have always recognised—that those who live in rural areas rely more on cars. That is the issue that we are debating. It is undoubtedly true that some services are more expensive in rural areas, and nothing that the Government can do could alter that. What I said at that time is right, and I withdraw nothing whatever from it. It does not contradict my point that the increase in petrol and other fuels, which affect everyone, are especially burdensome for people in rural areas who are already damaged, as the right hon. Member for Caernarfon (Mr. Wigley) said, by the poor state of farming.

Photo of John Bercow John Bercow Conservative, Buckingham

The hon. Member for Dudley, North (Mr. Cranston) mentioned the debate of 23 January 1995. Is my right hon. Friend aware that, on that day, the Financial Secretary, who was then in opposition, said of an increase in fuel duty:

People living in rural areas will be badly affected."—[Official Report, 23 January 1995; Vol. 253, c. 99.] She also said that to portray such a measure as environmental was cynical. Was she wrong then, is she wrong now, or does not she know which?

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

The difference is that, in 1995, the hon. Lady was not in a position to do anything on this matter. Now that she is in office, she is able to deliver. During the debate, we shall see whether her words were hollow or whether she intends to deliver on her intentions at that time.

We are debating the effects on rural areas of the increased duty, but the increase will also affect industrial costs, which are also incurred in rural areas, and the United Kingdom's entire distribution chain. All raw materials have to be moved and all goods distributed; the fuel that propels most of that movement is diesel, the fuel of industry.

The Budget signals a duty increase on diesel higher than that on petrol. Furthermore, the Red Book signals that future Budgets will widen the gap and that diesel duty will go on increasing at a higher rate than the duty on petrol in spite of the fact that diesel duty in the United Kingdom is already the highest in the European Union. The Freight Transport Association reports that it is 70 per cent. above the average of EU member states, so there is a competition point.

Industry and exporters in particular are suffering because of the high pound, and the Government are burdening them with a tax increase that goes to the heart of the productive economy. It is not hard to see what will happen. Not only will competitiveness, investment and the capacity to create new jobs be hit; there will be every incentive to hauliers conducting international business to fill their tanks abroad. That is not a trivial problem. If all the lorries that go to the continent leave with empty tanks and return with full ones, there will be a significant drain on the Revenue. When working out the yield from the increase in diesel duty, the Financial Secretary must have estimated the effects of what will be lost through hauliers and others filling their tanks overseas. There will be a significant loss of revenue if big articulated lorries with empty tanks fill up in France rather than in this country.

Photo of Chris Leslie Chris Leslie Labour, Shipley

While we are talking about loss of revenue, perhaps the right hon. Gentleman will tell us the cost to the Exchequer of his amendment. I understand that it might be in the region of £400 million. Will he confirm that? How does he plan to raise that extra money?

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

I shall come to the amendment in due course. To put the hon. Gentleman out of his misery, I assure him that we are merely returning the escalator to what we left behind in our Red Book. The Labour party has taken over all our expenditure commitments. Why cannot it take over our taxation estimates as well? If the hon. Gentleman supports that, he will support an amendment that would reduce the extra burden of taxation and return to the estimates that we left behind. There would be no loss of revenue, but a continuation of the revenue that we wrote into our last Budget. I am grateful to the hon. Gentleman for his intervention.

The effect of the annual increase in fuel duties is estimated as equivalent to 1 p on the basic rate of income tax every year. Those increases affect not just industry and distribution, but public services. Labour Members sometimes overlook the fact that ambulances and police cars run on the more expensive fuel. Without compensation, the increases in duty represent a real-terms cut in expenditure on those public services.

The Government's excuse for the increase in diesel duty is to encourage the use of low-sulphur diesel. We all know that the compounds produced when sulphur combines with oxygen are part of the pollution problem, particularly in cities, but instead of creating an incentive by reducing the cost of low-sulphur diesel, the Government have increased the duty on that fuel by more than the increase on petrol. It has gone up by 9.4 per cent. That is the second increase in less than a year. The only incentive is that the duty on ordinary diesel has gone up by even more—by 11.7 per cent. That is also the second increase in eight months. They are using a stick rather than a carrot.

The policy is particularly stupid given the Government's professed concern about global warming. My information from the industry is that taking a tonne of sulphur out of diesel releases 20 tonnes of carbon dioxide into the atmosphere because the procedure is very energy-intensive. There is then also the problem of disposing of the sulphur.

Diesel is a more efficient fuel than petrol for carbon dioxide emissions. A vehicle can go further on a gallon of diesel than on a gallon of petrol, and the combustion of the fuel produces less carbon dioxide. If the Government are concerned about global warming, why are they encouraging an industrial process that releases more carbon dioxide? Why are they encouraging the use of petrol rather than diesel?

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

Does my right hon. Friend agree that, in balancing petrol against diesel, the Government have also forgotten about the cancerous effects of the benzine and benzine-related compounds in petrol, which are absent from diesel?

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells 6:15 pm, 28th April 1998

My hon. Friend is probably right, but we do not know what the Government have forgotten, because they will not tell us. We could have had the answers to my hon. Friend's question if the Government had fulfilled their promise to accompany their Budget with a green book setting out the environmental implications of Government policy. As the Treasury Committee has recently observed, no green book was forthcoming, despite a promise by the Financial Secretary that one would be published. Perhaps she will fulfil that promise when she answers the debate. Even if she cannot produce the book this afternoon, she can at least tell us when it will be published, in line with her earlier assurance. The Government are in a muddle. They are setting up contradictory incentives. Their environmental goals are not clear.

The amendment would return the duty increase to the 5 per cent. escalator that we set in motion, and would restrict its implementation to once a year. The arithmetic in the amendment may not be exact—it is for the Government to improve on it if they can—but our intention is clear. We have taken approximately two thirds of the 5 per cent. increase that we left behind in recognition of the fact that this is the second increase in eight months. We are reducing the escalator, because we should get back to annual increases rather than trying to squeeze them in every eight months. That would lift the burden of the £9 billion extra hit on the private motorist and the productive sector of the economy caused by the Government's new policy on the taxation of fuel. If the amendment is accepted, as it should be, we shall strike a blow for industry, public services and the private motorist.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

I support the amendment. The Government are in danger of devaluing an important principle. The previous Government fully endorsed the principle of using economic levers up to a point to change behaviour. We encouraged people to switch to unleaded petrol by changing the rates of duty between unleaded and leaded. A measured increase in petrol duties was part of a programme of persuading people to use their cars less and to use public transport more.

The Government must explain why increasing the scale on which the duties are raised from 5 per cent. to at least 6 per cent. will make any difference. I do not believe that it will. A measured rise in duty is helpful as part of an overall programme to encourage people to switch from using their cars to using public transport, but on its own it is not an answer. With their excessive rise in petrol duty, the Government are putting too much faith in one policy. That will not work. The huge increases in traffic through my constituency despite increases in duty in recent years show that the use of the private car will not be influenced by the price of petrol alone. A huge convenience factor must be addressed before we can hope to stem the increase in traffic.

On Friday, we debated the Road Traffic Reduction (National Targets) Bill. It is evident that there is support on both sides of the House for measures that discourage motor traffic, but they must be carefully considered. The Government's proposal is an attempt merely to cap the previous Government's policy by taking it that step further, but without thinking through the consequences. I am sure that we shall hear from hon. Members who represent rural areas, such as Cornwall, where I used to live, which will be very hard hit by the scale of the increase that the Government have proposed for all road users without thinking through what other measures are needed.

The extra burden on the car driver will not make any difference to the increasing traffic in lanes around Guildford. It will not save us from problems on Halfpenny lane in Chilworth or through villages such as Compton and Puttenham, where the massive increase in traffic is causing tremendous disquiet. If the Government's only response is to raise petrol duty, it is simply not good enough. That will not solve the problem.

