Hydrocarbon Oil Duties

Orders of the Day — Finance Bill – in the House of Commons at 3:33 pm on 27th April 1999.

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Question proposed, That the clause stand part of the Bill.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury 3:44 pm, 27th April 1999

Clause 2 increases the rate of duty on petrol, diesel and other fuels.

Diesel duty is now 3p per litre more than the duty on unleaded petrol, to remove diesel's advantage when considering energy and carbon content per litre. The differential is also in recognition of the fact that diesel is more harmful to health than petrol because of the particulate and nitrous oxide emissions associated with it.

We have, however, further increased the incentive for ultra-low sulphur diesel by increasing the duty differential over conventional diesel from 2p to 3p per litre. That increase, if passed on to the consumer, should make ultra-low sulphur diesel cheaper at the pump than conventional diesel, and should further encourage the manufacture and use of that cleaner fuel. The duty rate for ULSD is now the same as that for unleaded petrol. Cleaner diesel already accounts for 70 per cent. of sales. By the end of this year, thanks to the duty changes that we are making, it could account for almost all of diesel sales in this country, with clear benefits for the environment. Similarly, the duty on road fuel gas has been reduced by 6.13p to 15p per kg—a reduction of 29 per cent. That reduction reflects the considerable environmental benefit of road fuel gas over other road fuels, especially diesel.

Gas-powered vehicles emit significantly fewer pollutants than those that use petrol or diesel. The Government hope that the substantial reduction will encourage manufacturers to increase the distribution and availability of that environmentally friendly fuel, and that the lower price to the consumer will help to offset the cost of vehicle conversion.

The duty on higher octane unleaded petrol, also known as super unleaded, is increased to 52.33p per litre. However, the duty rate will be cut to 49.21p per litre—2p above the unleaded rate—from 1 October 1999. It may be useful if I explain why.

The current duty rate on higher octane unleaded petrol is close to that of leaded because it contains high levels of benzene, which is a known carcinogen. Benzene levels in petrol, however, will be regulated from 1 January 2000, so there will no longer be a health reason for distinguishing between rates of duty on unleaded and high octane unleaded petrol. However, lead replacement petrol, which is to be introduced in the second half of this year, is dutiable as higher octane unleaded petrol, and will mostly be used in older cars, which are less fuel efficient and environmentally friendly than newer cars running on unleaded petrol. On that basis, therefore, it is right to apply a higher duty rate, if not as high as previously.

The duty cut will take effect from I October 1999, to facilitate the introduction of lead replacement petrol, allowing the industry time before 1 January 2000, when leaded petrol is banned, to sort out its supply logistics. I know that that is a concern, especially for those with older cars.

The clause therefore continues the policy, introduced by the previous Government, of increasing duties on road fuels by more than the rate of inflation. The fuel duty escalator was formally introduced by a Conservative Government in 1993, in an effort to meet the commitments that they made at the Rio earth summit. The present Government are continuing to use the escalator for similar reasons—because it will help us to meet the commitments that we made at Kyoto.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I shall give way to the hon. Gentleman and then to my hon. Friend the Member for Workington (Mr. Campbell-Savours).

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

Does the right hon. Gentleman recognise that we are discussing a cumulative problem? The escalator may have been introduced by a previous Government, but that means that there is no obligation on the present Government to continue it. Will he at least give an assurance to those who are most worried about increases—especially people in rural constituencies such as mine, for whom cars are a necessity, not a luxury—that the increases will not continue year on year? The implication of what the right hon. Gentleman is saying is that the escalator will be used ad infinitum.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I intend to discuss rural areas and the special transport needs of people living in the countryside. Very often, for such people, a car is a necessity rather than simply a luxury.

The hon. Gentleman asks about the continuation of the escalator. We made it perfectly clear in the Budget report this year that, as the Chancellor said in his 1997 July Budget, road fuel duties would be increased on average by at least 6 per cent. in real terms in future Budgets. That was the stated position in the Red Book; it remains the position today.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

May I take one intervention at a time? I give way to my hon. Friend.

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

About three weeks ago, I asked my right hon. Friend the Minister of Transport whether some research might be done on transport costs per tonne per mile in each European country, including the United Kingdom. I believe that that is the statistic that matters, because it will show that costs for British hauliers are now substantially higher than those of their European counterparts. I have been elected to represent a constituency 300 miles from London, from which freight must be carried to the major conurbations. That distance creates substantial on-costs for industry, and those calculations and that research are important. Can my right hon. Friend tell me whether that work is being carried out? If it is, will the Government take the results on board if they reveal what I suspect?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I am aware, first, that a variety of statistics are connected with the road haulage industry, in particular, those relating to the impact of the fuel duty escalator and, secondly, that my hon. Friend questioned my right hon. Friend the Minister of Transport about it at Question Time about a fortnight ago. I understand that my right hon. Friend replied positively. If that is the case, I am sure that the Department of the Environment, Transport and the Regions is looking at precisely the issues that my hon. Friend asked it to look at.

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

I understand that the Department may be doing that, but I want to know whether Treasury Ministers are involved in that research and whether they are prepared to respond if it shows what I believe to be true—that British hauliers, irrespective of the KPMG report and all the other issues, are paying more. I am deeply disturbed, because of the on-cost for companies in my constituency, which is 300 miles from London.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

At the danger of starting on the wrong foot—

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

May I answer one question at a time? I know that the hon. Gentleman is very keen in such debates, but can he contain himself for a moment?

It is important that, on this issue, we do not reinvent the wheel. If my hon. Friend the Member for Workington has put to my right hon. Friend the Minister of Transport—[Interruption.] Conservative Members have finally got the pun. If my hon. Friend has put the issue to my right hon. Friend and he has agreed to look at it, I am sure that he will do precisely that. The issue is properly the preserve of the Department with which my hon. Friend raised it.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I shall give way to the hon. Member for North Tayside (Mr. Swinney) and will take the other interventions later.

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

I am grateful to the Chief Secretary for giving way. I return to the point raised by the hon. Member for South Holland and The Deepings (Mr. Hayes) about the continuation of the fuel duty escalator. Saturday's edition of The Daily Telegraph carried a report that the Chancellor had been somewhat stung by the reaction to the fuel duty escalator and was considering not applying it in future Budgets. The Chief Secretary's reference to what was said in the Red Book seemed to contradict that report. Will he clarify what the Government intend and whether the fuel duty escalator will be applied in future Budgets?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

If there is a choice between believing what is in the Red Book and what is in The Daily Telegraph, I know which I would opt for. It is a matter for the Scottish National party—[Interruption.] Well, we know where the Opposition stand, but perhaps they and the SNP are in bed together on this issue; that is for the SNP and the Conservative party to sort out between themselves.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

Who is next? I give way to the hon. Member for Cotswold (Mr. Clifton-Brown).

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

I am grateful to the Chief Secretary for giving way. Following up the question asked by my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes), will he confirm that not only has he increased the fuel duty escalator from the originally proposed 5 per cent. to 6 per cent., but that the increase is cumulative? Value added tax is imposed on top of that 6 per cent., amounting to a cumulative increase of about 6.2 per cent. every year. Over 10 years, that would double the duty on diesel. Will he also confirm that the Conservatives, when they introduced the fuel escalator, were committed to its operation only until 2000? The Government have committed themselves to the regime until 2002.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I shall come back to some of the figures that are being bandied about by the hon. Gentleman, and by other Conservative Members, in a moment, but I remind him that Conservative Members were elected on a manifesto at the general election. Indeed, the Conservative party published what it called a green manifesto, which Conservative Members presumably considered to be binding for the remainder of this Parliament. In that manifesto the Conservatives stated: We need to balance the freedoms the car provides and its impact on our environment … We will continue to encourage the manufacture of more fuel-efficient vehicles through annual increases in fuel duties. I presume that that was a promise for the duration of this Parliament. If so, it is yet another promise that the Conservative party, this time in opposition rather than in government, has broken.

Photo of Mr John Hume Mr John Hume Social Democratic and Labour Party, Foyle

Does the Chief Secretary realise the damage that the rise in the cost of fuel is doing to Northern Ireland, above all other areas, particularly to the border regions? For example, in my constituency, for £100 one can buy 139 litres of diesel, but if one goes a mile down the road one can buy 229 litres. Four-star petrol costs 77p a litre in my constituency, where as one mile down the road it costs 62p. Unleaded petrol costs 70p in my constituency, whereas one mile down the road it costs 53p. That is wiping out petrol stations throughout our area. Is the right hon. Gentleman going to do something about that?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I am well aware of the concerns that the hon. Gentleman raises in relation to Northern Ireland. The Government and Customs are both aware of the illegal trade that takes place between the Republic and Northern Ireland. We are also aware of the problems that the illegal trade causes for traders in the north of Ireland. I hear what the hon. Gentleman says and if it would help him and his colleagues, Treasury Ministers would be happy to meet him to hear about his constituents' concerns. I should be happy to organise that as soon as is convenient to him.

Photo of John Bercow John Bercow Conservative, Buckingham

The Chief Secretary should know perfectly well that the Conservative party was not committed to percentage increases in the fuel duty escalator at the time of the election. I am happy to parley the point with him at any stage. Does he not accept that the Paymaster General, who is sadly not in her place, has a good deal of explaining to do about why she vigorously opposed the introduction of the escalator at 5 per cent., but is a fanatical enthusiast for it at 6 per cent.?

Given the Chief Secretary's concerns about the dangers of social exclusion, what constructive remark can he make to my 81-year-old constituent, Mrs. Zettl, who lives in the high street of Buckingham and who is infuriated by what has happened? As an elderly pensioner, she works for local charities that cannot afford to reimburse her, and her social life will be greatly undermined as a result of the Government's inconsiderate policy. What does the right hon. Gentleman have to say to her?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

What passes between the hon. Gentleman and his constituent is clearly a matter for him. However, I advise him to point out the relative impact of the fuel duty escalators applied by previous Conservative Governments and by the Labour Government. I shall come to that issue in a moment or two. The crux of it is that the increases in prices that took place under the previous Conservative Government, particularly in diesel, far exceed the increase that has taken place under this Government.

Several hon.:

Members rose

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I shall give way to the hon. Member for Tiverton and Honiton (Mrs. Browning) and then I must make some progress.

Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton

May I press the Chief Secretary on the answer that he gave to the hon. Member for Workington (Mr. Campbell-Savours)? I have a Devon constituency, where road haulage and distances are critical. It is a matter for the Treasury, whatever the outcome of the inquiry about costs by the Department for the Environment, Transport, and the Regions. We are trying to get a feel for how responsive the Chief Secretary is to the plight of the road haulage industry. Can we take it that he does not agree with the comments of the hon. Member for Ochil (Mr. O'Neill), who told the House last month that the road haulage industry was run by the biggest load of whingers under the sun?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

As the hon. Lady is well aware, the Government and the road haulage industry are working in partnership, through the road haulage forum. That is an extremely sensible way to deal with the issues. It is certainly preferable to the disruption that we have seen on the streets of some of our major cities in recent weeks. I hope that no right hon. or hon. Member would condone such disruption. We are considering the competitive position of the industry in discussions with the road haulage forum. We made good progress at our first meeting, and in so far as is possible we shall address the concerns of the industry. I say in all candour to the hon. Lady that that dialogue is far more profitable for the industry than the disruption that we have seen from a minority of militant hauliers who want to hold our inner cities to ransom.

4 pm

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

No. I have given way I do not know how many times, and I want to make some progress.

The Government are continuing to operate the escalator because it will help us to meet the commitments that we made at Kyoto. We all have a part to play in helping to meet those legally binding obligations. Because of the escalator, urban air quality will improve and greenhouse gases will be reduced by between 2 million and 5 million tonnes of carbon a year by 2010. The quality of air in urban areas in particular will be improved because of that. Nationally, road transport is responsible for almost a quarter of particulate emissions and almost half the nitrogen oxide emissions. Diesel is the worst offender, which is why the clause widens the differential between it and other fuels.

Until last week at least, the Opposition supported the escalator. They maintained and increased it. The shadow Chief Secretary, the right hon. Member for Wells (Mr. Heathcoat-Amory), was one of its leading proponents. Incidentally, I notice that he is not present. Just four years ago, during consideration of the 1995 Finance Bill, in the same debate that we are having today, he told the Committee of the House why the fuel duty escalator was such a good idea. He said: The 5 per cent. real increases are also an important part of our strategy to reduce carbon dioxide emissions. The fuel duties policy should reduce carbon dioxide emissions by around 2.5 million tonnes of carbon by 2000. This, together with other measures already announced, should enable us to meet our targets of reductions arising from the Rio agreement."—[Official Report, 23 January 1995; Vol. 253, c. 98.]

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I have already given way to the hon. Member for Buckingham (Mr. Bercow), but I have not given way to the hon. Member for South-West Bedfordshire (Sir D. Madel).

Photo of Mr David Madel Mr David Madel Conservative, South West Bedfordshire

The right hon. Gentleman has just referred to the quality of urban air. If he is so concerned about it, why have the Government cut the bypass programme to ribbons?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

The hon. Gentleman agreed to a green manifesto. At least I presume that he did, because he was a Conservative candidate at the general election. Despite all the difficulties, divisions and the splits inside the Conservative party, at least the Tories all signed up to the manifesto on which they went to the British people at the election.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

The hon. Gentleman has asked a question, and I shall give him the answer. I remind him of what he signed up to at the general election, and I also remind him that the promises that are made at elections should be kept subsequently, whether a party is in government or in opposition.

Photo of John Bercow John Bercow Conservative, Buckingham

On a point of order, Sir Alan. Is it in order for the Chief Secretary to criticise my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) for his absence from our considerations when he must be aware that my right hon. Friend is attending a sitting of the Joint Committee on the Financial Services and Markets Bill?

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

Order. The hon. Gentleman has said enough for me to know that that is not a point of order.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

It was not even a good try, Sir Alan.

In response to the question of the hon. Member for South-West Bedfordshire, I shall quote back to him what the Conservative party agreed to at the general election and what it put before the British people. Its green manifesto stated: We need to balance the freedoms the car provides and its impact on our environment. We need to consider new ways to break the link between desirable economic growth and undesirable traffic growth. That is what Conservative Members signed up to then, but apparently they do not believe it now.

Several hon.:

Members rose

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I shall give way to the hon. Member for North Wiltshire (Mr. Gray) and then I really shall make some progress.

Photo of James Gray James Gray Conservative, North Wiltshire

In the quote that the Minister gave from my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) reference was made to the year 2000, which was a good reason for having the escalator in the first place. By then, we wanted to move towards achieving our Kyoto commitments. Does not the Minister realise that there is almost no elasticity in petrol or diesel usage, and such elasticity as there is will have been achieved by the escalator to date. The year 2000 is in six months from now. Does the Minister agree with me that the escalator has done its job and we have achieved our Kyoto commitments?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

No, I do not believe that for a moment. I shall return shortly to precisely that issue—the implications of the Opposition's abandonment of their commitments to environmental objectives that were formerly a matter of cross-party consensus. We supported the then Government when they signed up to their commitments at Rio, and thankfully—we are grateful to them for this—they, as the Opposition, supported our commitments when we signed up to them at Kyoto. Now all that seems to have been dissipated.

We have not achieved our aims. That is precisely the point. The number of children with asthma continues to increase, especially in urban areas; pollution continues to increase; dirty lorries continue to have a harmful impact on air quality and the environment. The idea that we can simply wish all that away is the worst sort of political wishful thinking.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I will make a little progress, if I may. I shall take interventions in a moment or two.

We are not talking just about the issue as it affects urban areas. At least one Conservative Member has mentioned the impact of the fuel duty escalator on rural areas. Let me say two things to the Opposition. First, I agree with the right hon. Member who told the House four years ago: I know that a car is often a necessity"— for those who lived in the countryside, he meant— but all motorists must think about the environmental consequences of what they do.—[0fficial Report, 23 January 1995; Vol. 253, c. 103.] Again, that was said by the present shadow Chief Secretary to the Treasury. What he agreed with then he apparently opposes now, so both he and the Conservative party are on desperately thin ice when it comes to defending the interests of the countryside and of rural motorists. What is more, the present Government—unlike the last—not only recognise the transport needs of rural areas, but have taken action to meet them.

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

Is the Chief Secretary seriously incapable of understanding the difference between an escalator of 5 per cent., introduced when Britain had about the lowest fuel prices in Europe, and an escalator of 12 per cent. operating when we had easily the highest?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I am afraid that the right hon. Gentleman needs to revisit his figures. I shall read them to him shortly.

The truth is that, under the Conservative party, the increase in diesel prices because of the fuel duty escalator was not 5 per cent. at all: it averaged 10 per cent. during the last three years of Conservative Government. If the right hon. Gentleman wishes to bandy figures he is welcome to do so, but, again, he is on desperately thin ice.

It is not even as if the Conservatives stopped supporting the idea of environmental taxes the moment they left office. Quite the reverse. When we took office and announced that we were continuing the escalator policy introduced by the Tories—and, indeed, raising it in our first Budget—the Leader of the Opposition told the House: we welcome the Chancellor's continued use of tax for environmental purposes."—[Official Report, 2 July 1997; Vol. 297, c. 323.] The present Government believe that the Leader of the Opposition was right to believe that the taxation system can and, indeed, should be used to achieve our environmental objectives. The only difference between then and now is that the Tories want to disown now what they proclaimed then.

