Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 9:07 pm on 10th March 1999.

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Photo of Owen Paterson Owen Paterson Conservative, North Shropshire 9:07 pm, 10th March 1999

No, there is no European impact on vehicle excise duty and petrol or diesel duty.

We are talking about a major strategic industry. If we doubled rail investment, it is unlikely that more than about 10 per cent. of freight would go by rail. In 10 years' time, it is likely that 90 per cent. will still go by road. The Red Book contains an astonishing increase in duty: not the escalator of 6 per cent. that we were promised but an increase of 11.6 per cent., which puts 28p a gallon diesel.

Thirty-five per cent. of the cost of running a lorry is diesel, and more than 85 per cent. of the price of diesel is tax. The average small haulier, running perhaps 10 trucks, has had to pay an extra £35,000 a year since the Government came to power, and now the Government have added a further £20,000. That means an increase of £9 billion to £10 billion in fuel duties in this Parliament. The diesel-petrol escalator is worth more than 1p on income tax.

Our diesel is easily the most expensive in Europe. To fill a large truck with two tanks with 1,200 litres costs £756 here, as opposed to £438 in France or £354 in Luxembourg. I mention those countries because, in September, the French Government, who have a more intelligent attitude to their haulage industry, introduced a rebate to help French hauliers to compete with those of Luxembourg.

Vehicle excise duty is also totally out of line with the duties in other European countries. UK VED for a 38-tonne vehicle is £3,210; in France it is £486; and in Portugal it is down to £308. The Budget contains a savage hike in VED for a 40-tonne vehicle, up to £5,750. That gives a French operator a comparative advantage of £2,700, or about 3.5 per cent. of operating costs.

We discussed this issue in European Standing Committee A this morning, the Minister for Transport in London gaily said that we have lower social costs and management costs; but there is not a haulier in the country making a margin of 3.5 per cent., so our hauliers are already out of pocket on VED alone.

There was a move in the Budget to push people towards fitting catalytic converters so that they can burn ultra-low sulphur diesel. That is a chimera. To convert a Euro 1 engine costs £4,000 and a Euro 2 engine £3,500. The £1,000 rebate is not enough because—this is a critical fact that the Government have completely missed—the fuel does not generate the same amount of energy as ordinary diesel. A large haulier, Newell and Wright in Sheffield, converted 130 38-tonne vehicles and reported an 8 per cent. increase in fuel consumption that cost them £250,000 a year.

There is worse news on ultra-low sulphur diesel: more crude oil needs to be burned to get a given amount, so more carbon dioxide is produced in the refinery as well as more diesel being burned in the lorry. That cannot help the Government's environmental commitments.

The fundamental flaw is that the freight journey has to be made. There is no marginal impact in making freight more expensive, because the load has to be carried. Either it can be carried by a foreign-owned truck or the domestic haulier is forced to go abroad or be put out of business.

The Kyoto accord requires us to reduce emissions by 12.5 per cent. from 1990 levels. According to the Library, in 1990 power stations emitted 54 million tonnes of carbon; road transport 30 million; and other sources 76 million. That is 159 million tonnes in all. However, only 16 per cent.—emitting a maximum of 5 million tonnes—of that traffic was goods vehicles. Therefore, page 84 of the Red Book does not add up. I do not envisage that the carbon dioxide reductions that the Government have promised will come about and I would be grateful if the Minister would explain how they will do so.

I foresee the end of the British road haulage industry as we know it. Today, the Road Haulage Association has been flooded out with calls from people who want to take up its offer of a streamlined package of legal fees and administration costs to flag out abroad. The director general of the RHA has asked: What can we do to get out from under this Government? and has said that the association's members are, "voting with their wheels". Nowhere will that be more obvious than in Northern Ireland. All the road hauliers there will be based in the Republic.

The damage to the industry is considerable. According to the Centre for Economics and Business Research, more than 26,000 jobs will go in the haulage industry, but there is worse, as the economy as a whole will be seriously damaged. Every business is made less competitive by the swingeing increase in transport costs and that is particularly so in a constituency such as mine. The load has to be carried. As it is estimated that a further 26,000 jobs will go in the general economy, the job losses will amount to more than 53,000, which is more than the west midlands would lose if BMW took the drastic decision to move Longbridge production to Hungary.

The loss in tax revenue is a bigger down side. In 1998, the Excise lost £411 million. By 2002, it will be losing more than £1 billion in excise duty. I know hauliers who have not filled up a single truck in this country for two years. If they flag out and base abroad, many domestic-oriented British hauliers will be using foreign-purchased fuel. The total reduction in gross domestic product could be as high as £2.1 billion. As my hon. Friend the Member for Tiverton and Honiton said—