Photo of John Bercow John Bercow Conservative, Buckingham

Does my hon. Friend agree that, if the Government think that an increase in duty will reduce the use of the private motor car, they owe it to the House and to the public to publish an estimate of what they believe that reduction will be? If they fail to do so, we can assume that they do not expect a reduction in usage, and that the proposal is just a smash-and-grab raid on taxpayers.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

I thank my hon. Friend for pointing out that what really lies behind the Government's proposal is greed. They simply want to grab as much money as they can from the taxpayer. It is old-fashioned socialist greed. The implication is that those with the largest cars will pay the most. The calculation is spinning through the brains of Labour Members as we debate the issue. I would go further than my hon. Friend: the Government should not only publish estimates of how much the additional levy will reduce road traffic but tell us how they will spend the additional revenue to encourage alternative uses.

I should like to draw the Committee's attention to some very interesting alternative means of transport in my constituency that are at the forefront of thinking on the issue. They demonstrate the inadequacy of the Government's response in clause 7. The concept of an ultra-light railway system has been promoted by a firm based in Guildford that gave a presentation in the House only a few weeks ago. The system could have a significant impact in town centres such as Guildford by encouraging people not to use their cars. The concept relies not only on increases in duty but on new technology. More to the point, it is a purely market-driven solution, which requires no public subsidy. The Temporary Chairman: Order. We are discussing rates of duty; I am sure that the hon. Gentleman knows that.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

I am just contemplating how the additional revenue that the Government are planning to raise through the excessive increase in duty might be put towards a constructive policy of discouraging the use of the private motor car. If the Government cannot come up with such a policy, the idea that the motorist should be arbitrarily penalised clearly becomes highly debatable.

The Temporary Chairman:

Order. This is all very interesting, but I am afraid that we are debating a rather narrow amendment. I am sure that the hon. Gentleman would like to return to it.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

I am grateful for your excellent guidance, Mrs. Dunwoody.

We should emphasise that the Government are proposing a very narrow-minded policy that does not go nearly far enough towards solving the problems that face this country. Behind the example of the ultra-light railway is the fact that we shall solve the problems of excessive traffic through market solutions.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

Will my hon. Friend call on the Government to publish the specific environmental benefits of not raising the escalator, as we propose in amendment No. 12? No figures have been published either in the notes on clauses or in the Red Book to indicate specific environmental gains in terms of carbon dioxide emissions.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

My hon. Friend makes a very valid point. I hope that the Financial Secretary is making careful notes because recent interventions show just how far short the Government have fallen of what they should be achieving. If they want any support in the Lobby tonight, they must show that there is a purpose behind imposing additional levies on the motorist. The purpose must surely be traffic reduction.

We must come forward with market-driven solutions. As a result of the policy instituted by the previous Government, there is evidence that although an increase in petrol duty may form part of a comprehensive strategy, it cannot be the whole strategy. If it cannot be the whole strategy, it is simply not fair, particularly on less well-off people in rural areas who depend on cars, to penalise the motorist by proposing such taxes.

Photo of John Swinney John Swinney Scottish National Party, North Tayside

I support the amendment because some moderation of the Government's proposed increase is better than nothing. I calculate that the percentage increase recommended by the Conservatives was of the order of 6 per cent., against the 9 per cent. that the Government propose. It is important that we do something to moderate the proposed severe increase in petrol duty.

There has been much double-talk in this debate from Conservative spokesmen who have denounced measures that they were quite happy to introduce when they were on the Government Benches. I shall spare the Committee any further points on the hypocrisy of both main parties on this issue.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

The hon. Gentleman has just said that he wants to return the duty increase to the level that applied under the previous Government, which is exactly what the amendment proposes. Why, therefore, is it hypocritical for us to get together on the same issue?

Photo of John Swinney John Swinney Scottish National Party, North Tayside

Although I am grateful for that intervention, it is a curious way to welcome friends into the body of the kirk, as we would say in Scotland. I would have much preferred the amendment tabled by my hon. Friends and myself—or, possibly, that tabled by the Liberal Democrats. Unfortunately, those amendments were not selected.

Photo of John Swinney John Swinney Scottish National Party, North Tayside

It is not sour grapes. It is just a recognition that the Conservatives, as usual, are offering us a second-best solution to the problem, which I am happy to support.

If the clause is passed without amendment, we will have witnessed two inflation-busting increases in 12 months, totalling three in 18 months. As a Member of Parliament who represents a very large part of Scotland and a diverse rural constituency, I know that the increases are very damaging to the health of the rural economy.

I have listened carefully to, and comprehend, the Government's arguments at different stages in the Bill's passage on why it is necessary to go down such a route to reduce vehicle use and traffic congestion, protect the environment, reduce emissions, and all the rest of it.

On Second Reading, I questioned the Chief Secretary on that very point. I asked him what information the Government had at their disposal to suggest that increasing duty on petrol reduced car use. I thought that was a straightforward question. The Chief Secretary replied:

The matter has been looked into. If fuel duties are increased, there is a reduction in car use and lower carbon dioxide emissions."—[Official Report, 21 April 1998; Vol. 310, c. 609.] That sounded clear, but, to make sure, I thought that I would ask a written question to get the information out into the public domain. I asked the Chancellor

what data he has evaluated indicating that increasing the duty on fuel results in lower car use; and if he will make the studies available in the Library. The Financial Secretary kindly responded:

I shall let the hon. Member have a reply as soon as possible. That did not suggest to me that there was compelling evidence in the Treasury to suggest that increasing the cost of petrol resulted in less car use. I am sure that the full answer is in the post.

I question the central thrust of the Government's strategy in the clause, which is that increases in the cost of petrol will result in lower fuel use. The arguments are much more closely related to a balanced debate on road pricing, increasing parking charges in city centres such as London, and differential levels of vehicle excise duty in different parts of the country. I do not believe that the Government's approach of increasing duty disproportionately beyond the rate of inflation will work.

Photo of Professor Ross Cranston Professor Ross Cranston Labour, Dudley North

Did the hon. Gentleman also ask the Financial Secretary about the benefits that his constituency will receive from the £50 million a year for bus services for the next three years?

Photo of John Swinney John Swinney Scottish National Party, North Tayside 6:30 pm, 28th April 1998

I would not need the Financial Secretary's advice to get my calculator out to start working my way through that £50 million over three years for a number of large and diverse rural constituencies. I got into some trouble in a recent radio debate involving the hon. Member for Gordon (Mr. Bruce), when I suggested that there were no public transport services in my constituency. That was careless, because the next day I received a letter from the Stagecoach bus company telling me how many buses went through my constituency.

Photo of David Heath David Heath Shadow Spokesperson (Foreign and Commonwealth Affairs)

The hon. Gentleman's constituency has some similarities to mine in terms of its rurality. Many households need more than one car to go about normal life, because public transport does not exist for them. Does the hon. Gentleman agree that one way of making the imposition fairer on rural areas would be a drastic reduction in vehicle excise duty, with that package being presented to the rural motorist as environmental, but fair?

Photo of John Swinney John Swinney Scottish National Party, North Tayside

Such a solution would take account of the differences between areas. Petrol prices in London are substantially lower than in parts of my constituency, such as Blairgowrie, Pitlochry and Forfar.

The essential nature of cars in rural communities was outlined by the Scottish Office in 1987, which said:

"a car in a remote area may be both highly unreliable and barely affordable but nevertheless essential to survival and any households without a car in remote areas must be at a severe disadvantage."

Statistical evidence shows that, on average, 57 per cent. of households in Scotland have one car. In the highlands, the figure is 68.5 per cent.; in Grampian it is 68.3 per cent.; and in the northern isles it is 70 per cent. By my calculations, when above-inflation increases are taken into account, the increase proposed in the Bill means that an average rural car user will have paid about £60 extra a year since 1993. That is about £400 over that period for rural car users—an enormous burden for people who survive on fairly modest incomes, particularly in the current financial climate.

Earlier, the hon. Member for Shipley (Mr. Leslie) intervened on the right hon. Member for Wells (Mr. Heathcoat-Amory) and referred to a quotation from 1995. One of the points that I would use to shore up the argument that the right hon. Gentleman made is that, when petrol increases are introduced, the effect on small shops and the price of commodities—which is already higher in rural areas than in urban areas—is severe. That must be appreciated when decisions of this nature are made.

I have looked at the information on travel-to-work patterns in rural areas of Scotland provided by Highlands and Islands Enterprise. In the UK, about 9.85 per cent. of people travel to work by bus; in the highlands and islands, the proportion is 6.6 per cent.—showing a further differential in the availability of public transport and the essential nature of the car.