The Tories claim that the reason that the escalator should be abandoned now is that either it has gone too far, or it has done its job. They say that the extra 1 per cent. that the Government have added to it has made it unaffordable, and has wreaked untold damage on, in particular, the haulage industry. That is baloney of the highest order.

As I told the House last week, the price of a litre of diesel has risen less under this Government than under the last. The facts are these, according to the Digest of United Kingdom Energy Statistics. In December 1996, after the previous, Conservative Government's last Budget, the price of a litre of diesel rose to 62.59p. After this Government's first Budget, in July 1997, the price rose again, to 63.44p. The latest figures, for March 1999, show that the price is now 69.76p. The increase has been about 7p per litre. By contrast, under the Conservatives, the price rose by 26p per litre.

I should remind the shadow Chancellor and other Conservative Members of one other fact. The last five duty rises under the Conservatives added, respectively, 10 per cent., 10 per cent., 13 per cent., 10 per cent. and 7 per cent. to the price of diesel. In other words, the party that introduced the escalator—and is responsible for it having the greatest impact on fuel prices—now opposes it. A party that adopts such a position deserves to be called hypocritical. But that is not all.

There are two major implications of the Conservatives' latest policy twist. First, Conservative Members' claim to support a cleaner environment has been exposed for exactly what it is: warm words with absolutely no substance. Although the Tories supported the Government when we made our legally binding obligations at Kyoto, their abandonment of the escalator leaves them professing support for our environmental objectives, but opposing the means of achieving them. Presumably they believe that environmental improvements will simply look after themselves.

I should remind Opposition Members today, as I reminded them last week, of what the former Chancellor of the Exchequer, the right hon. and learned Member for Rushcliffe (Mr. Clarke), had to say about that issue. He said: Any critic of the Government's tax plans who claims also to support international agreement to curb carbon dioxide emission will be sailing dangerously near to hypocrisy."—[Official Report, 30 November 1993; Vol. 233, c. 939.]

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

No.

Hypocrisy characterises the Opposition's position in a second way. The fuel duty escalator raises about £1.5 billion annually. The Tories' abandonment of the escalator contributes to the £6 billion black hole in their spending plans caused by their opposition to key Budget measures. Moreover, they voice that opposition less than 24 hours after the shadow Chancellor said that the Tories would match our spending plans on health and education. Therefore, one shadow Treasury Minister is saying one thing—more money for schools and hospitals—whereas another shadow Treasury Minister is saying another—less money for schools and hospitals.

Conservative Members are all over the place on the issue. They describe Labour's spending plans as reckless, but then say that they agree with them. Yesterday, they said that they wanted to match our spending on schools and hospitals; today, they will be voting to take cash from those schools and hospitals. It is chaos laced with hypocrisy.

By voting against clause 2 stand part, Conservative Members will be failing to put their money where their mouth is. Their figures simply do not add up, and no amount of double-talk can disguise the fact that they cannot be trusted either with public spending or with Britain's public services.

The Opposition's credibility is also not enhanced by the ludicrous claims that they are making about the impact of the fuel duty escalator on the haulage industry. I repeat what I said last week in the House: the Government recognise and appreciate the contribution that the UK haulage industry makes to our economy. We also recognise that, by international standards, the industry is a highly competitive one. However, it suffers from problems of over capacity and inefficiency.

The best UK haulage fleets are better than any others in the world. However, there are also enormous variations in performance. According to the industry's very own figures, the best UK haulage companies are almost twice as fuel efficient as the worst. No one disagrees with the fact that there is considerable scope for many British hauliers to reduce their fuel consumption. The need to become more fuel efficient has been heightened by growing public concerns about the environmental costs that hauliers impose in their use of lorries. Road freight distribution is one of the fastest growing causes of air pollution, accounting for one third of the 35 million tonnes of carbon that result from vehicle use. It is right and proper that everyone, including hauliers, should play a part in reducing such emissions.

Photo of David Drew David Drew Labour/Co-operative, Stroud 4:15 pm, 27th April 1999

The case that my right hon. Friend is making is interesting, but does he share my concern that, as well as examining the road haulage industry, we should consider inventory policy? One of the key reasons why there are so many vehicle movements is the "just in time" system, which has been an environmental disaster in many respects.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

The industry and the Government agree that there are simple and straightforward steps that road hauliers can take to improve their performance. The representatives of the industry are discussing those issues with the Government now. Less empty running, better driver training, better logistics management and the use of cleaner engines will all make a difference to the haulage industry's fuel consumption. As I have said, the gap between the best and the worst is alarming—and closing that gap is in the hands of the industry itself. I am sure that provided that we can achieve agreements between the industry and the Government in the road haulage forum, we can begin to make progress in the direction that my hon. Friend would like.

The Government openly acknowledge that there is a balance to be struck between environmental objectives and the needs of the industry. We have established the road haulage forum to allow us to hear the industry's concerns, and, where possible, to deal with them. Dialogue rather than disruption will best serve the industry. Similarly, the industry will be best served by keeping a comfortable distance between itself and the Opposition. [HON. MEMBERS: "Oh."] After all, it was the Conservative party that drove almost 5,000 hauliers out of business during the recession that it created in the late 1980s and early 1990s.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

The hon. Gentleman has just come into the Chamber. He was not here for the start of my speech, and he should have been, so I shall make him wait a moment or two.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

The hon. Member for North Shropshire (Mr. Paterson) has been here from the beginning; he has been patient.

Photo of Owen Paterson Owen Paterson Conservative, North Shropshire

Can the Minister square his comments on the environment with the evidence that I have received from the Library that in 1990 Britain's carbon emissions amounted to 159 million tonnes, of which only 30 million came from road transport? Of that 30 million tonnes, only 16 per cent. came from freight. The maximum estimate is therefore that 5 million of the 159 million tonnes came from road haulage. As there is no evidence that the number of loads carried has been reduced, where does the Minister get his environmental conclusions from?

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I get my conclusions from the figures, which I recited earlier. Unlike his hon. Friend, the hon. Gentleman has been present for the whole debate. I presume that he was listening to what I said, but I shall repeat it for his benefit: road freight distribution is one of the fastest growing causes of air pollution, accounting for one third of the 35 million tonnes of carbon that result from vehicle use. If the hon. Gentleman wants to go away and check his figures, he will find that mine are right.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

No, I am not giving way. I want to finish now.

It is simply wrong to say, as the Opposition allege, that the escalator makes it impossible for United Kingdom hauliers to compete with foreign hauliers. One would be hard pressed to find any United Kingdom industry—

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I have made it clear that I am not giving way. I have given way on countless occasions, and frankly , I wish that I had not—[HON. MEMBERS: "Oh."]—given the baloney that I have heard from the Conservatives. I am certainly not about to give way again.

One would be hard pressed to find any United Kingdom industry more dominated by domestic providers than the road haulage industry. Of course we know that we pay more for diesel in this country than continental companies do, but they pay far more in corporation tax and labour costs. The tax burden here is lower than that in other major European countries. They have motorway tolls; by and large, we do not. Once all those factors are taken into account it is clear that moving out of the United Kingdom would be an expensive business for haulage firms.

A typical firm, with 50 articulated lorries, would face higher business costs of nearly £;400,000 a year in France, £;600,000 a year in Holland and more than £800,000 a year in Belgium. So, contrary to the irresponsible claims from Conservative Members, Britain is the best place for hauliers, especially as a result of the help that the Budget gave to the haulage industry.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

Instead of yelling, the hon. Gentleman should start listening. He might learn something.

The most fuel-efficient, road-friendly vehicles—and the companies that operate them—stand to gain from the package that my right hon. Friend the Chancellor announced on Budget day. That package includes the duty cut on cleaner, ultra-low sulphur diesel relative to ordinary diesel; the duty cut on road fuel gases enshrined in this clause; the freezing of vehicle excise duty for 98 per cent. of lorries, to which we shall return later in our deliberations; the doubling in the vehicle excise duty reduction for lorries meeting lower emission standards; and the cuts in red tape to allow lower-weight lorries to qualify for lower level vehicle excise duty. There are also, of course, the cuts in corporation tax, which have been welcomed so warmly by the business community.

The Government's approach will help the road haulage industry and improve the environment. There is a balance to be achieved between the industry's needs and the country's environmental needs. The fuel duty escalator helps to get that balance right.

Until last week, the Conservatives supported getting that balance right. What they argued for in government, they now argue against in opposition. Their position is irresponsible, unprincipled and hypocritical. It deserves short shrift from the Committee and I urge it to support the clause.

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I start, as usual, by declaring the outside interests disclosed in the Register of Members' Interests.

The Committee will have listened to the Chief Secretary's speech with astonishment. His assertion that the road haulage industry is grateful to the Government for the help that they have given is one of the most remarkable ever made by a Minister in the House. I am surprised that the right hon. Gentleman had the nerve and the gall to make it.

The huge rise in road fuel duties lies at the heart of the Budget, which was launched in such a blaze of chest-beating glory by the Chancellor. The Chancellor has rarely been seen since, but the Budget has fallen apart under the weight of scrutiny.

It is not surprising that the public are increasingly angry at the lies told about the Budget. They are angry with a Chancellor who claimed that it was a Budget for families while abolishing the last recognition of marriage in the tax system. They are angry with a Chancellor who claimed that it was a Budget for enterprise while increasing tax on business by £3.2 billion. That is the help for business for which business is supposed to be so grateful. Some kind of help that is.

Most of all, however, the public are angry with a Chancellor who claimed that it was a Budget of tax cuts, even though taxes are to go on rising by stealth. Figures from the House of Commons Library show the truth. Taxes will rise by £40.7 billion over this Parliament, and by £7.1 billion in the current financial year alone. That is the effect of the Government's stealth tax increases, the hidden tax rises that they hoped no one would notice. The rises amount to £1,500 for every taxpayer.

All that is after the Prime Minister promised before the election that there were no plans to increase taxes at all. After this Budget, no one will ever believe a word that the Labour party says on tax. The Government have broken their promises on tax not once, but again and again and again. It is in the context of an ever-rising tax burden that we must consider the massive increase in tax on petrol and diesel under Labour. There is a limit to the number of times that Labour can clobber motorists with massive tax hikes and hope to get away with it. That limit has been exceeded. Petrol and diesel are far more expensive in Britain than anywhere else in Europe. It is time that the Government recognised that their policies are doing great damage to motorists.

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

The right hon. Gentleman will recall that a number of increases in duty on DERV occurred under previous Conservative Governments. I opposed those increases, and the Freight Transport Association sent delegations to make protests to Conservative Ministers. Can the right hon. Gentleman explain why he failed to take those protests into account, rather than implementing increases that he knew in his heart to be wrong in principle?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

If increases were wrong then, how much more so are they now. The escalator was introduced—I said this earlier, and the Chief Secretary did not contest it—at a time when Britain had about the lowest priced fuel in the European Union. Now, however, our fuel prices are the highest by a large margin. If the hon. Gentleman was right to oppose what was done then, I assume that he will vote with us against the Government's stunning 12 per cent. increase on DERV and the increase on petrol.

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

The right hon. Gentleman has twice said that Britain under the Conservatives had the lowest priced fuel in the European Union. Can he name one country in which the price charged for diesel was higher when the Conservatives were in power? France? Italy? Germany? Belgium? Holland? Spain? Can he name just one?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

My understanding is that we had about the lowest price. Certainly, the then Chancellor believed that—[Interruption.]and I hear confirmation from my hon. Friends.

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

The right hon. Gentleman is wrong.

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

The hon. Gentleman is not helping his case. If we already had more expensive fuel then, the case for opposing the Government now is even stronger. He is building ever higher the case against the wretched clause 2, which is doing such damage. For all the arrogant insouciance of the Chief Secretary, the Government should acknowledge that they are crippling the competitiveness of the road haulage industry. The tax increases have gone beyond any environmental justification. They should accept our view that the annual road fuel escalator should be scrapped. Conservatives will vote against the road fuel duty increases, and we urge the Government to abolish the escalator.

Photo of Yvette Cooper Yvette Cooper Labour, Pontefract and Castleford

Given that the right hon. Gentleman opposes the fuel escalator that he once supported, and given that he claims to support the extra £40 billion for health and education, which he previously described as reckless and irresponsible, how does he make his sums add up? If the fuel escalator were abolished, where would he find the extra money for health and education?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

We expect a little more from the hon. Lady than that she should tamely read out junk mail from Labour party headquarters. Last July, in responding to the Chancellor's spending plans, I said—[Interruption.] The Chief Secretary is becoming very excitable, but I hope that, in view of what I said last night, and 10 months ago, he will refrain in future from—I must find a parliamentary way to express this—the deliberate distortion of our position. Last July, I said: The Chancellor hopes that we will oppose his plans to spend more money on health and education, but I am going to disappoint him. Let there be no doubt that we welcome extra money for those priority services."—[Official Report, 14 July 1998; Vol. 316, c. 196.] We supported the increases then and have done so ever since. I would be grateful if the hon. Lady had the decency to refrain from repeating that smear and distortion.

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I shall give way to the hon. Lady if she is prepared to withdraw what she said earlier and commit—

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

Order. We are in danger of confusion. Despite my calling the hon. Lady, I do not think that the right hon. Gentleman has given way. I call Mr. Maude.

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer 4:30 pm, 27th April 1999

I will cheerfully give way, with the qualification that the hon. Lady should withdraw what she said and commit herself to refraining from deliberate distortions and smears.

Photo of Yvette Cooper Yvette Cooper Labour, Pontefract and Castleford

Does the right hon. Gentleman deny that he told the House of Commons that the comprehensive spending review, which involved £40 billion extra spending on health and education was "reckless" and "irresponsible"?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

The hon. Lady should know better than that. Yes, I said that the overall spending settlement was reckless and irresponsible, and that is because it breaches the Prime Minister's solemn general election pledge to cut the social security bill. Will she tell the Committee that he never said that? The comprehensive spending review involves an increase in social security bills equivalent to the extra spending that we support on health and education put together. How is the extra £37 billion on social security consistent with the solemn pledge to cut social security bills?

Photo of Yvette Cooper Yvette Cooper Labour, Pontefract and Castleford

Does the right hon. Gentleman agree that the previous Government increased social security spending rapidly and that cutting social security bills is exactly what has allowed the Government to put extra money into pensions and child benefit? Given his concentration on the social security budget, what exactly does he want to cut—child benefit, pensions, or what?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

The best advice to the hon. Lady is, "When you are in a hole, stop digging." The lesson that she should learn from this is that she is okay with the first handout from Millbank tower, but beyond that she gets into serious difficulty. It was not the Conservative party, but Labour, that made a solemn general election pledge to cut social security bills. She should ask the Prime Minister what he plans to cut in the social security budget. It is his failure to cut it that makes the total spending plans irresponsible.

When we introduced the fuel escalator in the previous Parliament, petrol and diesel prices in Britain were among the cheapest in Europe. Labour increased the escalator by a fifth, and brought forward the increases from November to March.

Photo of Owen Paterson Owen Paterson Conservative, North Shropshire

According to evidence given to me by Brian Yeardley—he only haulier mentioned in the famous KPMG report—in 1994 only Luxembourg and Spain had cheaper diesel than the United Kingdom.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

The right hon. Gentleman said that it was the cheapest.

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

The record will show that I said, "around the cheapest". The disclosure that there are two countries with cheaper fuel bears that out.

From the basis introduced by the previous Government, Labour has increased the escalator by a fifth and brought forward the increases from November to March. Petrol and diesel prices in this country are now the highest in Europe. It is time to get off the escalator. The Conservatives realise that, when one gets to the top of an escalator, it is sensible to get off. We recognised the problems that ever-rising duty was causing to our drinks industry, so we acted to deal with them. In our last two Budgets, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) froze duty on beer and wine and cut it on spirits. He recognised that we could not continue remorselessly loading burden on burden for ever. The Government face a much worse problem that has been imposed on the road haulage industry and the motorist by the road fuel tax. Their policies are doing real damage, but Ministers' only response has been to insult the hard-working people in the haulage industry, do nothing and hope that the problems will go away. Well, they will not.

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

I wonder whether my right hon. Friend has in mind family businesses such as Betts and Co. in my constituency, which started in 1929, runs about four vehicles and has a turnover of £500,000 a year. Last year, despite that very good turnover, it made a profit of only about £15,000. This year, as a consequence of the increases that the Government are introducing, it is projected to lose about —5,000. The firm is far too small to think about moving abroad. It is suffering because of the increase in fuel duties. I am sorry that the Chief Secretary refused to take an intervention from me earlier on this matter. Does my right hon. Friend agree that the Government are deaf to such companies and that this sort of thing could undoubtedly put such companies out of business?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

My hon. Friend makes the point strongly. It is precisely that sort of case that has led the Freight Transport Association to call the rise in fuel prices "crackpot, cock-eyed and ridiculous". The Road Haulage Association claims that the British trucking industry is being forced into exile by penal increases in taxation.

