Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 8:47 pm on 10th March 1999.

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Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton 8:47 pm, 10th March 1999

I shall concentrate on matters in the Budget that particularly affect my constituency. I begin with a point that I raised with the Prime Minister this afternoon at Question Time, although I did not, of course, get a satisfactory reply.

In my constituency, which forms a large chunk of rural Devon, 80.4 per cent. of householders have cars. Those cars are necessary to their everyday lives. Users are of all ages. If they did not have access to a car, many elderly people in rural areas would have to move out of the villages and their homes elsewhere, and move into towns and cities. It is mobility, and the flexibility of that mobility, that make the car so important, yet today, those people face paying £3.13 for a gallon of unleaded petrol.

The Prime Minister seemed to indicate to the House this afternoon that, because of some of the pluses in the Budget, it did not matter that cars are being taxed at that level, but, in rural areas, there is a distorted effect. People living in rural areas will not enjoy any benefit that the Budget has given them in any other measure because they will need to spend the extra money keeping their car on the road.

The Government have increased the fuel tax escalator to 6 per cent. The tax has kicked in in three Budgets in two years; it has rocketed up since the 1997 general election. I was pleased to hear my hon. Friend the Member for East Yorkshire (Mr. Townend) say how the Conservatives would not only oppose but vote against the measure, which has been of great concern to me over many years, particularly on my constituents' behalf.

If the Government and the Prime Minister in particular are not willing to listen to Conservative Members about how unfair the measure is to people living in rural areas, perhaps he will look at the Hansard of yesterday's debate on the Budget, when his former Chief Whip, the right hon. Member for Bishop Auckland (Mr. Foster), said that he would be torn to pieces by his mainly rural constituents because of the imposition of that tax on petrol. It does discriminate against those who live and work in rural areas.

Many of those car drivers are also self-employed people. In rural areas, starting up small businesses is very important. People have a choice in rural areas: they either start a small business or they go and work somewhere, very often somewhere quite a long way away. Encouraging entrepreneurs in rural areas is therefore extremely important. However, those people are being hit not only by additional petrol costs but by the increase in class 4 national insurance contributions, which will affect 500,000 self-employed people.

We have heard much today, particularly from the Secretary of State for Trade and Industry, on large businesses' support for the Budget. However, the response from small businesses has not been so favourable. I should like to quote two responses that we have received today.

The first is from Brian Prime, chairman of the policy unit of the Federation of Small Business, who estimates that increased class 4 national insurance contributions— from 6 to 7 per cent.—will hurt not only those additional self-employed people but The real entrepreneurs and risk takers—the sole traders will miss out on the corporation tax changes, but will be hit by increases to national insurance contribution. The Federation of Small Business said that the Budget has completely missed the target where the majority of small firms were concerned". Again we heard the Government praying in aid the support of the Confederation of British Industry and big businesses. However, as Conservative Members know, if one is really serious about developing entrepreneurial skills across the United Kingdom, whether in rural areas or in towns, one realises that it is small businesses—the genuine entrepreneurs—who create wealth and growth. They are the people who, in the main, create the jobs. The Government should take seriously the fact that the Budget has hit that sector.

It would be wrong for me not to take this opportunity to talk about another sector, which includes many small businesses, which I know have made representations to the Government prior to the Budget: the road haulage industry. In his speech today, the hon. Member for Ochil (Mr. O'Neill), quite astonishingly, described road hauliers as whingers, which I am sure will not go down well with his own hauliers—I imagine road hauliers live in most constituencies.

In my rural constituency, in Devon, I have many road hauliers. I have also received a whole bundle of letters from such hauliers who are small businesses, many of which were established by owner operators, employing up to 12 or 20 people. They are very important employers in my constituency, but are now fearful—as they were before the Budget—about the very future of their businesses. The Government ignored the representations that they received in a document that was sent, before the Budget—it was also sent to hon. Members—from the Freight Transport Association and the Road Haulage Association.

Hon. Members are aware of the issues that the associations raised in their representations to the Government, and the urgency with which they wanted the Government to deal with their problems in the Budget. However, their concerns have not only been ignored by the Government, but been exacerbated in the Budget because of the increased tax on diesel.

Therefore, not only will we lose individual small businesses, but there will be a sea-change in how the industry operates. I believe that the change—the way in which businesses are so-called "flagging out"—will gather momentum, with businesses establishing themselves across the channel rather than operating in the United Kingdom.

I pay tribute to my hon. Friend the Member for North Shropshire (Mr. Paterson), who is in the Chamber, for raising the issue on the Floor of the House in a previous debate, in the hope that, prior to the Budget, the Government would listen not only to the industry but to representations from hon. Members on both sides the House.

It was with absolute dismay that I read the information provided today by the Road Haulage Association, after it had analysed the Budget's impact on the haulage industry. I beg the indulgence of the House to read it out. The increase will affect all my haulage companies. It says: Britain's hauliers reacted with 'anger and disbelief, to today's announcement by the Chancellor that Duty on Diesel Fuel is to be raised by more than 11 per cent.According to the Road Haulage Association, the rise will add more than £20,000 to the annual fuel bill of an average haulier"— fuel costs in the industry often represent about 36 per cent. of business costs, so this is a huge increase on a section of their costs— (vehicle fleet of 10 40te gvw artics), pushing their total average fuel bill beyond £200,000 for the very first time. The hike means that since the new Government came to power in 1997, fuel costs for the average haulier have increased by more than £50,000. Hauling goods around the country is important, but nowhere more so than in the south-west peninsula. In Devon and Cornwall, we have to haul goods further because of the topography of the region. We are trying to encourage new investment and to persuade new companies to establish themselves there. The cost of hauling goods once they are manufactured is critical to the decision on where in the country to locate. The increase in diesel duty has not only put a block on investment but jeopardised the companies that already exist in my constituency.

Commenting on the increases, the director of the Road Haulage Association said today: The reaction of my members to this increase will be one of anger and disbelief. Despite strong joint representations…the Chancellor has just rung the death knell for over 53,000 jobs in the UK haulage industry. It is particularly bad for hauliers who are competing against unfair competition from abroad. Increasing numbers of my members are asking how they can get out from under this Government"— by flagging out. The flagging out package will enable them to avoid the United Kingdom's very much higher vehicle excise duty, as well as giving them access to cheap foreign fuel. Many hauliers are simply awaiting the outcome of the Government's review of vehicle excise duty before making that decision, but—