The Government have embarked on a route that—as has been drawn to their attention in the Budget debates, at Second Reading and again today—is damaging the rural economy at a time when it is at one of the most fragile stages of its development. I urge the Government to think again and to give greater consolation than the £50 million over three years. [HON. MEMBERS: " fifty million a year."] I stand corrected. If that amount is broken down into individual constituencies—and the type of work required to build effective public transport services in fragile rural areas is considered—it will not take us very far on the bus.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Treasury)

Is the hon. Gentleman aware that the city of Aberdeen is discussing a possible cross-city commuter railway service, using the existing railway line? It is estimated that that would cost £30 million to £50 million. One project in one city could use the entire amount—and that is a project to bring rural people to work.

Photo of John Swinney John Swinney Scottish National Party, North Tayside

The hon. Gentleman makes a valid point, which touches on the impact on cities such as Aberdeen of the growing commuter belts outwith the major cities. The same problem exists in Perth and Dundee.

I conclude with some information on comparative petrol prices, which was kindly provided—I could not quite believe the source—by BBC Ceefax in April 1998. This country has the fourth largest average price for unleaded petrol in the EU, and many other countries operate with lower petrol prices. The Government, by pursuing the measures in the clause, are entrenching a problem which is felt by many people—particularly, and most severely, people in rural areas.

Mr. Burney:

It would be in the interests of hon. Members to remember that this is yet another tax increase, a tax increase that the Prime Minister said before the last election he would not be making. House of Commons figures—which Opposition Members have not denied—show that an average household will be more than £1,000 a year worse off as a result of mortgage rate and tax increases.

No one in the Chamber, Mr. Haselhurst, has even attempted to deny the independence and judgment of those figures. [HON. MEMBERS: "Sir Alan."] You have always been a knight in my eyes, Sir Alan. A large component of that burden on average families comes through increases in duty, including petrol duty.

The increase is in three parts. The escalator is going up from 5 to 6 per cent. Then there are the two timing changes that the Government have introduced in respect of the previous financial year: the timing was moved from November to July and there is the more long-term change of moving the point of operation of the tax increase from November to March. Those constitute three separate increases.

That is not more or less what the previous Government did. It is defying the laws of arithmetic to suggest that the increases in the Bill are more or less what the previous Conservative Chancellor was engaged in. It is complete nonsense. If Labour Members bother to read the Red Book, they will discover why. It shows that the estimate for the amount of revenue to be raised between 1997–98 and 2002 is over and above the estimate under the Tory 5 per cent. escalator: it is £9 billion more than under the Conservative escalator. A colossal amount of revenue is being raised by the increases that the Bill would put into effect. For that reason, we suggest that the increase be pegged to 5 per cent.

With that extra £9 billion over those financial years, a burden will be placed on the countryside. There is no other way in which to interpret £9 billion extra in revenue. Liberal Democrat Members have drawn attention to the experience of their constituencies. [HON. MEMBERS: "Nationalist Members."] I am sure that the hon. Member for Somerton and Frome (Mr. Heath) will make that point; he has already made it in an intervention.

The increases fall on families for whom a car is a necessity, not a luxury. Many Opposition Members who do represent rural constituencies—not perhaps as rural as Dudley—have a considerable number of rural constituents. They represent the counties of Oxfordshire, Buckinghamshire and Gloucestershire, and actually know and understand—

Photo of David Hanson David Hanson Labour, Delyn

Scotland and Wales.

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

I refer to the hon. Members who are here in their places and not to those who are not.

Photo of David Hanson David Hanson Labour, Delyn

There are no Conservative Members in Scotland.

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

Labour Members representing Scotland and Wales are not in their places at the moment; the hon. Gentleman should listen to what I say.

The fact remains that many lower-income families have smaller, perhaps quite old cars and are not very wealthy by any means, but they need a car to travel large distances. For example, outlying villages in my constituency—those in the Norfolk-Suffolk borders such Hinderclay and Redgrave—are miles away from any nodal transport. That has always been the case. In that part of high Suffolk, for 50 years public transport has not been as good as perhaps it should have been. I do not imagine that it will be any different under this Government, but that is a hard fact of life. The inhabitants there know that they need cars, sometimes more than one car. It is beyond belief that a Government who believe in governing supposedly for the many and not the few can ignore large swathes of the rural populations in Scotland and Wales.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

Will my hon. Friend consider the fact that, if the Government really want to represent rural areas, they should in some way balance the amount of money that they give to rural community bus services with the amount of duty that they raise on petrol?

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

My hon. Friend makes an interesting point.

Photo of John Bercow John Bercow Conservative, Buckingham

My hon. Friend's charm and courtesy in giving way are well established throughout the House. Does he agree that, if Labour Members representing rural constituencies are to prove that they are independent spirits and not craven lickspittles of the party leadership, they should be prepared to get up and denounce this vicious attack on country dwellers?

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

My hon. Friend makes a typically robust and eloquent point. Perhaps the Financial Secretary to the Treasury, once she has finished shuffling through her brief, will be able to take note of his excellent point and reply to it in her winding-up speech. What on earth do the Government think they are doing by raising the escalator in this fashion? What do they think that will do to rural communities and to poorer people who rely on cars as a necessity, not a luxury?

That brings me to the point that my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) raised in relation to public transport subsidies. The £50 million was a gross insult to rural communities. I know that Labour Members may not have many regional newspapers to which they bother sending Walworth road and Mandy towers press releases, but many of us do take a great interest in what media and newspapers in the shire counties say. They laughed the proposal for £50 million out of court. These are newspapers with no political bias of any description. [Interruption.] If hon. Members think that the East Anglian Daily Times is a party political newspaper, they are more incompetent when it comes to analysing political runes than I thought.

These are independent shire newspapers that take a dim view of the rhetoric of governing for the many, not the few, and of the Government's actions in hammering people who are least able to take on board tax increases of the sort that are outlined in the clause.

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

I happily, but reluctantly, give way to the hon. Gentleman.

Photo of Professor Ross Cranston Professor Ross Cranston Labour, Dudley North

I thank the hon. Gentleman, perhaps reluctantly, but he took the name of my constituency in vain earlier. Before he draws his remarks to an end, will he say something about the environmental impact? He has gone on for almost 10 minutes and has not mentioned the environment once. Does he agree that transport is the fastest growing contributor to carbon dioxide emissions? Is this measure not one step—one step admittedly—in trying to reduce those emissions?

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds 6:45 pm, 28th April 1998

As far as I am aware, the Rio targets in relation to carbon dioxide emissions were set under the previous Administration and were well on their way to being hit; indeed, I think that they were hit. Although there is always scope for environmentally friendly taxation, I am not convinced that the case has been made at all for increasing the escalator to 6 per cent. It certainly does not begin to answer the questions that those in shire counties ask about the impact on people who rely on their cars.

Many companies in rural and shire communities have fleets of vehicles. They are concerned about the impact that this unjustified tax hike to 6 per cent. and the increase in diesel will have on their businesses. The hon. Member for North Tayside (Mr. Swinney) made a good point about the impact on village shops and village retail. There is no doubt that this pernicious tax hike will affect people in rural areas. I wish that, in the spirit of openness, the Labour party would—if it is going to play with an even deck on this—admit that this petrol tax hike does cause a problem in rural areas, instead of just ignoring it, pretending that things are all right and using warm words.

The Government certainly have ambitions for a new Britain. They have ambitions to increase the 6 per cent. even more. Many of the business men I know believe that this is only the start of a smash-and-grab raid in future years. It is 6 per cent. this year. What about future years? Conservative Members know that the best way in which to cap and to stop what could be a remorseless attack, particularly on rural areas, through these tax hikes, is to support the amendment.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours Labour, Workington

I oppose the amendment, because I believe that 5 per cent. is insufficient. I support the Government's position that the figure should be higher.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours Labour, Workington

Yes, that is higher than 5 per cent. The hon. Gentleman can count. I congratulate him. I should have gone even higher.

I want to comment on leaded petrol and the distorting effect on petrol prices arising from the profile of taxation. I drove down the Embankment the other day and stopped at the first filling station. It seems to me that a lot of misrepresentation is going on about fuels and fuel prices nationally. That may arise in part because the previous Government provided in legislation for a commitment to a 5 per cent. increase. Fortunately, we have now removed that commitment.