The CBI has weighed in as well. As we know, it is not an organisation particularly prone to criticising the Government. It says: The CBI believes this policy is placing British business at a disadvantage. No doubt it is ignorant, useless and uncompetitive in the eyes of the Chief Secretary. It says: For some, bankruptcy may be unavoidable, while others may find it necessary to travel the extra miles to fill up outside the UK, or relocate altogether,"— is this fantasy from the CBI as well?— to the detriment of local filling stations and local economies. The costs for those based in regions such as Scotland and Wales,"— perhaps of particular interest just at the moment to the Chief Secretary and his colleagues who have less opportunity to take advantage of the cheaper diesel available on the Continent and who have further to go to reach Continental markets, could also rise disproportionately. —Either the road fuel duty escalator should be halted, or its impact on the commercial freight sector should be mitigated. No doubt that is all nonsense as well—another lot of hopeless people who are getting it all wrong. The fact is that the Government are failing to listen even to people on their side, including the hon. Member for Workington (Mr. Campbell-Savours). Another hon. Member said: Countless local road hauliers have talked to me about the road fuel duty … I know that many of them have real problems. the problems are not confined to road hauliers; large swathes of manufacturing industry are beginning to be hit by the tax … Common sense says that we must take our foot off the escalator at some time".—[Official Report, 20 April 1999; Vol. 329, c. 764.] That was the hon. Member for Dudley, South (Mr. Pearson) in this Chamber last week. He is right. If only more Labour Members had the courage to speak out in defence of some of the poorest people in their constituencies, who find petrol prices are now spiralling out of their reach, and firms that face being literally priced out of business.

One of my hon. Friends mentioned earlier the story in the newspapers at the weekend, which must have been placed by Treasury sources to try to head off the concern that is mounting day by day. It is headed "Brown in U-turn on petrol duty". It says: Ministerial sources said yesterday that the fuel duty escalator was likely to be phased out or dropped in next year's Budget. It will be interesting to hear from the Chief Secretary whether that is a correct bit of briefing or just another decoy to detract attention from the mess that the Government have made of this policy and the damage that they are inflicting day by day. The Chief Secretary smiles in a merry way, but plenty of his constituents are suffering as a result of the escalator. I hope that he will confirm that the Government will take the advice that they have been given, by not just the Conservative party, but plenty of people outside the House of Commons, that it is time now to call a halt to the road fuel escalator.

Photo of Chris Leslie Chris Leslie Labour, Shipley

I want to ask the right hon. Gentleman a simple question and I hope that I can get a simple, straight answer. Is his commitment to oppose any increase in the road fuel duty not just for this financial year but, say, for the next four?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

One expects a simple question from the hon. Gentleman. My commitment is exactly as I have stated it; we oppose the increase this year and we believe that the road fuel escalator should be abandoned. I do not know whether the hon. Gentleman is trying to say that he thinks that the same rate should continue in future. Does he believe that?

I have stated our position clearly; it has at heart the interests of competitiveness and enterprise in this country.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

At the risk of receiving the same unnecessary abuse, may I ask an equally simple question? Last Wednesday—not that long ago—the right hon. Gentleman supported a lengthy Opposition motion on the taxation of the road haulage industry, which made no mention of getting rid of the escalator; why not?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I know that the hon. Gentleman is new to the House of Commons, but he should understand that we are discussing the Finance Bill. We are talking about a Government commitment that is imposing grave damage—

Photo of Tony McNulty Tony McNulty Labour, Harrow East

Where is the right hon. Gentleman's amendment?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

On the same day, we announced our plans to move off the road fuel escalator. My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said that clearly during his speech in last week's debate.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

Will the right hon. Gentleman give way?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I shall not give way again. I have made the point quite clear. We made it as clearly as we could in the debate. If the hon. Gentleman was not paying attention at that time, that is his problem; he can check Hansard if he wants to do so.

The Government should accept that their policies are causing hardship now; it is not enough merely to utter warm and reassuring words about the possibility of doing something next year. The problem exists now. The Government have made a mistake now and they should scrap the escalator now.

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

The right hon. Gentleman might have heard the comments made earlier in relation to The Daily Telegraph article to which he referred. Based on the Chief Secretary's remarks, would it be fair to assume that the comments in the Red Book stand and that, over the weekend, the Government have been involved in some meddling to try to take the heat out of this debate, when, in fact, their intention is to maintain the fuel duty escalator for the remainder of this Parliament?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

The hon. Gentleman might be making a mistake by placing any reliance on what is contained in the Red Book, which is now a means to obfuscate the truth, not to illuminate it in the way that it has done in the past.

Duty on petrol rose by 4p a litre in the Budget, following increases of 4p and 4.5p in the Labour Government's first two Budgets. Overall, the average motorist is now paying more than £150 a year extra in petrol tax as a result of the fuel duty increases in those Budgets. The latest Budget alone cost drivers £50 a year—la stealth tax of £1 a week. Under Labour, petrol prices are now the highest in the European Union, and the proportion of the price of a gallon taken in tax by the Chancellor is now as much as £8.50 in every £10. Excise duty—

Photo of Derek Twigg Derek Twigg Labour, Halton

Will the right hon. Gentleman give way?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I have given way a great deal and I want to make some progress. If the hon. Gentleman persists, I shall give way in a little while.

Rural motorists and the least well-off are especially hard hit by these vindictive tax increases. We know that, when he can remember which day of the week it is, the Deputy Prime Minister thinks that owning a motor car is a luxury—for everyone except him, of course; for him, owning two gas-guzzlers is an absolute necessity. However, a car is an absolute necessity for people who live in rural areas; it is not a luxury. I point out to the Chief Secretary that those people are deeply insulted by Government rhetoric that depicts them as selfish and irresponsible when, in reality, most people in the countryside cannot get by without a car.

Let there be no mistake that these massive tax hikes hit the poorest people hardest. Many of those people mistakenly believed that the Labour party was on their side at the last election, but they now find that they are taxed ever more heavily. We understand why they feel betrayed by a Government whose members promised, before the election, that they had no plans to increase taxes, but who have been piling taxes on motorists ever since. That is why we shall vote against petrol tax rises.

It is not only car owners who are concerned. British truckers have seen diesel duty increase by a massive 12 per cent. in the Budget—that is 6p extra per litre.

Photo of Derek Twigg Derek Twigg Labour, Halton 4:45 pm, 27th April 1999

The right hon. Gentleman has complained about stealth taxes and has referred to the situation now. Will he take this opportunity to make a clear promise and rule out the idea that his party will ever introduce a road fuel escalator at the next general election or at any other time in the future?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I have stated our position clearly. People will be pretty insulted to find that the hon. Gentleman is trying to make cheap debating points about a time after the next general election, while businesses and motorists face extinction today. If he can only make cheap points while people are losing their jobs and livelihoods, it will confirm people's opinion that his party does not care about business or about the livelihoods of hard-working people.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

Does the right hon. Gentleman agree with the green manifesto that his party published at the last general election?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I fought the election on that manifesto. The fact is that an escalator was introduced when our petrol and fuel prices were among the lowest in Europe. We always said that there was a place for an escalator, until we reached the point at which it inflicted grave and excessive damage—then we needed to get off it. The point at which the escalator is doing disproportionate harm has now been reached, and exceeded—[Interruption.]—The Chief Secretary fails to take account of the fact that his Government activated the escalator three times during their first two years in office, and at a rate considerably in excess of that committed to under the Conservative Government. That is why the top of the escalator has now been reached and the escalator should be abandoned.

Photo of Derek Twigg Derek Twigg Labour, Halton

Will the right hon. Gentleman give way?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

No, I shall not give way any more. I want to make some progress.

Diesel duty in Britain is now the highest in the EU—by a considerable amount.

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

If my hon. Friend will forgive me, I shall carry on.

It is no wonder that scores of companies have complained that they face a huge competitive disadvantage compared to their continental counterparts. [Interruption.] Discount is scoffed at and sneered at by the Chief Secretary because he does not care about that. Companies are being forced to flag out their operations. The industry has warned that thousands of jobs will be lost unless something is done to reduce the ever-rising taxes on hauliers. Those who suggest that there are still environmental justifications for continuing those increases should consider some recent research by the Centre for Economics and Business Research Ltd. The calculations in that research show that road usage will be reduced by 0.51% following the increase, but that the impact on the economy will be a loss of nearly 12,000 jobs. The environmental justification for the escalator has now completely disappeared.

What is the Government's response to the legitimate, serious and heartfelt concerns expressed by so many people? It makes matters worse that Ministers seem utterly ignorant of the problem. The Financial Secretary claimed that lorries do about 40 miles to the gallon—the actual figure is less than 10 miles. Last week, the Chief Secretary said: The truth is that the price of a litre of diesel has risen by 7p since the general election."—[Official Report, 21 April 1999; Vol. 329, c. 929.] He has said that again today, but it is simply not true. The price of a litre of diesel has actually risen by about 14p since the election, and the proportion of the price of diesel taken in tax has risen from 76 to 86 per cent. since May 1997. The Chief Secretary's approach is symptomatic of the Government's arrogant attitude to the problems caused by their policies.

Photo of Alan Milburn Alan Milburn Chief Secretary, HM Treasury

I presume that the right hon. Gentleman was listening to what I said. I reiterated the figures that I gave last week. When he says that the price of diesel has increased by 14p, that is simply wrong. He should look at the statistics produced by the Digest of United Kingdom Energy Statistics—the official bible in relation to these issues. He will find that the allegation that he has just made is misplaced—as is the allegation made to me in writing by his right hon. Friend the Member for Wells Mr.Heathcoat-Amory).

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I continue to assert that what the Chief Secretary said was wrong and that my assertion is correct. We can argue about the facts and see what results.

Photo of Martin Smyth Martin Smyth UUP, Belfast South

Will the right hon. Gentleman give way?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

I am aware that the hon. Member for Belfast, South wants to make a point about the situation in Northern Ireland, so I shall give way to him.

Photo of Martin Smyth Martin Smyth UUP, Belfast South

As one who has been privileged to sit on the Opposition Benches facing both a Tory Government and a Labour Government, I know that it is part of the Opposition's job to press the Government. Dare I suggest that the right hon. Gentleman's argument, that it is time to stop and think again, is the same one that was applicable when, to deal with health issues relating to tobacco, we imposed higher taxes instead of limiting advertising? When the Chief Secretary spoke about Britain, were his remarks not a reflection of little England? People living around the south coast, in Scotland, Wales, northern England and Northern Ireland are suffering greatly. Firms are going out of business and, ultimately, social security costs will have to rise.

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

The hon. Gentleman makes the point powerfully and forcefully, and he is absolutely right. Sadly, the Government are not ready to listen to representations from all parts of the country. The problem becomes more intense the further away one gets from the prosperous south-east of the country.

The Chief Secretary's approach is typical of the Government's arrogant attitude to the problems caused by their own policies. They say that British hauliers need to sharpen up their act and they have the cheek to lecture businesses, saying that there is a problem with the haulage industry; the Chief Secretary repeated today the view that the industry's problems are of its own making. Do the Government realise how enraging it is for Britain's hauliers to be lectured about their supposed lack of competitiveness by Ministers with not a day's experience in business between them? Britain's hauliers operate in one of the most competitive markets in the world—they know the problems they face, and they know that one of their biggest problems is a Government who are ignorant of how to encourage successful businesses.

The Government also claim that the tax increases do not really matter because the British haulage industry is still more competitive than its continental counterparts—as though that gives them the right endlessly to continue to tax hauliers until their competitive edge has been completely eroded. The Government point to the famous KPMG report and claim that it shows the competitiveness of UK haulage. That report was not a report on road haulage at all, and it does not even address the point raised by the hon. Member for Workington about the cost of haulage per mile in this country. It is of some interest that Mr. Brian Yeardley, a haulier cited in the KPMG report, has been forced to flag out by the crippling tax increases imposed by the Labour Government. He says: The Chancellor has ensured that we are uncompetitive against foreign hauliers". Mr. Yeardley cannot be expected to know—after all, he is running a business, not sitting fatly on the Treasury Bench pontificating on the subject. He adds: Each of our vehicles must earn seventeen thousand pounds more annually than our European competitors to cover these extra tax costs. Is he wrong about that as well?

That is exactly why there is a problem, and it is why, last week, my hon. Friend the Member for North Essex (Mr. Jenkin) invited the Government to publish a proper report on the competitiveness of the British road haulage sector. Ministers have consistently refused to commission such a report and, despite the issue being raised last week, when the Chief Secretary was pressed on it today, he was unable to say definitively whether such a commission had been raised. The Government simply do not want to know the truth.

The Government should not take only our word for the problems being faced; they should listen to what hauliers themselves have said. I hope that, when they do that, Ministers will take a slightly less offensive attitude toward hauliers than the hon. Member for Ochil (Mr. O'Neill), the Chairman of the Select Committee on Trade and Industry. During the Budget debate, he said: Most of us who have been in the House for any time know that the road hauliers are the biggest crowd of whingers under the sun."—[Official Report, 10 March 1999; Vol. 327, c. 419.] Will the Chief Secretary take this opportunity to dissociate the Government from that grossly offensive statement, which has given enormous offence to many hard-working people who are struggling, against odds multiplied by the Labour Government, to make a living?

Photo of Derek Twigg Derek Twigg Labour, Halton

Will the right hon. Gentleman give way?

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

No. The hon. Gentleman fluffed his chance last time and I shall not give him another.

The Government should listen to the chairman of the Road Haulage Association, who said: When we put Tony Blair's Government into power, they created the illusion that they were going to be the party of small businesses. What happened is exactly the opposite. They are destroying our industry and destroying small family businesses that have been going for many years and causing enormous distress when people are losing homes that they have spent their entire lives working for. He must be someone else who does not know what he is talking about. The Government should listen to companies such as Ferguson, whose representative writes: Nissan informed me that we had been unsuccessful in our bid for a contract which they had decided to award to a Dutch company purely on the basis of price … we are unable to maintain a competitive edge in the UK, let alone Europe.

I have plenty more quotations from hauliers who have had an extremely rough time under a Labour Government who will not listen to them. The saddest of all comes from Mr. Gary Reeve, who comes from the Prime Minister's own constituency. He says: I am having to battle for the survival of my company which employs 18 people. He wrote to his local Member of Parliament—the Prime Minister—asking for help and received a very helpful reply from the Foreign Office which began: Thank you for your letter showing interest about the situation in Kosovo. That is about as helpful as the letter written by the Minister for Roads and Road Safety, Lord Whitty. He responded to a road haulier's complaints about the tax increase on diesel with a rare and special sensitivity, replying: All hauliers who operate internationally can take advantage of lower prices elsewhere. That means, "Push off, get on with it, don't bother us—we don't care about you." The industry and small businesses are entitled to expect better from a Government who promised them so much.

The huge increases in diesel tax mean that truckers are carrying a competitive millstone: not only are they paying far more in road fuel duty, but they have been clobbered by the virtual doubling of road tax. In that respect, we have made some practical proposals to help the industry with the introduction of the Brit disc—a useful idea, which would make a significant difference. It was casually dismissed out of hand by the Deputy Prime Minister during his infamous appearance at the Dispatch Box two weeks ago; the best we can hope for is that he thought he was dismissing some other proposal. I hope that Ministers will reconsider that intemperate response to a sensible suggestion, because it is a simple and serious proposal which would make a start on helping the road haulage industry.

The Government promised not to raise taxes, but they have broken that promise. They promised to listen to the voice of business, but they have ignored the voice of business. They promised to support hard-working people, but they have loaded them down with a devastating burden. It is not surprising that the Chancellor never comes to the House to defend his policies or even to debate them. It is not too late for this arrogant Government to think again. Unless they are willing to do so, I urge the Committee to vote against the clause.

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

I rise to make an unashamedly constituency speech today, because I feel strongly about the issue—to which I am not new. Over the years, I have argued repeatedly in favour of low fuel costs for Britain's commercial haulage operators. On several occasions, I wrote to Treasury Ministers of the previous Government objecting to the increases in the costs of DERV, and I did so on behalf of constituent hauliers who were being unfairly penalised by such increases. I want to make it clear at the outset that I am not opposed to the escalator. I am in favour of the escalator, but I am opposed to its being used in respect of DERV for commercial vehicles, and I believe that commercial vehicles should be exempted.

The reason for my opposition is derived from personal experience. In the 1960s and 1970s, before I was elected to Parliament, I half-owned a manufacturing company in Lancashire. We had a fleet of two articulated vehicles: a Ford D1000 tractor unit and a Scania 110 tractor unit, which those in the haulage industry will know are large vehicles. One of them was a sleeper-cab truck and we used to run it across Europe carrying our own goods, mainly exports or imported components. We also did back loads for freight forwarders in Milan and France and occasionally from the United Kingdom abroad. I have run trucks and have experience of the industry—albeit on a small scale 25 years ago when I was a young man, long before I was elected to the House of Commons. I recall in great detail the effect of diesel costs on manufacturing industry.

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I have protested repeatedly to successive Governments—including this one—about diesel costs and I have been corresponding with Treasury Ministers about this issue for the past 18 months. I feel strongly about diesel taxation, which I believe undermines the position of manufacturing companies in the regions. Those companies' high costs should be offset in part by low transportation costs. I regard transport costs for hauliers in the regions as part of regional policy. Some people view regional selective assistance as a necessary subsidy for industry, and one that ensures investment, and some believe that low energy prices are required in certain sectors, particularly in the chemical and paper and board industries. I believe that we must maintain a low price structure for energy and transport costs.