Leaded four-star petrol at that filling station was 73.5p a litre, while super unleaded was 79.5p. As far as the general public are concerned, the reference to unleaded petrol, although it is marked as super, implies that it complies with what we would regard as unleaded criteria. There is a distortion in the way in which such products are being marketed: the public are led to believe that they are buying an unleaded fuel when they are effectively buying a leaded fuel.

Photo of Edward Davey Edward Davey Opposition Whip (Commons), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Whip

Most garages selling super unleaded also sell unleaded, which is more commonly bought by consumers and costs less than four-star.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours Labour, Workington

I understand that, but my point is that super unleaded petrol is regarded by the general public as an unleaded fuel, but it costs 6p more than four-star petrol. Many hon. Members, including myself, will have gone into a petrol station and purchased super unleaded in error, paying 6p more than for four-star leaded, in the belief that we were protecting the environment. The reality is that purchasing the leaded fuel would have done more to protect the environment, because that fuel, as I understand it, is less damaging.

A total misrepresentation is going on at fuel pumps throughout the United Kingdom as to what super unleaded petrol is. My appeal tonight is for people to stop buying it; they are being overcharged and it is probably more damaging to the environment than the leaded four-star petrol, which is a substitute petrol.

Photo of John Bercow John Bercow Conservative, Buckingham

I am sorry to learn that the hon. Gentleman incurred that additional cost. Is it not wrong to assume that, simply because he has such poor judgment in those matters, the same can be said of his constituents, who are probably altogether more discerning?

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours Labour, Workington

If only that were the case. My constituents fall into the same consumer trap. Perhaps they are not blessed with the hon. Gentleman's intelligence.

The question of the ceiling and how it is working relates also to diesel. Last week, I spoke about ultra-low-sulphur diesel, which, I am informed, diesel drivers should now use, but which is almost entirely unavailable in the United Kingdom. There are only a few places where it can be bought. I am in favour of as many outlets as possible acquiring the right to distribute it, and selling it at a lower price, but the problem is that they do not have access to it.

I have rung garages in my constituency and further afield in Cumbria, and they tell me that it is almost totally unavailable. My plea to the Government is: please get on to the manufacturers and tell them that the public want it, that taxpayers' interests are served by their buying it, and that the interests of the environment are served by their using it. It should be made available as soon as is humanly or physically possible. We know that the pumping facilities exist on the forecourts, and there is no reason at all why companies should not begin the process of switching pumps from diesel to the new low-sulphur diesel.

When I allude to one other little reform, I hope that you will not rule me out of order, Sir Alan. I know that I am getting right to the margin of your forbearance.

We shall raise additional revenue from the tax increase that is being introduced, and that is welcome for environmental reasons, but there is another way of protecting the environment. We must make sure that people pay: that they get their MOT certificates, pay their road fund duties and insure their vehicles. Why do we not simply have one disc, in three parts, with three different inserts, dealing with vehicle excise duty, MOT and insurance? If we did that, and the date of expiry was marked on each part of the disc, a great number of vehicles, many of which are responsible in the greater part for the pollution that we so deprecate, would immediately be removed from the road.

Many vehicles are on the road that should not be. Let us not only raise taxes but enforce measures that already exist, because my view is that we could thereby be more environmentally friendly.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

My view is that the hon. Gentleman just about got away with that.

Photo of Edward Davey Edward Davey Opposition Whip (Commons), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Whip

I am glad to hear you say that, Sir Alan, because I want to support what the hon. Member for Workington (Mr. Campbell-Savours) said: there are ways in which we can force some of the polluting cars off the road.

I understand that the fines for not having a car properly insured are fairly minimal and that, in some cases, especially for youngsters, whose insurance costs would be significant, they are almost the same as the costs of a decent motor insurance policy. That seems ludicrous, as it offers no incentive to be insured. Increasing the fines might have a similar effect to the proposal of the hon. Member for Workington.

I want to cast the Committee's mind back to the incisive and robust speech of the hon. Member for Bury St. Edmunds (Mr. Ruffley). He focused our minds on a key aspect of the debate: the cumulative effect of the increases in fuel duties. We should think of the increases that have already happened in the past 12 months, because, if we add them to the new increases, as he said, the increase in taxation, over and above what was planned by the previous Government, is up to £9 billion. That significant increase was not foreshadowed in the Labour manifesto.

Cumulatively, the duty on leaded petrol has gone up by 8.9p and on unleaded petrol by 8.4p. For leaded petrol, that is a 21.4 per cent. increase in less than 12 months. As I understand it, the Government's inflation forecast is about 2.5 to 3.5 per cent. When they increase duty by more than 20 per cent. and claim that the increase is 6 per cent. above inflation on an escalator basis, they seem to be more pessimistic about the prospects for inflation than we have seen in their macro-economic forecasts. The cumulative effect of the two Budgets and two Finance Bills amounts to a swingeing increase.

Unfortunately, the conclusion of the hon. Member for Bury St. Edmunds was weak. He maintained that the amendment went far enough towards rebalancing the injustice of the increase. While Liberal Democrats will be supporting the amendment because it is the only show in town, it does not go anywhere near compensating people who will be affected by the large increase.

The Government are making the mistake of their predecessors. They are being narrow-minded in their approach to environmental taxation. It is important that we build popularity for environmental taxation and build consensus among the population. We shall do that only if people see benefits from the environmental taxes imposed on them. If we are to encourage people to change their behaviour and support those measures that will change their behaviour, we must give them some incentive and some benefit.

7 pm

When the Liberal Democrats impose an environmental levy such as this one, we always propose offsetting measures to protect those on low incomes who have no alternative but to pay the extra tax. We ensure that the environmental measures are revenue neutral and neutral in their effect on the economy as a whole. We have done that rigorously over the years. The hon. Member for Cotswold (Mr. Clifton-Brown) was right when he intervened in the speech of the hon. Member for Bury St. Edmunds. It is important that there are offsetting measures.

The Government have proposed two offsetting measures. One is being implemented quickly. They are making available £50 million a year for rural public transport. As other hon. Members have said, £50 million goes nowhere near compensating rural motorists who will be affected by the increase of more than 20 per cent. in 12 months in fuel duty. The money being raised by the Government is in billions of pounds. Seeing that side by side with £50 million shows that the Government do not accept the principle of offsetting measures. That is a great shame.

The Government have said that they will consult on a second measure. It is not in the Finance Bill, and that is a great shame. They have said that they are minded to consult on introducing vehicle excise duty at a starting rate of £100 for the least polluting cars. I presume that that consultation will happen later this year. It is a shame that it is being delayed, because compensation delayed is not really compensation for people paying higher fuel duties now. The Red Book merely states that the Government are interested in introducing a reduced starting rate of £100. 1 hope that they will go much further.

The Liberal Democrats have argued for some time that vehicle excise duty should be graduated far more than by the suggestions on which the Government propose to consult. We should like vehicle excise duty for the smaller-engined, more fuel-efficient cars to be reduced to just £10 in order to offset the impact of higher fuel duties, especially on rural motorists who need to use their cars and have no alternative.

The Government should be taking offsetting measures first before imposing these swingeing increases. The timing is of great significance. The right hon. Member for Wells (Mr. Heathcoat-Amory) mentioned the plight of agriculture and the rural economy as a result of the level of the pound and the problems caused by the decline in the beef industry as a result of the BSE crisis. I accept that the BSE crisis is not the Government's fault. I am happy to agree that the Conservative Government failed to tackle that problem sufficiently, but it has left the rural economy in dire straits. So to impose increases in fuel duty on the rural economy when they will be most directly felt and will have the most swingeing impact—increases of more than 20 per cent. in less than 12 months—is clearly a wrong-headed policy. Liberal Democrats will support amendment No. 12 and vote against clause 7 stand part.