It is totally counter-productive to levy costs on hauliers that they then pass on to customers without recognising the consequences of that decision for export prices and inflation within the United Kingdom. I am very conscious of the need to take account of environmental benefits when considering such matters. However, we must also bear in mind the cost to British manufacturing industry, particularly when the exchange rate is high and is causing that sector some discomfort.

I believe in the harmonisation of taxation across the European Union. I know that it is unpopular, but I believe that income tax rates, sales tax rates and all other rates of taxation should be uniform across the EU. 1 am a big supporter of the European Union, and believe that the proposition is utterly inevitable; it will come to pass. We may argue about it today and perhaps for the next decade, but, in the end, tax rates across the European Union will be harmonised. We should be thinking about that at this stage in our history. It seems quite silly to attend various meetings of the Commission and of the Council of Ministers and talk about level playing fields in differing areas of trade policy when we are aggravating a condition that will produce the antithesis of a level playing field. We should pursue harmonised tax policies, which means ending the escalator as it affects fuel prices for commercial operators.

I am very conscious of the impact of the increases in my constituency and on companies operating in Cumbria. I refer the Committee to some relevant correspondence and articles to which I have drawn Ministers' attention privately. The time has come to put this correspondence before the Committee, because I do not believe that Ministers have taken it into account. A shocking article appeared in the West Cumbrian News and Star on 22 March under the headline: Stobart Freezes Pay Over Fuel Tax". The article reads: Cumbria-based haulage firm Eddie Stobart has imposed a pay freeze on its staff because of fuel and road tax increases in the Budget.Eddie Stobart … has already registered 10 of its 840 trucks in Luxembourg to avoid Britain's tax increase.A further 40 look likely to be registered there, at a cost of only £350 a year… William Stobart, group operations director, said: 'We want to keep the workforce here. Registering lorries in Luxembourg is simply a cost-cutting measure…The drivers are angered and upset because Eddie Stobart can no longer pay a rise to his drivers. This is the first time this has happened and they say the Budget is to blame. We are not even getting a cost-of-living rise.Everything else in the world is going up but our wages. We have to survive too.' My right hon. and hon. Friends will know that I am loyal to the cause, but I do not believe that drivers should have to pay this tax. That is effectively what will happen: drivers in my constituency will have to bear the burden of additional taxation levied on hauliers. That is simply wrong.

I spoke to the Eddie Stobart firm this morning and I was told that the company made a profit of only £1 million last year. The reduction in corporation tax, to which my hon. Friends have referred and which is also mentioned in the KPMG report, will probably benefit the company by about £20,000 to £30,000 per annum. The cost of increasing duties and licences as proposed in the Budget will be £2 million. One figure does not compare with the other. If the difference is being paid by drivers in Cumbria or nationally, it is just plain wrong. That is why I think that the Government should rethink their decision.

As to flagging in Luxembourg, it is true that part of the Stobart fleet operates in the European Union. I think it is perfectly acceptable for companies to register vehicles abroad. The problem arises when firms start registering abroad vehicles that operate within the United Kingdom. The Stobart firm told me at midday today that it is planning to register about 100 vehicles outside the United Kingdom in Luxembourg. The firm may have to establish commercial premises in Europe in order to organise its activities properly. I am very worried about what I describe as the "Northern Ireland problem" whereby people drive over the border to register their vehicles and refuel. We are getting our tax profile wrong if that is now happening in England.

I understand that these items were included in public expenditure projections before the last general election and that the Government have simply carried them forward. Let us be truthful and say that that is what has happened: a defence based on environmental issues is misplaced. Public expenditure extrapolations as built into the Red Book must be borne in mind when taking decisions about this issue. How much would it cost the Exchequer if we were to find a way of exempting commercial operators from the increase in DERV duty? I suspect that it would be quite a small figure in terms of national expenditure, and I believe Ministers that should take that into account when considering future increases.

Another operator in my constituency, Mr. Teasdale of Cockermouth, travelled to London and took part in the great demonstration. I am not convinced that it is right to accuse those people of being wreckers. They feel very strongly about their business and have a case to argue. Frankly, I did not think that they were acting irresponsibly.

People are entitled to demonstrate. In the past 20 years as a Labour Member of Parliament, I have supported, in the House, demonstrations that I thought were right. 1 also supported demonstrations before I was elected. Indeed, I was involved in a demonstration some 30 years ago outside South Africa house in London, with some hon. Friends who are now in the Government. We accept that people have the right to demonstrate. That is all that the road hauliers were doing, and they were perfectly entitled to do so. Mr. Teasdale, the haulage contractor from Cockermouth to whom I referred, is expressing concern and asking the Government to rethink their policy.

I have another disturbing letter from a very reputable company in my constituency — Thomas Armstrong (Holdings) Ltd. It is one of the largest building companies in the north of England and employs many hundreds of people in that region. It has large carpentry shops and produces window frames, doors and roofing trusses for the building industry. It has a building division and a haulage division. The firm's letter to me, dated 24 March, says: As most of our lorries go out of Cumbria by road and we have to compete with other companies who are far closer to the market place, this latest increase has put our haulage business in jeopardy and we will possibly have to reduce our fleet by about 50 per cent. during the next 12 months. I am very worried about that. The letter continues: It is estimated that the total increase for fuel duty and road licence will be in the region of —400,000, which we will certainly not be able to recover from our customers who are only interested in savings not increases.We have written to all our drivers and informed them that due to the additional costs that have been imposed on us in the Budget, we intend to make changes which will result in the loss of jobs. I say to my hon. Friend the Economic Secretary that I was not elected to bring about job losses. We cannot allow companies to lay off workers as a result of measures that we have introduced.

As I said, I am not opposed to the escalator; I seek an exemption for commercial operators who run trucks and carry goods throughout the United Kingdom to and from remote areas, such as mine, which will suffer unreasonably as a result of the changes.

I have another letter, which I understand was sent to a number of hon. Members, from the Forestry Contracting Association. I could stand here probably for two hours and just read out correspondence because I am in contact with people in the industry who know of my interest and have been writing to me. I have picked out only the letters that are particularly interesting.

The forestry haulage industry is important because the cost of haulage is crucial to the cost of timber, and many rural economies and parts of the United Kingdom are dependent on the timber industry, just as paper and board mills are dependent on a supply of timber. Our options are to import the timber from Russia, as some companies would like to do, or parts of Scandinavia, or to buy it within the United Kingdom and sustain rural development — something that we all want to do. I favour the latter option but, if a paper and board facility is situated inland, the timber must be hauled from somewhere within the United Kingdom.

The Forestry Contracting Association said in its letter: The continued strength of Sterling and other factors outwith the control of the industry has led to increasingly large volumes of low priced imported timber being used in the UK … As a consequence, businesses have reduced production levels and there have been numerous sawmill closures and job losses throughout the UK… the imposition of significant increases in diesel costs and Vehicle Excise Duty will further damage the competitiveness of the sector.Specialist timber hauliers estimate that their costs will increase by at least 5 per cent. after the Budget announcement… There is little or no scope for further reductions in operating costs in the industry in the short to medium term. Haulage accounts for at least 25 per cent. of the delivered value of British grown round timber. 5.15 pm

The paper and board sector of industry is, internationally, extremely sensitive to price. I am for ever being called by Iggesund, one of the largest paper and board operators in the United Kingdom, with a factory in my constituency, which tells me how sensitive it is to the slightest movement in sterling against a basket of currencies, or against the dollar. Sterling's rate against the dollar has not been too bad, but its exchange rate with European currencies causes concern. Such companies are concerned about slight changes, and they are particularly sensitive to the changes in duty rates.

There has been another development, which I should draw to the attention of the Committee. It involves a Conservative-controlled council, but, on this particular issue, I have no intention of making political capital; I merely draw it to the attention of the Committee. Kent county council has issued a statement, in which one of its leaders said: I'll be astounded if we don't have vehicles flagged out by middle to the back end of this year. If we could save £100,000, I'd be happy flagging out. We're looking at flagging out 500 vehicles. I make no political point in quoting that statement; people will have to make decisions about how they want to arrange their affairs, but I am worried by the fact that a local authority is thinking about flagging out.

Today, a Conservative-run authority is considering that practice but, once it appears to generate savings, there is a danger that even Labour-controlled authorities may think that they should apply the same procedures and consider the savings that could arise simply from changing the flagging-out arrangements of their fleet. That is the kind of distortion that enters the debate when we neglect the need for harmonisation of taxation. That is why I am so keen to have harmonisation of all forms of tax, not only those in this sector.

Those who are in favour of the duty increases tell me that, in France and other parts of the European Union, the Exchequer compensates for the low level of VED because companies use the motorway system, where they have to pay tolls. However, anyone who knows how the freight industry in France works will know that many haulage operators simply do not use the motorways, but drive on the state roads to avoid paying the high tolls. We should be careful about using arguments about hauliers paying motorway tolls to compensate for other forms of taxation. In Italy, hauliers do exactly the same as they do in France. Even with the congestion in the strada nazionale system, most haulage operators use state roads wherever possible to avoid the high motorway toll charges.

I do not know whether the practice is the same in other countries, but the Swiss have an interesting system whereby, when one enters Switzerland, one buys a carnet. I do not know whether it is possible to have such a system in the United Kingdom. Switzerland is, of course, outside the European Union and may, therefore, legally be able to introduce such a charge, but we should perhaps consider a similar system for overseas operators coming to the United Kingdom.

Photo of James Gray James Gray Conservative, North Wiltshire

The hon. Gentleman will be aware that he is describing the Brit disc, which the Conservative party has been proposing for some time. I hope that his Government will now accept our suggestion.

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

I have spent a lot of time politicking in this place and, if there is a good idea, I do not mind from where it cometh, as long as it secures the survival of the haulage industry in the United Kingdom. I am very worried about the results of the Budget and the fuel escalator. I desperately want the escalator brought to an end as it affects commercial vehicles.

I have no problems with the fuel escalator as it affects the private car—and I represent a rural constituency. I do not object to petrol price increases. I believe that, over a period of years, people will switch to smaller vehicles. The incentive that we introduced in the last Budget, by reducing taxation on vehicles of less than 1100 cc, was a very good idea—anything to incentivise the use of smaller vehicles. I am asking for the escalator to be brought to an end, not on petrol, but on diesel fuel for commercial vehicles.

We are repeatedly told that the British road haulage fleet is too large. I believe that to be a fallacious argument. In order to restrict and contain price increases in the commercial haulage business in the United Kingdom, it is necessary to ensure that more vehicles are available than are required—that the fleet is "too large". The moment that the fleet reflects demand, operators will increase prices. The existence of small operators, who have lower costs and who submit lower bids to their manufacturers customers, has a restraining effect on haulage costs in the United Kingdom, ensuring that costs do not increase too fast. Such small companies are in a position to say, "I will do the job for less". That was the case in the years when I was in business. I have been talking today to haulage operators whom I have met; they accept that it remains the case. An oversupply inevitably has implications for inflation.

I am worried about a market where many of the little operators have been driven out of business because they cannot afford to operate. I am worried about a market where supply exactly meets demand, because I believe that, as a result, the large operators will start to jack up their price. Let us have oversupply.

I apologise to my hon. Friend the Economic Secretary for the fact that I had to make this speech, as I am blindly loyal. I have no problems with what we have done in the past year and a half, but this issue will not go away. Next year, when Budget decisions are being taken in the Treasury, I hope and pray that she will argue passionately—I beseech her to do so—that the escalator should not be used against the haulage industry, because it is extremely damaging to constituencies such as mine.

Photo of Mr David Madel Mr David Madel Conservative, South West Bedfordshire

It is a pleasure to follow the hon. Member for Workington (Mr. Campbell-Savours). I appreciate that a great deal of his speech was constituency based; part of mine will be. The only aspect on which I disagreed with him was his opinion that the Government had done a good thing in fixing one of the vehicle excise duty thresholds at 1100 cc. That was the wrong capacity to choose. Older cars of less than 1100 cc do fewer miles per gallon than more modern cars of up to 1400 cc; and, as 1400 cc is recognised by the tax man as a tax point where one pays less or more, it seemed to me that the vehicle excise duty should sensibly have been fixed at 1400 cc—not at 1100 cc, as was suggested.

I am sorry that the Chief Secretary to the Treasury has left because, when he kindly gave way to me, he kept waving a document about the Conservative party's environmental credentials—what we had stood for or not stood for at the election. I will tell the Committee exactly what I stood for.

First, I stood for an increase in the bypass-building programme, on grounds that that would improve the quality of urban air. Secondly, in my constituency we stood for the restoration of the rail link between Dunstable and Luton. So did 80 per cent. of the people in Dunstable who were asked about that in a poll; so did Labour members of South Bedfordshire district council and Labour members of Dunstable town council. The only blockage was the opposition of Labour-controlled Luton council to the reintroduction of the railway. As a result, because the local authorities were not united, we lost the transport package bid. Instead of arguing for the restoration of the railway—the track is all there; it would not cost much—Luton council argued for a busway. That is not nearly as environmentally friendly as the restoration of the railway would be; and when Luton people vote on 6 May, some of them will remember the anti-environment attitude of that Labour council.

I am glad that we are having a full day's debate on this subject, because it gives the Government another chance to sort out their ambivalent attitude to the car industry. Since the Budget, the Government have announced £200 million for Rover at Longbridge, and Ford has announced that a new car will be built at Dagenham. I have no doubt that local Labour MPs around the Longbridge and Dagenham plants are luxuriating in the glow of the good news for employment that two new models will be built at those plants.

However, not all the cars that will be built will be exported. A buoyant home market is necessary to sustain production and demand in those plants and in others throughout the country, and to sustain the many suppliers of the car industry.

As the car industry invests, it constantly improves engines and makes them cleaner. Research on that subject is intensifying. Since 1992, toxic emissions from motor vehicles have decreased by 42 per cent. That is the result of the commitment of the car industry to produce cleaner, more fuel-efficient engines—and that process will continue.

The Government should also use today's debate to sort out their attitude to the considerable increases in car ownership in this country. For instance, more and more women now own cars to get to work. I welcome the huge increase in the number of women who are working. However, they often now work flexi-hours, so the bus will not do. Often they will use a car to get to a training course. The car allows them to exercise maximum choice in school selection—in which the Conservative party believes—so they need a car to get their children to school.

Cars built 10 years ago—provided that they have been properly serviced—are proving durable, and that has opened up a market for young people, who can just about afford a car priced between £1,000 and £;2,000. They need to get to their first job, or to an evening training class. The bus will not do as a substitute for them.

The third strand in the increase in car ownership is pensioners, who are living longer, are in better health and enjoy better pensions, and therefore want to retain their mobility and independence.

Those are very important social trends in car ownership and in life style. Instead of continuing the fuel escalator, the Government should respond positively to what is happening. They should not say blithely, "You can avoid more pollution by getting on the bus." In my view, no amount of smooth and beguiling propaganda can ever make the bus an attractive alternative to the car. I draw attention to two reasons for that.

First, the way in which housing estates have been constructed makes it virtually impossible for the bus to go round the estate to pick up people to go to work, a training course or another activity. Secondly, as I said in my intervention on the Chief Secretary, the road-building programme and the bypass programme have been cut to ribbons by the Government, discouraging the use of buses. One will not get buses out of towns unless the bypasses are built—a process that we had set in train. We had not gone fast enough, but at least we were going in the right direction.

I do not think that people expect revenues from fuel duty to be spent on the continual widening of the motorways and the construction of new motorways. We have come to the end of the motorway building programme, but we are nowhere near the end of the bypass building programme, and I wanted to hear something more positive about that from the Government.

5.30 pm

There comes a time when a tax becomes useless and dangerous. The fuel escalator tax has become useless because the technology, design and thrust of the car industry mean that less fuel is being used. It has become dangerous because of the effect that it is having on the road haulage industry—for all the reasons given by the hon. Member for Workington—and because of its effect on the cost of living and on the competitiveness of this country.

It is time for Labour Members to put constituency before party. They will have received the same representations as us, and many of them represent rural or semi-rural constituencies. My advice to them is, for once, disregard the Whips—do not take any notice of them and join us in the Lobby this evening.

Photo of Eddie McGrady Eddie McGrady Social Democratic and Labour Party, South Down

I want put on record the particular and terrible problems that the increase in the duties on hydrocarbons are causing in Northern Ireland. The Committee may be inclined to switch off when a Northern Ireland Member gets up to say how uniquely difficult a problem is in Northern Ireland, but this problem has a visible, physical uniqueness there and causes disadvantage.

Northern Ireland has the United Kingdom's only land border with another sovereign state—a state with fiscal and customs and excise regimes different from those in the United Kingdom. I draw attention to the fact that there is probably not a single haulage business in Northern Ireland that is more than 50 miles from the border with the Republic of Ireland. In that context, we can best consider the increase in duties over the past number of years by referring to the period between 1990 and 1999. In the Republic of Ireland, there was an increase of 6 per cent. in the duty on unleaded petrol. In Northern Ireland, which is part of the United Kingdom, there was an increase of 242.2 per cent. That is an enormous differential.

The same applies to diesel fuels. In the Republic of Ireland over those 10 years, the duty increased by 14.8 per cent. In Northern Ireland, it increased by 264 per cent. over the same period. Those increases are cumulative and not attributable to any particular Government, but there is a crunch point at which it becomes impossible to trade in such conditions.

I refer the Committee to the enormous increase in smuggling. It is reckoned that a large percentage of wholesale and retail trade in fuels is illegal. Customs and Excise has told us in public statements that it cannot cope, is addressing only a fraction of the problem and catches only a few of the people involved. Let me put the meaning of that smuggling into context. A person who can smuggle 25,000 litres, which is a relatively small amount, can make £4,600 profit on the load. If he is further engaged in illegal activity and does not even pay value added tax, profit can increase to almost £;6,500 per load. Smuggling has a huge attraction for the worst elements in our society, who can make a fast and enormous profit.

Smuggling is one problem that we face, but the legitimate trade also faces the problem of the enormous differential between the customs and excise duties imposed over a 10-year period. We have come to the crunch and businesses are being put out of action completely. Large distributors are trying to hold the line, for a limited time, by reducing prices to their main customers in Northern Ireland. Local oil and fuel distributors cannot do that, so they cannot pass on any comfort or cushion to the petrol retailers, which means that, as we sit here, petrol retailers and small oil distributors are going out of business right along the border—from Donegal to South Down. Northern Ireland is semi-circumscribed by the land border, so everyone is within reasonable reach of cross-border trade and substantially reduced prices, either for bulk purchases or for fuel for individual cars.

In addition, most of Northern Ireland's communities—especially in the border counties—are rural and, except for a line running north to south, we have no railway system whatever. We are totally dependent on the roads system. Small retailers scattered throughout the countryside not only supply petrol, but cater for a substantial number of the household needs of rural communities.

Over and above that, the transport and haulage business is also in danger of being decimated or transferred. People have to transfer their whole operation only 10, 20 or 30 miles, and they are doing so. Businesses are setting up networks—this issue has been referred to in other contributions—not in Europe, but in the Republic of Ireland, 10 miles away across the land border. Those communities are losing all the jobs associated with road haulage and transport companies, with oil and fuel distributors and with local service stations, and they already suffer fairly high levels of unemployment; the continual increase in duties is having a terminal effect on those sectors.

The hon. Member for Workington (Mr. Campbell-Savours) referred to local councils looking elsewhere to buy fuel. Take it from me, the imposition of best value means that Northern Ireland district councils will buy their fuel from across the border—full stop, end of story. Buying across the border is best value, by a long chalk. If it would pay to register vehicles across the border, that could be done quite readily—by the stroke of a pen—without effecting any great administrative change. On top of all that, we have the additional difficulty of the road tax situation. Road tax in Northern Ireland is 11 times greater than that in some of our European counterparts.

It is easy for me to recite our problems—I am conscious that they have been caused over many years by the accumulated burden of customs and excise duties—but I have a suggestion that I hope the Economic Secretary will take on board, if she would care to listen. Our situation is not unique. There are other land borders throughout Europe and I draw her attention to the particular problem of the customs and excise differential between the Netherlands and Germany. A special protocol is in place under which border retailers and distributors receive a special rebate. As one recedes from the international boundary, the rebate decreases. It means that there is a tempering of the differential between the borders of the Netherlands and Germany. That arrangement was put in place by the Dutch and German Governments with the approval of the European Union's competition agency.

Photo of Mr Seamus Mallon Mr Seamus Mallon Social Democratic and Labour Party, Newry and Armagh

May I point to another anomaly? At present, given where we stand politically, we have agreed six cross-border bodies known as "new implementation bodies", and another six areas for enhanced co-operation between north and south. One of the areas is energy, and the objective is to harmonise the relationship between the north of Ireland and the Republic in terms of energy. Is it not contradictory that the Government are to spend £33 million in the first five years to set up those bodies to harmonise areas within the economic life of the island, yet they blink at the type of change that could allow harmonisation to take place to the advantage of people in the north of Ireland?

Photo of Eddie McGrady Eddie McGrady Social Democratic and Labour Party, South Down

I thank my hon. Friend for his intervention, which well illustrates the totality of the problem between the north and the south of Ireland. The people of Ireland, north and south, have agreed to try to rationalise those differentials, particularly in respect of energy production and distribution, as well as fuel costs and transport problems, which is the subject that we are dealing with today.

In replying to the debate, will the Minister undertake to pursue the idea of a protocol, such as that between the Dutch and German Governments, and to see whether it could be applied to the much more difficult and detrimental differential that exists along the border between the Republic of Ireland and Northern Ireland? I ask this as a matter of grave urgency because we cannot wait for another Budget to turn things around. We simply will not survive it. As the smuggling becomes more and more profitable, it will increase and become a substitute for other activities, which we have now peacefully got rid of.

Firms are being transferred and small businesses, retail outlets, and local oil and petrol distributors are falling down commercially. It would be an exaggeration to say that that is happening daily, but it is certainly happening weekly. Ultimately, the suppliers of fuel in Northern Ireland will be those who import it illegally because the legitimate trader and transporter simply cannot survive if he competes in an honest way.

If honest men and women in the transport, distribution and retail industries want to survive commercially and to earn an income for their families, they are being forced into the hands of the illegal dealers. It is the only way in which they can survive and make a profit. In many instances, they are being forced into the hands not just of smugglers—there is a certain romanticism about smugglers in Ireland—but of paramilitaries. That is an entirely different prospect.

It is a layer-upon-layer problem. The paramilitaries are now becoming very interested in that lucrative and safe trade because Customs and Excise has admitted that it cannot deal with it, and it does not seem to have the potential of dealing with it in the foreseeable future. Admittedly, the smugglers' activities are innovative and clever. They will become increasingly innovative and clever as Customs and Excise—or "the Revenue", as it is known—catches up with them.

The fuel differential could at least be addressed if the Minister would take urgent action to see whether a two sovereign states protocol, with the approval of the EU and the legitimacy of equal competition, could be applied to Northern Ireland as a special and difficult case. I hope that the Minister's response will give some comfort to those whose businesses now face a very bleak future.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Treasury) (EMU and the City) 5:45 pm, 27th April 1999

I have been listening to this debate with mounting concern because what was a carefully assembled political consensus in support of environmental taxation appears to be steadily unravelling. It is unravelling in several different ways.

We have heard about the road haulage problem, not merely from Opposition Members, but from the hon. Member for Workington (Mr. Campbell-Savours). We have heard about the problems in respect of petrol duties, especially in rural areas—we have just heard forcefully about that problem in Northern Ireland. In another context, we have seen how the Government have allowed powerful interests within the Confederation of British Industry to drive a coach and horses through their new energy taxation by exempting all the energy-intensive industries. It is a bit like exempting heavy smokers from cigarette duty. We need to ask why that is happening, what can be done to stop it, and what the consequences are.

The Liberal Democrats strongly believe in the principle of environmental taxation, which is an effective way of preserving the environment. It does so in an economically efficient manner, working with the grain of the market. It sends signals to consumers and companies to change their behaviour and their fuels. Those who oppose it have a strong obligation to explain not just how they would replace the revenue, but how they would achieve the environmental objectives. One either abandons the objectives, or one achieves them through regulation. As we heard in the introduction of the Regulations on Small Businesses (Reduction) Bill earlier this afternoon, regulation is a costly way of achieving one's environmental ends. What is the alternative to environmental taxation?

Environmental taxation works. Before this debate, I looked at the model that the Government use—the previous Government also used it—to estimate the impact of taxation changes. I apologise for the technical jargon, but the price elasticity of demand in the model for transport is very high at 0.4. If duties in the transport sector are doubled, within three or four years, usage and pollution are reduced by some 40 per cent., which is a bigger coefficient than for any other part of the economy.

Perhaps the figures need updating—they are certainly not politically driven—but the evidence on which this Government are working, and on which the previous Government worked, suggests that environmental taxation in the transport sector is effective in achieving its objectives.

Photo of James Gray James Gray Conservative, North Wiltshire

The hon. Gentleman claims that the increase in fuel duties over the past few years has resulted in a reduction in road traffic. That is not the case. Road traffic has increased exponentially over recent years despite the increase in petrol duty.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Treasury) (EMU and the City)

The hon. Gentleman is right to say that road traffic has increased, but many factors operate in that respect, including the growth of the economy, which is a counteracting factor. I am sure that the model is technically competent and takes that factor into account. The hon. Gentleman is right to imply that we need constantly to examine the assumption on which we base those calculations, which is why a few years ago, the Treasury Committee asked the Government to report back on the assumptions that they were using. Moreover, I am confident, given the consensus among them, that the technical people who develop those models are correct in believing that environmental taxation works.

So far, we support what the Government have been doing with the escalator. However, we part company with them in our belief that they are letting this political consensus unravel because they are not being careful enough with the politics. We argue strongly that, instead of environmental taxation being used, as it is now, as a milch cow for the Treasury, it should be used in a hypothecated way. The revenues from environmental taxation, particularly of the transport sector, should be more clearly earmarked for public transport and reductions in vehicle excise duty, so that people in the transport sector can see where their tax revenue is going.

Hypothecation is, to some extent, playing tricks with Treasury accounting. It does not raise additional money, but it helps politically to convince people, especially those in rural areas and in the transport industry, that their revenue is being used productively.

Photo of Owen Paterson Owen Paterson Conservative, North Shropshire

I am intrigued by the hon. Gentleman's faith in the Government model. Already in this debate, we have had two examples in Ireland from hon. Members on both sides of the Committee showing that the effect of the escalator is to drive the Northern Irish haulage industry south of the border. What funds will be available to the Government if duties are paid to the Irish Government and not to the British Government?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Treasury) (EMU and the City)

If all petrol and diesel duty were disappearing across the Irish frontier, the hon. Gentleman would be right. I think that he would accept that, with all due respect to the real problems of Northern Ireland, this matter is a little marginal to the United Kingdom economy as a whole.

The hon. Gentleman has prompted me to turn to the specific issue of the diesel escalator and how it operates. There is some confusion. The assumption is that the diesel tax issue is purely about road haulage, but it is not. One of the main problems in the transport sector has been the gradual encroachment of diesels in the car market and all the pollution problems associated with that. That is one of the reasons why the Government were right to attack the disparity between the treatment of diesel and petrol. They have done that in the last two Budgets, and that has corrected an obvious anomaly that made no environmental sense.

The other confusion that has arisen—the discussion of Northern Ireland highlighted this—is that there are two distinct ways in which the competitiveness problem operates. One of them is the smuggling of fuel as a result of a differential in duty rates across a frontier. That has been described in some detail, and I recognise that it is a legitimate problem. It probably operates across the channel and in Ireland.

However, there is a quite different problem for which different solutions are required, and that is the flagging out issue. I suspect that the problem is real, but exaggerated. We have been told for the past two years, especially by Conservative Members, about the horrendous problems of trying to operate businesses on the continent of Europe and the difficulties of payroll taxes, high business taxes and red tape. It is highly improbable that, on the strength of a relatively small but growing differential in duties on diesel, large numbers of British companies will up their roots and relocate in that highly unfriendly business environment.

None the less, let us take these anecdotes at face value and let us assume that this is a real problem. What has been brought out in passing is that there is a solution. The hon. Member for Workington referred to the Swiss carnet, the Conservatives have suggested the Brit tax and there is the vignette: we are all describing the same idea in slightly different language. If such a system were implemented, it would, in large measure, solve the problem of flagging out—although not so much the problem of cross-border smuggling, which is being addressed.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

The hon. Gentleman will recall that the hon. Member for Workington (Mr. Campbell-Savours) had another solution to this problem, which was the harmonisation of taxes. He foresaw that it would be proper to reduce our level of DERV tax to that pertaining on the continent. Does the hon. Gentleman agree with his hon. Friend the Member for Lewes (Mr. Baker)? He said: I think that the Government should concentrate on increasing European Union levels"— of fuel duty— rather than on reducing them here".—[Official Report, 18 March 1999; Vol. 327, c. 1346.]

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Treasury) (EMU and the City)

My hon. Friend the Member for Lewes (Mr. Baker) was right. If there is a move towards harmonisation of duties in this area, it should come from increases in continental Europe.

Another way of dealing with this problem would be to develop àn idea that has already been incorporated in the last two Budgets. The reduction of vehicle excise duties on lorries has been incorporated to a degree, and it could be taken further. A combination of the vignette, a reduction of vehicle excise duties on lorries and whatever voluntary efforts the Europeans make—we cannot persuade them to increase their own duties—would deal these problems.

I suggest that the Europeans would be well advised to raise their own duties because many of the studies that have been done on the transport sector suggest that, even at present rates of the escalator, the social and environmental costs associated with road transport are not being met. A very effective study produced by Oxera, which is an Oxford-based consultancy whose leading consultant was widely used by the previous as well as the present Government, shows the extent to which the social and environmental consequences of road haulage are still not properly captured in the tax system.

One of the points that the study makes effectively is that heavy vehicles destroy the road track. A 40-tonne, five-axle truck apparently—I am not a technical expert—inflicts the same damage on the road system as 10,000 cars. That is a vastly disproportionate cost. Many of the pollution costs are also substantial, some of which, such as particulates, have been touched on. Diesel fuel is the source of 44 per cent. of particulates, and the percentage is growing. About 20 per cent. of the pollution associated with nitrogen originates with diesel, and that is the source of ground level ozone and the associated respiratory problems.

The tax system does not fully capture the large environmental and track use costs related to road haulage.

Photo of John Bercow John Bercow Conservative, Buckingham

I hope that the hon. Gentleman realises the political reverberations that his argument will cause. Is he aware that if he encourages the member states of the European Union to raise their excise duties, they will be doubly encouraged to exhort us to raise our income tax levels?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Treasury) (EMU and the City)

The hon. Gentleman knows perfectly well from previous debates that our approach to European integration does not include a belief that tax harmonisation in Europe is desirable in itself. That is why I did not lay emphasise on that recommendation when it was prompted by the hon. Member for New Forest, West (Mr. Swayne). I would be happy, as I am sure would the road hauliers, if European countries voluntarily moved towards harmonisation of rates at a higher level.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Treasury) (EMU and the City)

May I finish this point, and then I shall happily give way to the hon. Gentleman.

It is fine for the Government to accept the principle of environmental taxation and the escalator, but this sector needs a little bit of joined-up government. I have an example of a recent planning application on the borders of my constituency in south-west London. I am sure that hon. Members have similar examples in their constituencies. A nationalised industry, the Post Office, proposed to relocate its sorting office on a new site that was immediately adjacent to a railway line, the Feltham marshalling yards. Hounslow, the neighbouring planning authority, approved the application not as a rail-based sorting office, but as a road haulage project. There was no use of railways whatever.

I prompted Railtrack to do a study and it suggested that rail use would have been profitable, although not enormously. I and my local council protested to the Secretary of State, and asked him to call in this application specifically to establish how committed the Government were to shifting from road freight to rail. The request was turned down and the project has been approved. It will go ahead as a road haulage project despite the adverse economic and environmental impact that it will have. It is one thing to raise more revenue from the road hauliers, but it is quite another to have an integrated policy that is manifestly lacking in that department. We are less concerned about cross-border smuggling of petrol, although it clearly takes place in Ireland, and about the flagging out problem in relation to petrol. However, there is a different problem. We are all conscious of the fact that large amounts of revenue are being raised without any obvious comeback for the consumer—£1.5 billion has been suggested with regard to the escalator.

6 pm

The hon. Member for Macclesfield (Mr. Winterton) has made some interesting calculations, demonstrating that if petrol duties had been linked to the retail prices index rather than the escalator, there would have been £5 billion less revenue from that source. We are talking about enormous sums, with no obvious return to the motorist. I believe that the Red Book shows a total of £70 million for rural public transport; that is a good gesture, but a very small one.

We suggest that, to maintain what is a diminishing amount of political support for a basically sensible proposal—the escalator on petrol duties—the Government must show more political commitment to channelling their revenues into public transport on the one hand and the reduction of vehicle excise duty on the other, especially duty on smaller cars. Some progress has been made in that direction, but we feel that it could be taken much further.

I want to say a little about the Government's new approach to energy taxation. It does not feature in the clause, but it is important to the debate, because in the long term, it will determine how much environmental taxation is raised from transport and how much is raised from other sectors of the economy. I am very worried—as, I think, are Members of all parties—about the way in which the new tax has been structured. I think that the system has been flawed from the outset, in that it exempts important sectors of the economy that could contribute to the carbon dioxide reduction targets to which the Government attach such importance.

Perhaps most understandably, the household sector is exempted. Such taxation is regressive as it affects households, but there are other ways of dealing with the problem. The Government are not deterred from increasing cigarette duties, for instance. We may understand the Government's reasoning, but the fact remains that they have exempted an important sector of the economy that could have been influenced.

Much less excusably, the Government have exempted energy-intensive industries. I believe that, in years to come, they will be severely questioned about their reasons for introducing a new round of environmental taxation that was so inconsistent and so flawed.