In spite of what some Conservative Members have said, the Government have published an environmental assessment of the measures on fuel duty and have given some details of the effect of the increases on the environment. I refer right hon. and hon. Members to page 78 of the Red Book. There is a column on the environmental impact on the reductions in nitrous oxide and various other pollutants. I cannot quite describe it from what is written because it is in scientific shorthand that I do not understand, but the bit that I do understand is where the Red Book states that the fuel duty increases will result in a

Reduction of around 3 billion car kilometres". However, there is a note saying:

These estimates are subject to significant margins of uncertainty. I am sure they are. [Laughter.] The Financial Secretary laughs, and she is right to do so.

The more serious point is that that is all that we have—one page; a little line on those massive increases in duty. I am afraid that that does not go anywhere near meeting the promise that the Financial Secretary made recently. Of the promise of a green book setting out the Budget's environmental consequences, she said:

We have every intention of keeping that promise from the first full Budget."—[Official Report, 10 July 1997; Vol. 297, c. 1062.] In Labour's 1994 pre-election environmental policy paper "In Trust for Tomorrow", it made a commitment to a green book. We have not had it in this Budget. That is a great shame.

We are not able in this Committee to make a proper analysis of the environmental effects of the Government's measures unless the Government start meeting their pledges. So the Liberal Democrats will vote against the Government on amendment No. 12 and clause 7 stand part because the clause will have a damaging impact on the rural economy, and one that has not been offset by alternative measures. The Government have failed to put before the Committee any serious analysis of environmental impact.

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

I am in favour of the amendment because I represent a rural constituency.

There is no question but that clause 7 is punitive and cynical and shows that the Government do not understand one bit the needs of rural constituencies. That is the reason for the amendment. The Government do not understand that 75 per cent. of people in rural areas depend on their cars to go to work. They do not understand that rural people have to travel 50 per cent. further than people who live in towns, and that they depend on their cars. Cars for those people are a necessity, not a luxury.

The Government made much of the process of public consultation before the Chancellor's statement. Yet again, that reveals that they are a cynical Government with a cynical practice of public consultation. Had the Chancellor come to my constituency and taken the opportunity to consult businesses in the rural area, he would have seen a survey that we conducted of 300 small businesses. Of those 300 businesses, 97 per cent. told us that they disapproved of the increases last July. The Chancellor would also have discovered that, when asked whether they thought that a 5 or 6 per cent. increase was right, only 1 per cent. of those businesses agreed.

Photo of Chris Leslie Chris Leslie Labour, Shipley

Will the hon. Gentleman give way?

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

I shall give way in a moment.

When they were asked whether they thought that the increases would be bad, neutral or good, 94 per cent. said that they would be bad.

Photo of Chris Leslie Chris Leslie Labour, Shipley

Will the hon. Gentleman give way on that point?

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

The hon. Gentleman will have an opportunity in a moment.

Why have the Government imposed that increase, which will hit the elderly, poor and sick in my constituency?

Photo of Chris Leslie Chris Leslie Labour, Shipley

Will the hon. Gentleman give way?

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

In a moment. I wish to make some progress.

My constituency contains three community hospitals—Burford, Chipping Norton and Witney. The Government, who promise great things on the health service, are to close Burford hospital. The people who use it will have to travel 11 miles to Witney hospital, and those who live in rural areas will have to pay extra money to get there. The Government propose to close 25 per cent. of Witney hospital's beds, so people will have to go on to Oxford. That is a tax that will hit the sick, the vulnerable and those who live in rural areas.

Photo of Chris Leslie Chris Leslie Labour, Shipley

I am grateful to the hon. Gentleman, who is so generous in giving way. He mentioned a survey, which I am sure was statistically and methodologically correct, about the opinions of rural businesses about a 6 per cent. increase in road fuel duty. Did they give an opinion about the 10 per cent. increase in road fuel duty in 1993 which was introduced by Norman Lamont, the former Chancellor?

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

I am grateful to the hon. Gentleman for his question, because we made it clear that the road fuel escalator was a constructive tax, so long as the market could plan for it. The difference between the previous Government and this one is that this Government are cynical tax-grabbers who have introduced two increases through the road fuel escalator in 12 months and who are interested only in grabbing money from people's back pockets, front doors and back doors, and now from their car doors.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

Does my hon. Friend recall that the previous Government increased petrol duty against a background of significantly falling oil prices? The Government are introducing larger increases when oil prices have bottomed out.

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

My hon. Friend is exactly right, and it is interesting that the hon. Member for Shipley (Mr. Leslie) has not sought to intervene again. Perhaps he has learnt the lesson that he needs to learn.

Photo of Chris Leslie Chris Leslie Labour, Shipley

I listened carefully to the hon. Gentleman's point and should like an answer. Norman Lamont, the former Chancellor, increased road fuel duty by 10 per cent. in 1993. Was it useful in achieving the hon. Gentleman's objective of helping rural areas?

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

I am grateful to the hon. Gentleman for asking his question again, because he clearly did not hear what my hon. Friend the Member for Guildford (Mr. St. Aubyn) said. When hon. Members intervene to make what they perceive to be clever comments, they must consider them in context. As my hon. Friend the Member for Guildford said, if Labour Members examined the overall fall in the price of oil and pump prices at petrol stations, they would realise that the Chancellor is hitting the poor, the sick and people in the countryside. The Government do not care about them.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

The hon. Gentleman mentioned the price of oil. Will he comment on BP's reduction of its pump price, which acknowledges the falling price of oil? That did not happen in 1993.

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

The Financial Secretary makes a valid observation—BP responded to a request from the Chancellor. At a time when petrol prices have been cut in rural communities, it is kind of him to shove petrol prices up left, right and centre.

The Institute of Fiscal Studies has studied a sample of households to discover what the effect of the tax would be. The Government claim to protect the poor, but the IFS has shown that the wealthy will not suffer, because there will be only a 1 per cent. cut in their average living standards. The income of the poorest 10 per cent. will be cut by 2.25 per cent. by this increase alone—so much for a Government whose rhetoric claims that they care about the poor.

The measure is taxation by a Government who promised throughout the election campaign not to raise taxes. They have taken another opportunity to hit the British public in rural communities as hard as they can, which shows that they have no understanding of the needs of the rural economy and people who live in rural areas.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

What a load of toffee we have heard from Opposition Members. I draw their attention to an authoritative study published on 3 March, which compared the cost of travel by different modes of transport between 1974 and the present day. The cost of travelling by train has gone up by 68 per cent. and the cost of travelling by bus has gone up by 57 per cent., but the cost of travelling by car has gone down by 7 per cent. The Opposition spin the line that the marginal increase in petrol cost for cars will spiral the economy down into recession and hurt the rural poor. It is complete rubbish.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central 7:15 pm, 28th April 1998

I shall give way in a moment, but only after I have provoked three hon. Members at once.

The Government are setting off on a path of environmental sustainability with an holistic view of economic competitiveness in the global economy. Within that wider context, and given that a transport White Paper is forthcoming, the changes should not be interpreted by Conservative Members in such a farcical way.

Photo of John Swinney John Swinney Scottish National Party, North Tayside

I am grateful to the hon. Gentleman, who knows that I represent a large rural constituency. I tell him the truth—petrol prices are higher there than in urban areas. He quotes average figures showing that the cost of motoring has come down by 7 per cent., but he must understand that it has come down by more for some people, primarily those in urban areas, and by much less for people in rural areas, who have no alternative to public transport. Will he reflect on the toffee that he is talking?

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

The hon. Gentleman is obviously not a statistician. There is a difference between regional differentials and average rates moving down. At all times there has been a higher price in the countryside, but for virtually everyone there has been a reduction of 7 per cent. in the cost of car use which is geared into the technology of new cars and the depreciating costs of old cars as well as the average cost of fuel.

The Government took a balanced approach in the Budget, which refocuses the burden of taxation on usage rather than on ownership, in the interests of maintaining jobs. A more sophisticated incentive scheme towards sustainability will emerge as the strategy develops. Graduated excise duty will achieve preferential treatment for clean fuels and for clean vehicles, and I hope that there will be more incentives for gas-powered vehicles as part of a wider strategy. Conservative Members shake their heads, but there are 1 million gas-powered cars in Italy and only 4,000 in this country because the previous Government failed to lead the market by setting up a system of incentives in a context within which the economy could adjust to be competitive and environmentally sustainable.