I reiterate my party's support for the principle of environmental taxation and the principle of the escalator, but urge the Government to think more clearly about the opportunities for hypothecating revenue and for offsetting it in other ways, particularly reductions in vehicle excise duty. We are evolving a taxation system involving relatively low taxes on labour and profits in comparison with the rest of the continent, and relatively high taxes on pollution. That balance is right: we should be trying to preserve it, and the Government should be thinking much more carefully about how to reassemble the political consensus in favour of environmental taxation—a consensus that they are in danger of losing.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

One of the most strenuous attacks on clause 2 was made by the right hon. Member for Wells (Mr. Heathcoat-Amory) during last week's Opposition Day debate. In his speech he quoted one of his constituents, a haulier, who had complained to him that any more increases in fuel duty would be the last nail in the coffin".—[Official Report, 21 April 1999; Vol. 329, c. 915.] The question which that prompts is not simply, "Who put in the first nail?", but "Who built the coffin in the first place?". The answer, of course, is that it was the right hon. Member for Wells himself, and his fellow Conservative Ministers, who, when in government, introduced the fuel escalator in 1993—first at 3 per cent., and, in December that year, at 5 per cent.

Hon. Members will note that, while the Opposition have sought to make much of the fact that the Government have raised the escalator in three Budgets in two years, they forgot to point out in debate that it was they who had pioneered the practice. It was during the second Budget speech that the then Chancellor of the Exchequer and now "shadow Leader of the Opposition", the right hon. and learned Member for Rushcliffe (Mr. Clarke), declared: 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."—[0fficial Report, 30 November 1993; Vol. 233, c. 939.]

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

On that note, I willingly give way to the hon. Gentleman.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Does the assumption that the escalator does, indeed, constitute a coffin underlie what the hon. Gentleman has said so far?

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

I concluded the last part of my remarks with the words sailing dangerously near to hypocrisy". I used to work in shipping. It is clear to me from my professional experience that those who sail close to things usually end up with a shipwreck. Certainly, that is what has happened to the Conservative party since this whole misguided campaign began. Its integrity has gone down to Davy Jones's locker, hand in hand with its memory.

It has been argued that the extra 1 per cent. put on the escalator by this Government has made the crucial difference to the industry. I asked the House of Commons Library to provide me with the differential between the cost of diesel today and the cost that would have obtained had the Conservative's 5 per cent. escalator continued on target. The answer was just 4.29p per litre—but that figure relates only to the escalator, and, as hon. Members know, the escalator was on top of inflation. What, then, could the industry have anticipated under the Conservatives had they remained in office?

At the time of the last Conservative Budget, the underlying rate of inflation was 2.7 per cent.; today, under Labour, it is 2.1 per cent. That difference of 0.6 per cent. means that the true differential in the price of diesel between Conservative and Labour would be not 4.29p, but just 1.7p. The party which, during its term of office—according to the Library—imposed an increase totalling a massive 46.6 per cent. has dared to accuse this Government of betraying the road haulage industry over an increase of just 1.7p. If that is betrayal, Goneril and Regan loved their father, Iago never stole a handkerchief, and Brutus was nowhere near Rome on the Ides of March.

My right hon. Friend the Chief Secretary spoke of a balance to be struck between environmental concerns and the industry—

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

I am sure that the hon. Gentleman will take us for an interesting and probably informative excursion through the reasons why the Conservative Government introduced the escalator, but I would like him to answer a question. If we now believe—the hon. Gentleman may say that he does not, of course—the evidence presented by the road haulage industry, and if we believe the evidence presented by a number of our constituents throughout the country that the escalator is causing severe problems, and if they are right in saying that some 26,000 jobs may be lost because of our failure to compete with our European counterparts—

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

No doubt the hon. Gentleman will have an opportunity to make his own speech in due course, but I will deal with the issues that he raised, because they are legitimate and important. Indeed, I was about to do so.

I am confident that my right hon. Friend the Chief Secretary has had an opportunity to read the recommendation of the fourth report of the Select Committee on the Treasury, which says that it would expect the Treasury to evaluate its effect next year"— meaning the effect of the increase in excise duty— and report progress in the next Red Book". I consider that sensible. What I cannot believe is that the party which, for 20 years, folded its arms and muttered the mantra "market forces" as 30 per cent. of British manufacturing industry went into liquidation now affects horror, and demands that the Government save small, uncompetitive road hauliers. What I cannot believe is that the party that stamped on every strike and public demonstration with all the rigour that Norman Tebbit could muster is now cosying up to industry rebels who block the streets of London and prevent the people of London from going about their business. I suppose that it was at least a good Tory demonstration—it was held in Pall Mall, after all.

I cannot believe that the party that has been apoplectic in its opposition to European tax harmonisation is now demanding that the Government should set their fuel duty only after doing an Esso price check at pumps across Europe.

In seeking to strike out clause 2, the Opposition seek to deny the Exchequer £1.5 billion of revenue this year, and a total of £4.7 billion over the next three years. Yet, the Opposition offer no alternative way of raising that revenue. That is not responsible opposition, but opportunism. In this debate, the shadow Chancellor said that he believes that the social security budget should be cut. If that is so, where is his amendment to that effect? What is his proposal? What would he cut—pensions, or disabled people's benefits? A responsible Opposition would come clean and state how they would cover that revenue shortfall, or what spending they would cut.

I turn now to the fundamental question. For what purpose was the fuel duty escalator introduced? I hope that I may now be able to answer the question of the hon. Member for Witney (Mr. Woodward). In 1993, the Conservatives introduced the tax precisely to change behaviour—the behaviour of transporting goods by road haulage. Did they think that they could do that without any road hauliers going out of business? Of course not; that was the policy's objective. There is a logic in that that even Janus could not deny. If one raises duty to discourage road freight, one aims inevitably and precisely to put road hauliers out of business. To protest when that policy begins to work is not only madness but hypocrisy.

The final hypocrisy is that the policy was introduced to meet the United Kingdom's emissions targets. When it came to signing the Kyoto resolution, the Opposition supported the Government on those targets.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

Sit down; this is a serious debate.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

No; I shall not take any further interventions.

Conservative Members' worst hypocrisy is to have supported us—as they did—when we signed the Kyoto targets, and to have agreed that the fuel escalator policy was designed to take freight off the roads, but now to cosy up to the road haulage industry, at the expense of our children's future.

Photo of James Gray James Gray Conservative, North Wiltshire

I am very pleased to contribute to this important debate. As many hon. Members are keen to contribute to it, I shall keep my remarks as short as I possibly can.

Until I heard the speech of the hon. Member for Brent, North (Mr. Gardiner), I thought that I should be speaking on very much the winning side of the debate, as—apart from the rather limp speech of the Chief Secretary to the Treasury—all the other speeches by Labour Members, in their own little way, opposed the escalator.

I am happy also to follow the hon. Member for Twickenham (Dr. Cable). His speech has prompted Conservative Members to start drafting our press notices, and showed the Liberal Democrats in their true light, as the high-taxation party. My constituents in North Wiltshire shall be extremely interested, tomorrow, to read his remarks in Hansard.

It is rather nice to follow the speech of the hon. Member for Brent, North—who is an ambitious fellow, and has done his very best to support Government Front Benchers. He is probably one of the very few Labour Back Benchers who would do so. However, I suspect that the hon. Member for Workington (Mr. Campbell-Savours) probably more realistically and accurately represents Labour views on the issue than he does. Nevertheless, as the hon. Member for Harrow, East (Mr. McNulty) demonstrates, there are always plenty of Labour Members who are ready to be sufficiently sycophantic to support Ministers on any proposal, regardless of how controversial and unpopular it may be. 6.15 pm

The hon. Member for Twickenham was, for two reasons, incorrect when he praised the escalator as an environmental tax. First, there is plenty of empirical evidence to show that there is absolutely no remaining elasticity in road usage. Over some years, as has so frequently been pointed out by Labour Members, the fuel price has increased exponentially—but so has road usage, which has increased much more than the fuel price.

Most observers would accept that there is no relationship between the fuel price and the amount of road usage. Most fuel is used by, for example, company car drivers, who have to drive their mileage. A travelling salesman will not say, "I'm not going to go to the north of Scotland today, because they've raised the petrol price by 6 per cent." Therefore, elasticity is extremely limited. Unless one increased the petrol price by a gigantic amount—doubling or trebling it, which, as I shall contend later in my speech, may be precisely what the Government have in mind—or went to other such extreme lengths, it is extremely unlikely that, over the years, road usage will decrease.

The hon. Member for Twickenham was wrong in his description of the escalator as an environmental tax for a second cogent reason: environmental taxation works, by definition, only if it discourages certain types of activity. One levies an environmental tax because one is saying to people, "That is an undesirable type of activity, and we don't want you to do it." Therefore, if the tax works, over the years, the Treasury's tax take will decrease. A successful environmental tax prevents people from doing something that is undesirable in the eyes of the law.

The Red Book, however, states that the net tax take from the escalator will increase annually. Over the years, the escalator tax take has increased, demonstrating that—whatever else it may be—it is definitely not an environmental tax. It was designed to increase, not decrease, the amount of revenue that the Treasury takes. Only if the Red Book were to contain figures showing a downward spiral in the net take from the escalator would we be able to accept that it was an environmental tax.

A variety of my hon. Friends have already described the appalling damage that the escalator would do to a variety of activities, and we have heard several constituency examples of its effect on hauliers. I should like to add an example from my own constituency—from C and H (Hauliers) Ltd. of Nettleton near Chippenham, in Wiltshire, from whom I received a letter this morning. It states: The 11 per cent. increase in diesel duty now means that my foreign competitors can fill their trucks for half the cost to me. It is interesting that the Economic Secretary to the Treasury fully supports the tax. Perhaps that may be because of a quotation that I discovered recently. When asked by haulier Mr. Bob Stewart what a 38-tonne heavy goods vehicle might achieve in miles per gallon, the hon. Lady replied: Well, I would imagine 45 miles per gallon; that's what my car does". It may be that the hon. Lady started from quite the wrong premise. She should know that the average truck does 7.5 miles per gallon—some one seventh of what her car does. If she calculated her figures in the recent Budget on the basis of her car, at 45 miles per gallon, I suggest that this may be an opportunity to re-examine the figures, and to go back to hauliers and say, "I'm awfully sorry; we understand what went wrong."

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I wonder if the hon. Gentleman was making a similar statistical error when he mentioned the lower price elasticity of demand for petrol. Perhaps he uses his car quite a lot and will not use it any less if the fuel price rises. However, before the debate, I took the precaution of checking on the matter with the Library, and that information indicates that the elasticity of demand is quite high. Customs and Excise estimates that a 1 per cent. increase in the price of petrol will lead to a 0.272 per cent. fall in consumption. That would be equivalent to reducing carbon dioxide by 5 million tonnes—

The First Deputy Chairman:

Order. I must remind the Committee that interventions must be brief.

Photo of James Gray James Gray Conservative, North Wiltshire

I am grateful to you, Mr. Martin.

I am also grateful for the lies, damned lies and statistics offered from across the Chamber. There are, of course, a million different ways of cutting that particular piece of cake, but in recent years—since the 1950s or 1960s—the price of petrol has increased by far more than the rate of inflation, yet during that time road usage has increased even more. That demonstrates that there is hardly any relationship between the price of petrol and the use of the roads. If there were, road usage would presumably have declined in recent years, and anybody who walks along the streets of London can see that that has not happened.

The hon. Member for Wimbledon (Mr. Casale) wondered whether I might be able to use my car more or less according to the price of petrol. That shows where he comes from. He speaks as an urban Member, interested only in urban people—his constituents, who can always jump on to a bus or a train. He was right to draw attention to the fact that my constituents in the country could not reduce their car use even if they wished to.

Even if petrol cost £100 a gallon, my constituents, such as the old people who live in my village or the farmers who live down 10-mile drives, would still need their cars to get to the shops or to get their children to school, irrespective of the cost. The hon. Gentleman is right to say that country dwellers such as those whom I represent could not use their cars much less, but would be severely damaged by a continued increase in the escalator.

Here is one more quotation from the road haulage industry. A letter from Brian Yeardley Continental Ltd. says: Buying Diesel in the UK our company would spend at least £1,057,000 more annually than our competitors abroad". It was interesting to hear the hon. Member for South Down (Mr. McGrady), talking about petrol and diesel being smuggled across the Irish border. I saw that myself when I was in South Armagh recently with the armed forces parliamentary scheme. Through telescopes we watched huge petrol lorries crossing the border, entirely unchecked by the police or the Army. Such' operations form a significant part of the activity of the IRA.

What similar activities shall we soon see in Calais? In that case it would not be smuggling, but if someone wants to take his lorry from Dover to Aberdeen and back, he does not have to fill it up in Dover. He can fill it up in Calais, before it crosses the channel—and the operators have made it perfectly plain that that is what they will do. The Road Haulage Association is giving out something called the flagging out pack, which gives advice on how to do that and save enormous sums, not only on diesel but on VAT. I realise that VAT is not the subject of the clause, but it does parallel damage.

Let us compare what the haulage industry is telling us with what the Minister of Transport is quoted as having said recently—a telling quotation, that shows us where the Budget comes from and what the Government are thinking: UK operators do not suffer from any serious disadvantage over foreign competitors". Presumably that is why tens of thousands of them are blocking our streets—because they do not suffer from any disadvantage, and are perfectly happy to pay whatever the Government want them to pay for diesel. That is unbelievable, astonishing nonsense. It is amazing that the Minister responsible for transport should be able to stand up and say such a thing.

There is another aspect of the debate that I, as a member of the Select Committee on Environment, Transport and Regional Affairs, with a keen interest in environmental matters, find worrying. The argument has been advanced, both in the debate and in Treasury papers, that the purpose of the escalator is environmental. The Government say that it is nothing to do with income, or even with schools and hospitals, apart from as a small postscript. Apparently, the main reason why they want to keep the escalator going is to achieve their Kyoto targets.

In his rather limp opening remarks, the Chief Secretary said something like, "We are determined to achieve Kyoto. We haven't yet achieved it, but the Conservatives have shown that they are no longer signed up to it." He was wrong, for several reasons.

Anybody who knows anything about the Kyoto targets knows that we are already close to achieving the 12.5 per cent. reduction for which we signed up. Nothing further was needed in the Budget. To all intents and purposes, the target has been achieved, although that had nothing to do with cars and vehicles, but was a result of the dash for gas.

Photo of James Gray James Gray Conservative, North Wiltshire

The hon. Gentleman may shake his head, but according to the current figures, about 10.5 or 10.75 per cent. has already been achieved. We have nearly another 2 per cent. to go, but most people estimate that that will easily be achieved. That is why the Labour party, and the Deputy Prime Minister in particular, have said that 12.5 per cent. can easily be achieved, and that we are determined to aim for 20 per cent.

The 12.5 per cent. reduction can be achieved without the escalator. We do not need it, so the straightforward hypocrisy of the Government becomes plain. They say that we are trying to save the planet and achieve our Kyoto targets, although any environmentally aware observer knows that the British target is already within sight.

The fuel duty escalator merely masquerades as an environmental tax. Indeed, many of the environmental taxes now being discussed by the Economic Secretary to the Treasury will also be merely masquerading. The Government should be straightforward and say "We need more money, so we are going to do this, that and the other." It is disgraceful for them to dress their taxes up as environmentally beneficial.

The Government have made great play of the fact that the Conservatives introduced the escalator. They are right; we did. However, one gets on an escalator because one is on the ground floor. We were on the ground floor then; we had a huge carbon dioxide emission problem and our petrol price was one of the lowest in the world. We got on the escalator, and it was supposed to clock up increases for two or three years, until 2000.

However, nobody in his right mind gets on an escalator to stay on it for ever. It was astonishing to hear the Minister say that he expected the 6 per cent. escalator to continue for ever. One of my hon. Friends has already pointed out that, in that case, the price of petrol will have doubled in 10 years. My maths is not up to working out what the percentage increase will be after that.

The Minister talked as if the escalator would go on for ever, through the roof. We have continually challenged him to deny that, but he continues to talk in those terms. We would have got off the escalator when we got to the top, which by our own predictions would have been in 2000—this financial year.

Photo of Chris Leslie Chris Leslie Labour, Shipley

Will the hon. Gentleman define exactly what the image of getting off the escalator means? Is he saying that fuel duty should be frozen now?

Photo of James Gray James Gray Conservative, North Wiltshire

Of course not; I am saying that we should get off the escalator now. In other words, broadly speaking, fuel duty should rise in line with inflation. That is, broadly speaking, the approach—[HoN. MEMBERS: "Is that party policy?"] It is right that our Treasury Front-Bench spokesmen should be cautious in their approach to such matters, but I speak from the Back Benches, and I am happy to call for such a freeze even without any form of endorsement from my Front Bench colleagues. None the less, they have made it plain that they oppose the escalator this year.

Hon. Members can take it from me that because the Conservative party cares about the freight industry and about rural drivers, when we are in government in three years' time there will be enormous pressure from Conservative Members against our returning to the escalator.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

The problem that I have with the Conservatives' current claim to care is that in 1992 the Conservative party campaigned against the idea of a fuel duty escalator but then proceeded to implement one.