We do not have all the information, because we await the launch of the transport White Paper by my right hon. Friend the Deputy Prime Minister, who will put the issues in the wider context discussed at Kyoto. I support the Government's position. The amendment is myopic and pedestrian, and should be rejected.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

I support the amendment. The increase through the escalator is a real increase, over and above inflation. The Government's helpful notes on clauses say that this measure alone will increase inflation by 0.28 per cent. Over 10 years, the pure compounding of the inflator will result in an increase of 3.3p per litre; and the actual increase in hydrocarbon duties of 4.4 per cent. a year gives a 44p per litre increase. Adding to that the increase in VAT take—VAT goes on top of the increase in hydrocarbon duties—means that the tax regime that the Government have established for petrol will amount to a staggering 50p a litre over 10 years.

The measure will have a disproportionately injurious effect on certain classes of the community—I am thinking particularly of the low-paid, Mr. Deputy Speaker. It is all very well for us and other groups in the public sector and elsewhere who are able every year to get pay increases that nearly match the rate of inflation; but for those who are low-paid or pensioners, whose incomes do not increase with inflation, it is an especially savage measure. In my rural constituency, Mr. Deputy Speaker, that inflator—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. Gentleman should remember that we are in Committee and that I should not be addressed as Mr. Deputy Speaker.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

I apologise, Sir Alan. I should know better.

The increase of the inflator will have a disproportionate effect on those groups in society who are unable to make up their income to an indexed level. My hon. Friend and neighbour, the Member for Witney (Mr. Woodward), made the point especially well that, to those in rural areas—particularly pensioners and those who are low paid or disabled—the car is not a convenience but a necessity. The Government should think carefully about the regime that they have put in place.

I wish to make one or two points about the environmental effects, Mr. Deputy Speaker, as the Financial Secretary is bound to crow about that aspect when she answers the debate. Some of the claimed environmental effects are dubious, as are the figures on page 75 of the Red Book. I shall ask Sir John Bourn, the Comptroller and Auditor General at the National Audit Office, to use his new powers and new methodology to examine the figures and determine whether or not they are accurate. I suspect, Mr. Deputy Speaker, that those figures are mainly based on the fact of improved technology. Major reductions in carbon dioxide and nitrogen dioxide emissions have come about in the past few years through improved technology such as lean-burn engines and catalytic converters; the reductions have little or nothing to do with fiscal instruments introduced by the Government.

The hour is late, so I shall make only one more point, which is the competitive effect of the inflationary increases on heavy goods vehicles. In coastal areas, we shall find hauliers who have come from the continent with large spare tanks that were filled up on the continent; inland, they will have an unfair advantage over domestic hauliers because of the duties and increases that the Government have wrongly introduced in the Budget. That is why I shall support the amendment.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. I hope that, with the assistance of the editors of the Official Report, the hon. Gentleman will be able to delete all references to Mr. Deputy Speaker, which he continued to make throughout his speech.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

This has been a long debate and, with your guidance, Sir Alan, I should like to deal with both the amendment and the substantive clause in one go, if that would be in order.

The hon. Member for Cotswold (Mr. Clifton-Brown) referred to what he thought would be the likely impact on the retail prices index. I refer him to the answer given in Treasury questions last week, which gave the figures from 1990 on the impact of the escalator and fuel price rises, including the figures relating to the 10 per cent. increase imposed by Norman Lamont, to which my hon. Friend the Member for Shipley (Mr. Leslie) referred. Those figures do not bear out the hon. Gentleman's calculations.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

I should like to make some progress. This has been a long debate and hon. Members are keen to discuss other clauses.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

On a point of order, Sir Alan. I quoted the inflationary rise from the Government's own notes on clauses. Paragraph 12 of the notes on clause 7 states that the impact of the increase on inflation is 0.28 per cent.—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. Gentleman knows that that is not a point of order for me.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

Perhaps the moral of this story is, give way and so avoid a spurious point of order.

The whole point of the Budget, including the increases under clause 4, was that it would be good for Britain. An overwhelming 53 per cent. of the population agreed; they accepted the principles that are now enshrined in the clause. My right hon. Friend the Chancellor is the most popular Chancellor ever after a Budget—Conservative Members obviously lament their failure to achieve such a record in government.

By far the largest number of submissions to the Government in response to the pre-Budget report were in connection with the environment. Those submissions encouraged the Government to make progress on environmental protection, and especially on achieving our targets on carbon dioxide emissions. Opposition Members clearly did not want to refer to the fact that the Kyoto agreement will be legally binding on us. It is an international agreement whereby we have to achieve a reduction in carbon dioxide emissions, and the clause is part of our strategy to do that.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

The hon. Gentleman chose not to speak in the debate; I shall give way to him later if there is time, but, in fairness to hon. Members who did participate in the debate, I should address their points.

My hon. Friend the Member for Workington (Mr. Campbell-Savours) spoke about market definition in respect of super unleaded, but he appears to have been misled by the name of that product. He is right to say that there is a higher duty level on super unleaded, but that is because of the damage caused by the much higher benzine emissions. Super unleaded is used by a very small section of the community and is being phased out, as is leaded petrol.

My hon. Friend went on to refer to the availability of ultra low-sulphur diesel—

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Conservative, Cotswold

The Financial Secretary might not have understood her brief. The higher the lead levels in petrol, the lower the benzine levels, so super unleaded has a lower level of benzine than ordinary petrol.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

I am clear on the fact that super unleaded contains more carcinogenic compounds. If the hon. Gentleman would care to debate the point with me in the Tea Room tomorrow morning, after I have been to the Select Committee on the Environment, I should be happy to oblige.

My hon. Friend the Member for Workington went on to refer to the availability of ultra-low-sulphur diesel. He is right to say that the Government's strategy of increasing the differential is designed to encourage wider availability of ultra-low-sulphur diesel. However, there has already been improvement: the Sainsbury supermarket chain, which started making ultra-low-sulphur diesel available in response to the previous Government's introduction of the mechanism, now provides it at more than 200 petrol stations and plans to extend that. Obviously, the Government are keen to ensure the availability of that product.

Elsewhere in the Bill, the Government have tightened the definition of ultra-low-sulphur diesel to ensure that the Bill delivers on the environmental objectives that we set out.

The general tenor of the debate seems to be, on the one hand, to complain that the Government have increased the fuel escalator and, on the other, to complain that we have not, and that we are not doing enough, quickly enough, to deal with CO2, emissions and to deliver on the environmental commitments that the Government have and were elected on. For every argument that the escalator is too high at 6 per cent., others are advanced by the environment lobby, to the effect that it is not high enough and that more rapid progress is needed. The Government have sought to strike a balance, so that we deliver on our commitments on CO2, reductions and study the fuels and their emissions to make progress on urban air quality as well as on CO2, emissions.

7.30 pm

Several hon. Members said that there should be a reduced vehicle excise duty rate for rural areas alone, to recognise dependence on cars in rural areas because of the lack of public transport. A specific reduction for rural motorists would be incredibly expensive and cumbersome to administer within the system, but wide open to abuse, because other people could register in rural areas. The Government took the view—confirmed in today's announcements by my right hon. Friend the Minister of Transport—that we should invest in a transport fund for rural areas.

Hon. Members may complain that that is not enough, but it is a huge increase on the money made available specifically for rural transport projects under the previous Government. The previous Government made available only £1 million. For all their concerns and worries about rural communities, and despite the fact that they had a 5 per cent. escalator—as opposed to our 6 per cent.—they made available only £1 million for rural initiatives, and now they have the cheek to say that we are not doing enough. As many hon. Members said, car owners buy approximately the same amount of fuel regardless of where they live. We have sought to ensure that all car users are making a contribution to the attainment of our environmental objectives.

The United Kingdom is taking a lead internationally in promoting action to reduce greenhouse gases, and duty must be a vital element in that strategy. We have put forward, in the Budget and in the Bill, a duty rate regime that recognises the damage that leaded petrol does, and increases pressure against its use. It recognises the damage that diesel does to the environment, and the need to encourage ultra-low-sulphur diesel, and therefore to adjust the duty rates for those two fuels.