Photo of James Gray James Gray Conservative, North Wiltshire

The hon. Gentleman has found some conflicting evidence. All day we have been told that we were committed to the escalator in 1992-94, but the hon. Gentleman has apparently discovered a commitment by us to get off it. I am delighted to hear about it, because that is what I propose. Perhaps our policy has taken several years to implement.

Photo of James Gray James Gray Conservative, North Wiltshire

I have already dealt with the hon. Gentleman's point. I must not become flippant, because this is an important subject. Of course we were committed to the escalator once, but then we introduced it and it did its job. The fact that we so wholeheartedly supported the Kyoto commitments, and the fact that the United Kingdom is near to achieving them, is testimony to what the escalator has done.

By contrast, the Labour Government came into power saying that there would be no new taxation. In retrospect they say, "What we meant was that we wouldn't change the base rate of income tax." Even so, they were happy to abolish the 20 per cent. rate of income tax without the fact being announced in the Budget speech. None the less, the claim was, "No new taxation." Well, if that was told to the rural drivers in Chippenham and to the heavy goods vehicle drivers in my constituency, the sound of laughter would be heard all the way from north Wiltshire.

Drivers in Scotland especially will pay the price. I spent last weekend campaigning in the country where I was born, brought up and educated. This is a huge issue in my native land. Hauliers in the north of Scotland have a greater problem than anyone, because they have so much further to go. The road fuel escalator problem will be a huge matter in the run-up to 6 May, both in the elections for the Scottish Parliament and in the local government elections south of the border. If we have our way, the Government will pay the price for this disgraceful tax.

Photo of Derek Twigg Derek Twigg Labour, Halton 6:30 pm, 27th April 1999

In his speech earlier, the shadow Chancellor spoke about stealth taxes and said that the Government were not open about what they were doing. However, it is interesting to look at the Conservative manifesto for the 1992 general election. It is hard reading, but I managed to get through it. It makes no mention of the fuel duty escalator, nor of the 22 taxes that the Conservative Government subsequently introduced. That is worth noting.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

The hon. Member for North Wiltshire (Mr. Gray) did not seem to understand the point that I made earlier. Not only did the 1992 Conservative manifesto not mention the fuel duty escalator, but on the street the party campaigned against it. The Conservatives said at the time that they would not get on the escalator but, once they were elected, they were happy to do so.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

And look what happened to them.

Photo of Derek Twigg Derek Twigg Labour, Halton

I am grateful to the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) for clarification of the point that he made earlier, which I now understand completely.

It is interesting that no Conservative Members have tabled an amendment to the clause, perhaps because no one knows what amendment the different wings of the party might support. The safer option has been chosen—simply to vote against the clause standing part of the Bill. I do not know to which wing of the Conservative party the shadow Chancellor belongs on this matter.

It is easy to get the impression, from this debate, that the fuel duty escalator did not exist under the Tory Government, that petrol tax was never increased, and that the road fund licence did not go up. One would think that it was a different world for road users only a couple of years ago. However, the record shows that the escalator was introduced by the Tories. The right hon. Member for Wells (Mr. Heathcoat-Amory), the former Paymaster General, told the House on 23 January 1995: I know that a car is often a necessity, but all motorists must think about the environmental consequences of what they do. He went on to say that petrol and fuel costs are but one component in the budgets of those who live in rural areas. Plenty of other things are cheaper in rural areas … 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"—[Official Report, 23 January 1995; Vol. 253, c. 103-04.] The shadow Chancellor seemed to suggest that in some way what the Government are doing is causing job losses and people to lose their houses. He omitted to say that, under Tory tax and economic policies, there was record homelessness, and that record numbers of people lost their houses and were thrown out of work. In addition, 5,000 haulage companies went out of business.

Conservative Members seem to want to pretend that the slate is clean and that nothing happened under the Tory Government. The shadow Chancellor said that the Conservative party opposes the escalator for now, and the hon. Member for North Wiltshire (Mr. Gray) said that it would oppose the escalator this year. When I asked whether the Conservative party would support the fuel duty escalator at any time in the future or whether it would be ruled out in the party's next election manifesto, I received no answer.

That says a lot about the Conservative party, which cannot be trusted on these matters. Perhaps we will explore that in greater detail as the debate progresses.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

Will the hon. Gentleman say whether he will fight the next election on a commitment to keep the escalator, or to drop it?

Photo of Derek Twigg Derek Twigg Labour, Halton

Our policy is clear, and was presented in the Budget. Conservative Members will not make a statement about their party's intentions. As usual, they try to hide instead, but that is the difference between us.

Various leaflets from the Automobile Association and other sources have presented a breakdown of each £10 spent on fuel. Of that total, £8.50 is accounted for in tax, but £7.70 of that was imposed by the previous Tory Government two years ago. This Government have introduced an increase in the fuel duty escalator of 7p a litre, but the increase under the previous Government was 26p.

Photo of Derek Twigg Derek Twigg Labour, Halton

In a moment. I want to make some progress.

The figures that I have quoted show a clear difference between the actions of this Government and their predecessor. As I said earlier, 5,000 hauliers went out of business under the Tory Government, but I have yet to hear any apology for that from Conservative Members. They seem to have forgotten totally all the people who have lost businesses, houses or jobs, and the effect that those losses had on the economy. A balance must be struck between road haulage and the environment. Clearly, lorries and heavy goods vehicles have a greater impact on the environment than cars. Lorry usage on motorways and roads causes a disproportionate amount of damage, and that problem must be tackled. Many people complain about the number of lorries on our roads, and any Government must deal with that.

Mr. Burney:

Does the hon. Gentleman have any rural constituents? If so, is he trying to tell the Committee that none of them has written to complain about this disgraceful hike in petrol duty?

Photo of Derek Twigg Derek Twigg Labour, Halton

Hale village is the only rural area in my constituency. People who live there have welcomed the Government's integrated transport policy, which will mean that buses will go to villages such as Hale on a more regular basis. Under the previous Government, those services did not exist. That is the main concern: certainly, no one from Hale has written to me about the increase in fuel duties. I hope that that answers the hon. Gentleman's question.

Also conspicuous by its absence today is any condemnation by Tory Members of the terrible effects of the recent disruption by lorry drivers of various towns and cities around the country. That disruption caused snarl-ups on many roads and had terrible effects on people's ability to get to work or go about their business. I have not heard any Conservative Member condemn the action, although perhaps one of them will do so today.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

I am grateful to the hon. Gentleman for giving way to me again. Is he on the point of condemning strike action in the public services, which is clearly the logic of his argument?

Photo of Derek Twigg Derek Twigg Labour, Halton

I gave Conservative Members an opportunity to condemn the actions of the lorry drivers, but none has taken advantage of it. It may be that they support that action.

Photo of Owen Paterson Owen Paterson Conservative, North Shropshire

I have spoken about this issue since July and at every public meeting I have made it clear that it is not in the lorry drivers' interests to disrupt the public just when the public are being convinced that the drivers' cause is a good one. Does the hon. Gentleman have any evidence that one essential load has not been carried because of the fuel escalator?

Photo of Derek Twigg Derek Twigg Labour, Halton

It is interesting to see the split developing between hon. Members on the Opposition Front and Back Benches. That might be a symptom of the machinations of the past few days that we have read about in the press. One wonders what is the real view of the Conservative party, but we may get some interesting comments later.

Photo of Owen Paterson Owen Paterson Conservative, North Shropshire

I thank the hon. Gentleman for giving way again, but he has specifically invited interventions from Conservative Members. I hope that he will answer the question that I asked a moment ago: can he give any evidence that the escalator has reduced the carriage of freight? Have any essential loads not been carried because of it?

Photo of Derek Twigg Derek Twigg Labour, Halton

I find that point astonishing because it was the Conservatives who introduced the escalator and carried on increasing it. The hon. Gentleman might ask himself his rhetorical question after he has had a look into history.

There are interesting questions around the subject of lorries and freight movements. Over the past six to 12 months I have held discussions with representatives of large multinational companies in my constituency about whether freight can be moved off the roads and on to rail. One point often raised is the marginal cost of that decision. For example, it would be difficult in the case of 44-tonne lorries.

The decision is marginal, but the companies have strong views on how they can improve their commitment to the environment, and they want to consider the switch. One company is still going down that road, but another felt unable to make a case for transferring freight to rail. The interesting points raised emphasise the importance of the Government's case.

We want a strong haulage industry that employs people. However, we must ask how we can put more freight on to rail by making it a better business proposition for companies. That is a particular issue in my area where chemical industries such as ICI, Albright and Wilson, and Elf Atochem are discussing whether they can develop a rail head for freight. Many dangerous chemicals are transported by road, and the companies argue that it would be environmentally safer if more could be moved by rail.

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

There is an easy way to move freight off roads and on to rail. All we have to do is run a policy for cheap rail freight. Immediately, huge volumes of freight would transfer.

Photo of Derek Twigg Derek Twigg Labour, Halton

I am grateful to my hon. Friend for that intervention. We can consider several options for creating incentives to move freight to rail, but we must make it competitive for businesses to do so. The Government have made clear commitments on public transport and on moving more freight by rail. Most people would support those policies.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

Rail freight is attractive and preferable, but the hon. Gentleman must realise that since Lord Beeching, in vast tracts of Scotland, such as my constituency, rail freight is not an option because there is not even a railway line.

Photo of Derek Twigg Derek Twigg Labour, Halton

Many years of Tory Government are responsible for most of that. I do not know West Aberdeenshire and Kincardine very well, but in my area, with the Mersey and Liverpool docks, the Manchester ship canal, the west coast line and rail links to Wales and Holyhead, freight is an attractive option. The hon. Gentleman will accept that I cannot talk for every part of the country.

Whatever happens, companies in the haulage industry will face some difficulties. There are questions of competitiveness and efficiency, and there will always be some shake-out or change. However, in response to the point that there has been no consultation on the clause, I must say that the Government have set up a forum with the haulage industry. Last week, my right hon. Friend the Minister of Transport said: It is not I who maintain that the road haulage forum is constructive. Let me quote the Freight Transport Association after the first meeting, which stated that it was 'very impressed and encouraged by the will, intent and urgency of the forum to get to grips with our industry's problems without delay'."—[Official Report, 21 April 1999; Vol. 329, c. 964.] In spite of reservations raised by the Conservatives and others, the Government have made a clear commitment. They are listening to the hauliers with whom they are holding a dialogue. The Government should be supported for that.

6.45 pm

One further problem must be addressed. The Conservative party has not offered any alternative with which to fill the funding gap if the escalator were abolished. That is often the case with the Conservatives of course. Perhaps they would cut social security, benefit for disabled people, education or investment in public transport. Who knows? The Conservatives have not said, and that says much about them. They have no policy, but the Government do have a policy and that policy will succeed in the best interests of the country.

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

I shall concentrate on some important points. We are dealing with a vital subject that affects all walks of life in our economy. The hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) has mentioned the lack of availability of public transport links in his constituency, and my neighbouring constituency is similarly large and rural.

We should begin with some history of the fuel duty escalator, which was introduced by the Conservatives in 1993 at 3 per cent. It was subsequently increased to 5 per cent., and the Chancellor has increased it to 6 per cent. above inflation. We are not, we should recall, dealing with the matter as a one-off issue: this is the third time that I, a Member elected in 1997, have dealt with it under a Labour Government.

It is not unrealistic to expect that by the end of this Parliament a gallon of petrol will cost £4.30, and a gallon of diesel £4.35. When we consider those costs, we can clearly see the difference they make to the working of the economy and to the increased cost base affecting many of our constituents and the businesses that employ them.

It is ironic that we are considering spiralling fuel costs at a time when this country—particularly Scotland—is producing oil. We are an oil-producing country, but we have some of the highest petrol prices in Europe. The rate at which prices have increased, and their levels in comparison with those of several of our European competitors, are important issues.

I shall concentrate on what I consider to be the real impact of the fuel duty escalator in four specific areas. First, it affects employment. The Freight Transport Association has supplied several Members with estimates of the impact that it considers the escalator will have on employment. It suggests that more than 50,000 jobs could be at risk as a result of the resulting increase in business costs.

We have already heard of the danger of haulage companies deciding to up sticks from the United Kingdom to find alternative bases in Europe. From my political position, I find that argument fascinating. I am often told, particularly at the moment by Labour Members, that the possibility of constitutional change may mean businesses automatically leaving Scotland. Yet I hear from Ministers that there is absolutely no way in which the application of punitive fuel duty escalators will mean that businesses will want to leave the United Kingdom for other parts of Europe. That is a curiously contradictory argument.

Secondly, the escalator will have an impact on the cost of services. In large rural areas such as the constituency that I represent, every walk of life is affected by increases in fuel costs. It hits the cost of goods put on the shelves of local shops with fragile budgets in isolated areas. It impacts on the costs that local authorities have to bear to provide home help services and other care support in rural areas. The cost of all aspects of services will increase. The burden does not fall only on shopkeepers who are trying to sustain businesses in fragile areas but on local authorities that are already wrestling with enormous pressures on their budgets while continuing to extend and broaden the services provided to vulnerable people.

Photo of Chris Leslie Chris Leslie Labour, Shipley

How much revenue would be forgone to Scottish public services if the fuel duty escalator was not kept?

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

I can divide the figure in the Red Book to make a calculation about the Scottish economy, but the Government must get their lines of argument correct. I have listened for a good few hours, albeit with a time-out to make some telephone calls, to Ministers saying that this is all about environmental targets. Either it is about money or the environment; it cannot be both or either as it suits them. We have become terribly familiar with that characteristic under this Government.

The third area on which the fuel duty escalator impacts is infrastructure, on which I have some sympathy with the hon. Member for Twickenham (Dr. Cable). He said that the collapse of the political consensus on the issue came about partly because road users did not feel that the penalty of the fuel duty escalator flowed through into investment in infrastructure. That is a fair point. People who are almost dependent on roads, particularly in rural areas, do not feel that infrastructure is being improved enough. When we try even to secure modest road improvements in Scotland, there seems to be paralysis in the Scottish Office in determining where they will be made. Those issues directly affect our communities.

Finally, there is the question of rural communities. I have considered the impact on jobs and service provision but we must also consider the matter in terms of the purpose of the Government's measures. If they are designed to reduce car and lorry usage and the volume of traffic—I accept that that is a possible Government motive—we must consider how realistic it is to expect such a change of road use pattern. In most of my constituency, people who want to be employed somewhere five, 10 or 20 miles away could not sustain such jobs using public transport; it would at least be very difficult.

The Government have made much of their measures to try to compensate for the disadvantages of rural areas, such as the rural transport fund. Its resources were enhanced by the Chancellor in his March Budget statement. Given the nature of my constituency, I was keenly interested in how the fund would work and what impact it would have there. I thought that it might have been a genuine attempt by the Government to mollify some of the harsher effects of their policy. To my horror, I found that in my large rural constituency in Scotland, only three petrol stations would be eligible for assistance. One has already gone out of business, so we are down to two. In vast areas, the supply of petrol is doubtful. I doubt whether the Government's measures will make much difference. If the Government want to deliver their objectives on fuel usage and the impact on the environment, they must recognise that a stronger and more sophisticated public transport system is the key, not penalising road users for whom fuel is essential.

Debates such as this are always better informed by real experience. Two cases have come to my attention, one from within my constituency, one from without. Last week, I visited Bellwood Nurseries, an interesting company near the town of Alyth that supplies mature trees for landscaping contracts throughout the United Kingdom and western Europe. It is trying to make its way in the world through the great commitment of its management and staff. It estimates that its haulage costs will increase by about £10,000 because of the application of the fuel duty escalator. It would break commercial confidentiality if I told the Committee the proportion of its profits involved, but it is a substantial aspect of its cost base. Into the bargain, the most competitive company in the provision of haulage services to Bellwood Nurseries is leaving the Scottish economy to relocate to Calais. Bellwood Nurseries will have to procure alternative, more expensive haulage services on top of already higher costs as a result of the fuel duty escalator. That is a double whammy of rising fuel costs and the demise of a competitive haulage sector.

I have mentioned the example from outwith my constituency before. Norfrost in Caithness is a successful refrigeration equipment company. It transports its products across the United Kingdom and Europe and is heavily dependent on road haulage. It is increasingly trying to diversify into a broader range of freight transport services by using rail. It finds the support that it is being given for that positive. It estimates that the fuel duty escalator will add £100,000 to its annual running costs, a severe competitive disadvantage.

I met some hauliers earlier this afternoon. One mentioned a haulage company in Scotland that is registering its vehicles in the Republic of Ireland and having its MOTs done there to save £4,000 per vehicle in registration costs. I have not had a chance to consider that closely this afternoon, but the numbers are alarming.