We have ensured that gas oil and heavy fuel oils have increased by the same percentage as petrol and diesel. Duty for fuel gases is frozen again. We are considering commitments to introduce a vehicle excise duty regime that encourages people to have smaller vehicles which are more efficient, less polluting and better for the environment. That consultation is proceeding, but it takes time.

When there was criticism of the escalator, the previous Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), said:

Any critic of the Government's tax plans who claims also to support the international agreement to curb carbon dioxide emissions will be sailing dangerously near to hypocrisy."—[Official Report, 30 November 1993; Vol. 233, c. 939.] Post Kyoto, to deliver on our commitments, we need to increase the escalator to deliver the cuts in carbon dioxide. We were asked whether it would have an effect. Institute of Petroleum figures show that, in the first nine months of 1997, inland demand for petrol fell. It did so only slightly, but it fell, and the escalator is feeding through into results.

The Government have ensured that the increase in the escalator is part of our environmental objective, and that we have a twin strategy to tackle the problems of transport in rural areas. Amendment No. 12 does not live up to the Conservatives' professed commitment to the environment. They have not told us how they would achieve the necessary reduction in CO2 emissions if the amendment were accepted. Simply, they must decide whether they want to be committed to the environment and the difficult decisions that must be taken to deliver on that commitment, or whether they want to continue to make cheap political points across the Chamber. I had hoped that, given Conservative Members' commitments to the environment when they were in government, they might recognise the importance of this measure in the Government's strategy.

I ask the Committee to reject the amendment, not only because the revenue lost to the Government would be crucial, but because—most important—it would undermine our commitment to reach our CO2 emission target, a Kyoto target which is steep, and, under the Government's commitment to the 20 per cent. reduction in particulates, very demanding. The strategy must start now, and clause 7 makes that start. I urge my hon. Friends to reject the amendment and to support the clause.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Treasury)

As the Financial Secretary was not willing to give way to me, I thought that I would speak briefly on the issues.

The Government appear to be making a strong case for increasing the tax in order to deliver what they regard as environmental benefits. It has been powerfully argued that many people in rural areas have no alternative to using the car, so they are obliged to pay more and continue to create the same amount of emissions. The Financial Secretary well knows that transport initiatives between towns and in cities are needed to reduce those emissions, and that, if the extra revenue were diverted to such initiatives, it would make a much more substantial contribution than it will if it is pocketed by the Treasury.

In the unamended version of the Red Book, it was projected that, by the year 2002-03, the escalator effect of the petrol increase would take the Government's receipts as a percentage of gross domestic product to more than 40 per cent.—the highest, apart from one year, that we would ever have achieved. Two questions hang in the air. First, if the Government are so keen on the environmental benefits, why are they not using the money for the necessary transport? Secondly, if they are arguing that they need the revenue, how come they are finishing the year in which the forecast public sector borrowing requirement of the previous, Conservative, Chancellor was £19 billion in the red, and the out-turn is just under £1 billion? The Financial Secretary tells us that the Government are desperate for the revenue. Obviously, the position is improving, and the Government are simply taking more taxes from the taxpayer, neither offsetting them with tax cuts elsewhere nor delivering measures that would provide real help for people, many of whom have no alternative to the car.

We support amendment No. 12, because the Government must balance their claim that fuel duty is a green tax with real green measures, which will bring about the desired changes; and, potentially, they must offset a reduction in taxes elsewhere for the very substantial extra revenue that they are enjoying.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

It is obvious from the Financial Secretary's response to the debate that this tax-raising measure has little to do with protecting the environment and everything to do with increasing the Treasury's tax revenues.

The Financial Secretary has failed to answer our questions about the environmental consequences of the tax increases and the perverse incentives that are being introduced that could, in some cases, damage the environment. She has broken her promise to bring forward an environmental Green Book with the Budget statement. It is up to the Opposition to protect the British people and British industry from a wholly unnecessary and damaging £9 billion tax increase during this Parliament from the increase in road fuel duties alone. The measure will raise taxes, damage competitiveness and hit all of those who rely on transport. I urge my right hon. and hon. Friend and others to support the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 139, Noes 271.

Division No. 259][7.40 pm
Allan, RichardJones, Ieuan Wyn (Ynys Môn)
Ancram, Rt Hon MichaelKennedy, Charles (Ross Skye)
Arbuthnot, JamesKey, Robert
Ashdown, Rt Hon PaddyKing, Rt Tom (Bridgwater)
Atkinson, David (Bour'mth E)Kirkbride, Miss Julie
Ballard, Mrs JackieKirkwood, Archy
Beggs, RoyLaing, Mrs Eleanor
Beith, Rt Hon A JLait, Mrs Jacqui
Bercow, JohnLansley, Andrew
Blunt, CrispinLeigh, Edward
Brazier, JulianLetwin, Oliver
Breed, ColinLewis, Dr Julian (New Forest)
Browning, Mrs AngelaLidington, David
Bruce, Malcolm (Gordon)Lilley, Rt Hon Peter
Burns, SimonLivsey, Richard
Campbell, Menzies (NE Fife)Lloyd, Rt Hon Sir Peter (Fareham)
Cash, WilliamLlwyd, Elfyn
Chapman, Sir SydneyLuff, Peter
(Chipping Barnet)MacGregor, Rt Hon John
Chope, ChristopherMcIntosh, Miss Anne
Clappison, JamesMackay, Andrew
Clark, Dr Michael (Rayleigh)Maclean, Rt Hon David
Clarke, Rt Hon KennethMc Loughlin, Patrick
(Rushcliffe)Madel, Sir David
Clifton—Brown, GeoffreyMalins, Humfrey
Collins, TimMates, Michael
Colvin, MichaelMaude, Rt Hon Francis
Cormack, Sir PatrickMawhinney, Rt Hon Sir Brian
Cotter, BrianMichie, Mrs Ray (Argyll & Bute)
Cunningham, Ms RoseannaMoore, Michael
(Perth)Morgan, Alasdair (Galloway)
Curry, Rt Hon DavidMoss, Malcolm
Dafis, CynogNicholls, Patrick
Davey, Edward (Kingston)Norman, Archie
Davies, Quentin (Grantham)Oaten, Mark
Davis, Rt Hon David (Haltemprice)Prior, David
Day, StephenRandall, John
Dorrell, Rt Hon StephenRobathan, Andrew
Evans, NigelRobertson, Laurence(Tewk'b'ry)
Ewing, Mrs MargaretRoe, Mrs Marion (Broxbourne)
Fabricant, MichaelRowe, Andrew (Faversham)
Fallon, MichaelRussell, Bob (Colchester)
Fearn, RonnieSt Aubyn, Nick
Fox, Dr LiamSalmond, Alex
Fraser, ChristopherSanders, Adrian
Garnier, EdwardSayeed, Jonathan
George, Andrew(St Ives)Simpson, Keith (Mid—Norfolk)
Gibb, NickSpelman, Mrs Caroline
Gillan, Mrs CherylSpicer, Sir Michael
Greenway, JohnSpring, Richard
Grieve, DominicStanley, Rt Hon Sir John
Hague, Rt Hon WilliamSteen, Anthony
Hamilton, Rt Hon Sir ArchieStreeter, Gary
Hammond, PhilipSwayne, Desmond
Hancock, MikeSwinney, John
Heald, OliverSyms, Robert
Heath, David (Somerton & Frome)Tapsell, Sir Peter
Heathcoat—Amory, Rt Hon DavidTaylor, John M (Solihull)
Hogg, Rt Hon DouglasTaylor, Matthew (Truro)
Horam, JohnTaylor, Sir Teddy
Hunter, AndrewTredinnick, David
Jack, Rt Hon MichaelTrend, Michael
Johnson Smith,Tyrie, Andrew
Rt Hon Sir GeoffreyViggers, Peter
Wallace, JamesWillis, Phil
Wardle, CharlesWilshire, David
Waterson, NigelWinterton, Mrs Ann (Congleton)
Webb, SteveWoodward, Shaun
Welsh, AndrewYeo, Tim
Whitney, Sir RaymondYoung, Rt Hon Sir George
Widdecombe, Rt Hon Miss AnnTellers for the Ayes:
Wigley, Rt Hon DafyddMr. John Whittingdale and
Willetts, DavidMr. James Cran.
Abbott, Ms DianeCryer, Mrs Ann (Keighley)
Adams, Mrs Irene (Paisley N)Cummings, John
Ainger, NickCunliffe, Lawrence
Ainsworth, Robert (Cov'try NE)Cunningham, Rt Hon Dr John
Alexander, Douglas(Copeland)
Allen, GrahamCunningham, Jim (Cov'try)
Anderson, Donald (Swansea E)Dalyell, Tam
Anderson, Janet (Rossendale)Darling, Rt Hon Alistair
Armstrong, Ms HilaryDavidson, Ian
Ashton, JoeDavies, Rt Hon Denzil (Llanelli)
Atherton, Ms CandyDavies, Geraint (Croydon C)
Atkins, CharlotteDawson, Hilton
Banks, TonyDean, Mrs Janet
Barnes, HarryDenham, John
Bayley, HughDewar, Rt Hon Donald
Beckett, Rt Hon Mrs MargaretDobbin, Jim
Bell, Stuart (Middlesbrough)Dobson, Rt Hon Frank
Benn, Rt Hon TonyDonohoe, Brian H
Bennett, Andrew FDowd, Jim
Benton, JoeDrew, David
Bermingham, GeraldDrown, Ms Julie
Best, HaroldEagle, Angela (Wallasey)
Betts, CliveEagle, Maria (L'Pool Garston)
Blackman, LizEdwards, Huw
Blizzard, BobEllman, Mrs Louise
Boateng, PaulFlynn, Paul
Borrow, DavidFollett, Barbara
Bradley, Peter (The Wrekin)Foster, Rt Hon Derek
Bradshaw, BenFoster, Michael Jabez (Hastings)
Brinton, Mrs HelenFoster, Michael J (Worcester)
Brown, Rt Hon GordonFoulkes, George
(Dunfermline E)Fyfe, Maria
Brown, Rt Hon Nick (Newcastle E)Gapes, Mike
Brown, Russell (Dumfries)Gardiner, Barry
Browne, DesmondGeorge, Bruce (Walsall S)
Burden, RichardGerrard, Neil
Burgon, ColinGibson, Dr Ian
Butler, Mrs ChristineGodman, Dr Norman A
Byers, StephenGodsiff, Roger
Caborn, RichardGoggins, Paul
Campbell, Alan (Tynemouth)Golding, Mrs Llin
Campbell, Mrs Anne (C'bridge)Griffiths, Jane (Reading E)
Campbell, Ronnie (Blyth V)Griffiths, Nigel (Edinburgh S)
Campbell—Savours, DaleGriffiths, Win (Bridgend)
Canavan, DennisGunnell, John
Cann, JamieHain, Peter
Casale, RogerHall, Mike (Weaver Vale)
Caton, MartinHall, Patrick (Bedford)
Chapman, Ben (Wirral S)Hanson, David
Chaytor, DavidHeal, Mrs Sylvia
Chisholm, MalcolmHenderson, Ivan (Harwich)
Clark, Dr LyndaHepburn, Stephen
(Edinburgh Pentlands)Heppell, John
Clark, Paul (Gillingham)Hesford, Stephen
Clarke, Charles (Norwich S)Hinchliffe, David
Clarke, Eric (Midlothian)Hoey, Kate
Clarke, Rt Hon Tom (Coatbridge)Home Robertson, John
Clwyd, AnnHood, Jimmy
Coaker, VernonHoon, Geoffrey
Coleman, IainHopkins, Kelvin
Cook, Frank (Stockton N)Howarth, Alan (Newport E)
Cousins, JimHowarth, George (Knowsley N)
Cox, TomHowells, Dr Kim
Cranston, RossHoyle, Lindsay
Humble, Mrs JoanPerham, Ms Linda
Hurst, AlanPickthall, Colin
Hutton, JohnPike, Peter L
Iddon, Dr BrianPlaskitt, James
Jackson, Helen (Hillsborough)Pound, Stephen
Jamieson, DavidPowell, Sir Raymond
Jenkins, BrianPrentice, Ms Bridget (Lewisham E)
Johnson, Alan (Hull W & Hessle)Prentice, Gordon (Pendle)
Johnson, Miss MelaniePrimarolo, Dawn
(Welwyn Hatfield)Prosser, Gwyn
Jones, Barry (Alyn & Deeside)Purchase, Ken
Jones, Helen (Warrington N)Quin, Ms Joyce
Jones, Ms JennyQuinn, Lawrie
(Wolverh'ton SW)Radice, Giles
Jones, Jon Owen (Cardiff C)Rammell, Bill
Jones, Martyn (Clwyd S)Rapson, Syd
Keeble, Ms SallyReed, Andrew (Loughborough)
Keen, Ann (Brentford & Isleworth)Reid, Dr John (Hamilton N)
Kennedy, Jane(Wavertree)Robinson, Geoffrey (Cov'try NW)
Kidney, DavidRogers, Allan
Kilfoyle, PeterRooker, Jeff
King, Andy (Rugby & Kenilworth)Ross, Ernie (Dundee W)
Kingham, Ms TessRoy, Frank
Kumar, Dr AshokRuane, Chris
Lawrence, Ms JackieRuddock, Ms Joan
Laxton, BobSavidge, Malcolm
Lepper, DavidSawford, Phil
Leslie, ChristopherShaw, Jonathan
Levitt, TomSheerman, Barry
Lewis, Ivan (Bury S)Sheldon, Rt Hon Robert
Liddell, Mrs HelenSingh, Marsha
Lloyd, Tony (Manchester C)Skinner, Dennis
Lock, DavidSmith, Angela (Basildon)
Love, AndrewSmith, Rt Hon Chris (Islington S)
McAllion, JohnSmith, Miss Geraldine
McAvoy, Thomas(Morecambe & Lunesdale)
McCabe, SteveSmith, Jacqui (Redditch)
McCafferty, Ms ChrisSmith, John (Glamorgan)
McDonnell, JohnSmith, Llew (Blaenau Gwent)
McFall, JohnSpellar, John
McGuire, Mrs AnneSquire, Ms Rachel
McIsaac, ShonaSteinberg, Gerry
McKenna, Mrs RosemaryStevenson, George
Mackinlay, AndrewStewart, David (Inverness E)
McNamara, KevinStinchcombe, Paul
McNulty, TonyStoate, Dr Howard
Mactaggart, FionaStott, Roger
McWalter, TonyStrang, Rt Hon Dr Gavin
Mallaber, JudyStringer, Graham
Mandelson, PeterTaylor, Rt Hon Mrs Ann
Marsden, Gordon (Blackpool S)(Dewsbury)
Marshall, David (Shettleston)Taylor, Ms Dari (Stockton S)
Marshall, Jim (Leicester S)Temple—Morris, Peter
Marshall—Andrews, RobertThomas, Gareth (Clwyd W)
Maxton, JohnThomas, Gareth R (Harrow W)
Michael, AlunTipping, Paddy
Michie, Bill (Shef'ld Heeley)Touhig, Don
Milburn, AlanTrickett, Jon
Mitchell, AustinTruswell, Paul
Moffatt, LauraTurner, Dennis (Wolverh'ton SE)
Moonie, Dr LewisTurner, Dr Desmond (Kemptown)
Moran, Ms MargaretTurner, Dr George (NW Norfolk)
Morgan, Ms Julie (Cardiff N)Twigg, Derek (Halton)
Morgan, Rhodri (Cardiff W)Walley, Ms Joan
Morley, ElliotWatts, David
Morris, Rt Hon John (Aberavon)Wicks, Malcolm
Mudie, GeorgeWilliams, Rt Hon Alan
Mullin, Chris(Swansea W)
Murphy, Denis (Wansbeck)Williams, Alan W (E Carmarthen)
Murphy, Jim (Eastwood)Wills, Michael
O'Brien, Bill (Normanton)Winnick, David
O'Brien, Mike (N Warks)Wise, Audrey
O'Neill, MartinWood, Mike
Organ, Mrs DianaWorthington, Tony
Osborne, Ms SandraWray, James
Pearson, Ian
Tellers for the Noes:
Mr. Greg Pope and
Mr. David Clelland.

Question accordingly negatived.

Clause 7 ordered to stand part of the Bill.