The Chief Secretary's argument, which I am sure that we will hear again from the Economic Secretary, stressed the environment and the protection given to rural areas. He also said how supportive the Government were of the road haulage industry. I was therefore surprised to read in the newspapers the other day the refreshing candour of one of Labour's candidates for the Scottish Parliament, Mr. Jim Stevens, who is standing for the constituency represented in Westminster by my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Morgan). Mr. Stevens labelled the fuel duty escalator a poll tax on wheels". He said that rural voters were "seeing through" the Government's argument and that compensation in the form of rural transport services amounted to nothing. He said: That becomes irrelevant in an area like Galloway where people have little alternative to the car and where there is no public transport.Fuel price rises of this order hit people in rural areas, especially the poor, hard and much harder than people in urban areas. The tax is regressive because it hits poor people as much as it hits rich people.And it is a double whammy because petrol companies subsidise prices in urban areas which runs totally against Government environmental policy aimed at reducing car pollution in cities.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

The hon. Gentleman makes an important point. The case is even stronger, because such taxes hit poor people harder than wealthy people. People who drive elderly cars do not have the fuel efficiency that the Economic Secretary enjoys and will suffer more.

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

That is a fair point. Poor people who live in isolated parts of my rural constituency will not make 50 or 60-mile round trips to cities to buy supermarket priced petrol, from which people who can afford to do weekly or monthly shops benefit.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Does the hon. Gentleman believe that it is the Government's plan to tax the poor more heavily as a means of encouraging them to become richer?

7 pm

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

The hon. Gentleman is more able to penetrate the deepest thinking of the Government and their bizarre notions than me. The escalator is certainly a tax on the poor, as Labour candidate for the Scottish Parliament seat of Galloway and Upper Nithsdale said very effectively in that newspaper article. I am sure that it has not escaped the notice of my hon. Friend the Member for Galloway and Upper Nithsdale whom I am delighted to see here from the campaign trail.

Just after the Budget, a rather indiscreet remark was made by Lord Sewel, the Minister with responsibility for agriculture and fisheries in Scotland. It was a fascinating example of the rebuttal machine of the Labour Government coming into play quickly. He said in a casual moment that in applying the fuel duty escalator the Government had underestimated the ferocity of the reaction and misjudged the public mood. I can trace only one newspaper in which that comment managed to reach the surface, after it was expunged from any possible recollection by anyone else. His comment gave the game away.

I intervened in the Chief Secretary's speech to ask him to clarify the status of an article that appeared in The Daily Telegraph on Saturday, which suggested that the Government had been chastened by the reaction to the fuel duty escalator and were in the process of giving a commitment that it would not be applied in the future. The Chief Secretary referred me to the Red Book, which confirms that it will be applied for the remainder of this Parliament. Obviously, this is a matter of enormous significance. We need clarity about the Government's intentions. It is bad enough having to face the effects of the escalator in this Budget. If we can, as a result of the enormous pressure applied by various sectors, manage to constrain the Government's use of it in the future, that would at least be of some benefit to those who are hard pressed.

The article in The Daily Telegraph cited ministerial sources as the origin of the story about the Government's U-turn. I find it fascinating that it commented on the ferocity of the campaign against the escalator that has been waged in Scotland, to which the hon. Member for North Wiltshire (Mr. Gray) referred, and to the activities of my party in raising the issue during the Scottish election campaign. I hope that the Economic Secretary will be able to clarify the Government's position and announce tonight that the Government will step back from that punitive taxation on the poor and rural communities of Scotland and other parts of the United Kingdom.

Photo of Margaret Ewing Margaret Ewing Scottish National Party, Moray

Has my hon. Friend noticed that there is not a single Labour Member representing a Scottish constituency present on the Government Benches?

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

I am grateful to my hon. Friend for pointing out that piece of information.

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

It is shocking, but not exactly surprising. I shall be interested to look at the voting record for the Division at 10 o'clock this evening, or whenever it is, to see into which Lobby Labour Members who represent rural constituencies such as mine trooped. It will be fascinating to see what all the huff and puff about rural transport amounts to when it comes to their putting their vote where their mouth is.

The road fuel duty escalator is doing enormous damage to the Scottish economy and the rural economy. It is shortsighted and uncompetitive and the Government should listen carefully to the strong representations that have been made not only by Opposition Members but convincingly by Labour Members.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

The—[HoN. MEMBERS: "Hear, hear."]. I am delighted to receive that badge of recognition and warm support from my colleagues.

The haulage industry, like much of the countryside, believes that it is under attack from the Government. There is no question about that. We can debate at length whether it is really under attack from the Government, but it certainly believes that it is under attack. The industry also believes that it is under attack from the Minister. It rings a bit hollow with hauliers in my constituency when they are told that a forum is being set up after the event. After all this has been done, a forum is being set up to discuss why it has been done. It is not a forum for discussion or a consultative group to plan the best way of dealing with the issue before the tax is increased. It a forum to try to pacify the industry after the tax is increased. That is what it amounts to. We welcome the forum because it is better than nothing, but how much better it would have been if the Government had shown an honest commitment to the countryside and the haulage industry by setting up a forum before the measure was introduced.

Mr. Deputy Speaker—I am sorry, Mr. Butterfill, I was promoting you for a moment. The anger and bitterness in the industry is well summarised by a letter that I received from a small haulier in my constituency, Healey Transport of Pinchbeck in South Holland. I read the letter with deep concern, as I am sure that the whole House will receive it. Mr. Healey said: These outrageous taxes are severely damaging businesses like mine in your constituency. I did not take that at face value. Being a diligent Member of the House, I wanted to examine that claim in greater detail, so I telephoned Mr. Healey to ask him some questions and to justify his assertion. He told me that his £800,000 turnover business was suffering an increase of £25,000 per annum as a result of the escalator. That is £25,000 in additional overheads for a small business. Those of us who have been in business appreciate just how significant that is in annual terms for such a business. It will undoubtedly push some businesses such as Mr. Healey's to the brink of disaster. It will certainly mean that they cannot expand.

We heard, however, from the Chief Secretary that haulage businesses needed to reinvest to improve their fleet and make their vehicles more fuel-efficient and environmentally friendly. Do the Government not realise that the only way in which companies will be able to do that is by using their profits to reinvest in their assets? That will not happen if the Government take money away from them in additional tax. That money might have been used to improve the fleet, make it more fuel-efficient and bring it up to the level of the best in the industry about which the Chief Secretary spoke; but that will not happen now, because Mr. Healey simply will not have the money to do that. Hauliers throughout my constituency, including Fowler Welch, which I mentioned in last week's debate, Spalding Haulage and many others, are being pushed to a similar position of jeopardy.

I shall now make some specific points not yet covered. The first is that the extra fuel costs have a disproportionate effect on rural communities. Let me explain that in a little more detail. I do not mean simply the extra costs endured by people living in remote communities because they have to use their car to get to the basic necessities of life—to work, to school, to hospital, and so on. I mean that hauliers are disproportionately based in rural areas. My hauliers have asked me, "What do you expect us to do—to change the places where they grow potatoes, vegetables and cut flowers?" Those places are static, so the hauliers have to be based there. Typically, those places are a long way from where products are retailed. Of course, haulage companies are based in rural areas, because rural areas produce the goods that haulage companies carry. There is no alternative for them.

The hon. Member for Halton (Mr. Twigg) spoke about the desirability of moving freight on to the Mersey or on to rail. That is impossible in large parts of the country because we do not have access there to alternative means of haulage. He really ought to know that. It is insulting for him to say that companies ought to move to rail, when most places have not had suitable railway lines for 35 or 40 years.

Photo of Derek Twigg Derek Twigg Labour, Halton

Will the hon. Gentleman give way?

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

I will give way, but, if the hon. Gentleman is going to come out with drivel about the previous Government cutting the railways, when most railway lines disappeared in the 1950s and 1960s, he had better think first.

Photo of Derek Twigg Derek Twigg Labour, Halton

Is the hon. Gentleman saying that there are no opportunities to get freight on to rail?

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

There are some opportunities, but in significant areas they are limited. It is simply not a practical alternative in large sections of rural Britain to talk about moving haulage from road to rail. It is simply not possible to move to where the goods are produced. The knock-on effect is felt by the producer, the food industry and a range of related businesses which will suffer additional costs and inconvenience.

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

When my hon. Friend was considering the problems that have been induced in rural areas, did he take note of the comments of members of the National Farmers Union? They calculated that tens of millions of pounds in road costs would be added to the farming business and, in many cases, would push an already depressed industry over the edge.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

My hon. Friend is right to request amplification of a point that I made at the beginning of my speech: it is not just the haulage industry, but the whole countryside, that feels under attack from the Government. This latest episode is merely another instalment in the story of the abuse of our rural heritage, our countryside and our rural economy that has been going on since 1997. I do not deny that there were problems before that, but they have been exacerbated and intensified under the Labour Government.

Photo of Eric Martlew Eric Martlew Labour, Carlisle

Will the hon. Gentleman tell us who introduced the fuel escalator?

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

Repetition has its place in politics, but it is not necessarily a place that I should want to occupy with the same alacrity as the hon. Gentleman.

My second point relates to the impact of the measure on small businesses. I have mentioned some of the larger companies in my constituency, including Fowler Welch, which I also mentioned last week. That company has taken the option of taking over a small continental haulage firm in order to run some of its fleet from the continent. However, that opportunity is not available to small hauliers. We are talking about small local companies moving local goods domestically. They cannot occupy different ground; they are obliged to continue doing what they do now. Their work is typically with small producers. Small producers make disproportionate use of small community-based family haulage firms, which are especially affected by the measure. As some hon. Members have pointed out, it is true that some hauliers will be forced to flag out and to relocate on the continent. However, many do not have that option because of where they are based and the size and nature of their business. The measure is a disproportionate attack on small business.

My third point relates to cars. We must be clear that, in many rural communities, the car is a necessity. It is a fact of life for many people; it is not possible for them to have any quality of life without access to a car. The problem with this fuel tax is that it is regressive. It affects poor and rich alike and has an especially damaging effect on the poor, the elderly and the disabled. It will affect the people who will suffer most from being restricted to their small village or hamlet. Indeed, in my constituency, where the population is sparse, some people do not even live in a village or a hamlet; some live in an extremely isolated spot somewhere in the middle of the fens, and, without access to a car, they will have no quality of life.

The measure will affect not only economic opportunities, but social and cultural opportunities. We should not ignore those. It is all very well for the Government to look back to a halcyon age when no one travelled more than five miles to do anything, but I assure them that, nowadays, the vast majority of people would not want to live that type of life. If that is the halcyon age to which the Government aim to return us, they will have a rude awakening from most British people when they put it to the test.

Photo of Chris Leslie Chris Leslie Labour, Shipley

For the record, in the distinguished parliamentary career before the hon. Gentleman, will he tell us now whether he will ever again vote for an increase in road fuel duty?

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

The hon. Gentleman pays me great tribute when he refers to my distinguished parliamentary career—it will look very good in Hansard. I certainly do not want to dispute the point. I hope that my career will be increasingly distinguished, but, for the record, I want to ensure that the fact that I received such a plaudit from a Labour Member is amplified.

As for the hon. Gentleman's question, the answer is simple. One must judge the matter on the basis of the facts that are presented at the time. The truth is that Governments have to take decisions based on the prevailing circumstances. My judgment is that the fuel escalator has done its job and that we do not need to increase fuel duty. We certainly do not need to increase diesel prices by 11.6 per cent. at present. We have heard from the Conservative spokesmen—who certainly speak on this subject with far more authority than I do—that they do not believe that the escalator should continue. In future Budgets under a Conservative Government, when we are re-elected in three years' time, we may well need to consider the possibility of increases in petrol duty in the light of the prevailing circumstances. That is the honest answer, and the hon. Member for Shipley (Mr. Leslie) would expect nothing less from me. However, I do not think that we should consider the escalator—or anything like it—because we feel that it has gone far enough; it has done its job and it has come to the end of the road.

Obviously, the Government do not accept that; they do not believe that it is important to maintain low petrol prices for poor people, rural communities or the haulage industry. That is a frank difference of opinion, which we have begun to explore during the past few weeks. However, the Government would do well to be honest with the British people about that difference of opinion. We do not want more soft words or spins in The Daily Telegraph, when the Government tell us that they are looking at the matter again. We know very well that they are not looking at it again. We do not want to be told one thing in the media and another from the Dispatch Box. We want an honest and open debate on the matter.

From what we have heard tonight, it seems to me that Conservative Members acknowledge the pain and suffering that are being inflicted on rural, and other, communities and the difficulties facing the haulage industry, but that most Labour Members do not. Perhaps they do, but they do not care. I prefer to think that they do not understand, rather than that they do not care.

Photo of Tony McNulty Tony McNulty Labour, Harrow East 7:15 pm, 27th April 1999

In relation to honesty, does the hon. Gentleman accept that, in the much-vaunted notion that £8.50 in every £10 spent on fuel is tax, £7.70 of that £8.50 was being paid before 1 May 1997? We are actually talking about 80p for every £10 spent on fuel. Is the answer yes or no?

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

In response to an earlier intervention, I tried to make the point that it is cumulative—I hope that the hon. Gentleman will comprehend that. The latest increase comes on top of those that have been made before. I do not want to stray into speaking doggerel like the hon. Member for Brent, North (Mr. Gardiner), but this is the straw that broke the camel's back. I cannot bring into my speech Iago, Caesar, Brutus and Davy Jones's locker as he did, because I do not share his skills in lyricism.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

May I assist my hon. Friend by adding that the Government are fiddling while Rome burns?

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

Far be it from me to try to match the rhetoric of my hon. Friend, but the point needs to be made that the measure comes on top of previous increases. We can debate all night whether those increases were right or wrong. In a brave speech, the hon. Member for Workington (Mr. Campbell-Savours) said honestly that he disagreed with those previous increases. Conservative Members took the contrary view that the increases were right, because of the price of petrol and the competitive situation of our industry at that time. However, we are tonight debating not history, but what is happening today. The hauliers and those who have to pay extra for their petrol will not be impressed to hear Labour Members going on about what happened 10 years ago, rather than debating, honestly and openly, this increase, this Budget, this pain and this suffering.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

It is interesting to hear Labour Members complaining about the position of the previous Government. We have suffered three Budgets in two years and the haulage industry has suffered three extremely large increases—[HON. MEMBERS: "Speak to the Chair."] I apologise, Mr. Butterfill. The matter is causing a great deal of difficulty, especially to small haulage businesses in our constituencies.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

As ever, my hon. Friend speaks with great alacrity on these matters—[HoN. MEMBERS: "Lucidity."]—Perhaps I was thinking of lucidity.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

Indeed, brevity as well. Having said that, my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) is correct to point out that the Government have not only got it wrong this time, but got it wrong repeatedly. The hon. Member for North Tayside (Mr. Swinney) said that people were now seeing through the Government. He made a good speech, but on that point I disagree with him: it is not that people are now seeing through the Government; they have already seen through the Government. They have had two years to see through the Government.

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

There is always a danger of Government Members wanting to talk about history, when the reality is that road hauliers face bankruptcy because of the current Government's policy. We have to take account of the fact that our European competitors are not increasing excise duty in the same way that we are, with the result that our hauliers are finding their position extremely uncompetitive. In my view, we should protect the livelihoods of our own people.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

My hon. Friend brings me to my penultimate point. One of the disappointments felt by hon. Members and the industry is caused by the Government's lack of understanding of the competitive position in which their measure puts our haulage industry. The Minister of Transport said: I'm convinced that you don't suffer from any serious competition … The fuel duty escalator is here to stay … I have never met a business man yet who goes out of business and says it is his fault. The problem with that approach is that it reveals cavalier arrogance, disregard and contempt—it is similar to the comment about whingeing hauliers. Such comments do nothing to commend the Government for their sympathy or understanding of the wider community.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman Conservative, Billericay

Does my hon. Friend agree that that is the "let them eat cake" political argument?

Photo of John Reid John Reid Minister of State, Department for Transport, Minister of State (Transport), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions)

As I have said several times before, although the last sentence of that quote is accurate, the first two are not. It is absurd to suppose that my view is that there is no competition, and I have never said that.

I dare say that I have met more hauliers today than the hon. Gentleman has, and I shall continue to talk to them. I started today talking with Mr. Sandy McCracken, a haulier, and then met several of his friends. I then met five major hauliers through the Freight Transport Association, spoke to the council of the FTA, and came back here and met the general-secretary of the Road Haulage Association. I am always available to talk to hauliers.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

I am delighted to hear that the Minister is doing so much talking, but actions speak louder than words. The Government would have done well to consult and listen before introducing the measure, rather than doing so afterwards. It is good that they are talking now and that they are showing at least a degree of guilt for their action—the fact that they are exercising their guilty conscience is healthy and good, but they should have consulted before they acted.

Photo of Owen Paterson Owen Paterson Conservative, North Shropshire

Does the Minister's reply not contrast dramatically with the decisive action taken by the French Government, who also signed the Kyoto accord, but who have introduced a rebate so that French hauliers are competitive with Luxembourg hauliers? A socialist Government introduced that measure last October.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

My hon. Friend makes a valid point about the willingness of Governments in competitor nations to support their industry more vigorously and enthusiastically than the Labour Government are prepared to support the British haulage industry. That is cause for sorrow, regret and considerable disappointment.

In his opening speech, the Chief Secretary advised the industry not to get too close to the Opposition, but he should understand that the industry is bound to get close to the Opposition when it sees that the Opposition are listening, responding and learning and that they are prepared to share its concerns and to act on them. The industry sees nothing of that in the Government. The industry will continue to become closer to us and to work with us for the benefit of the industry, the countryside, people and jobs, because it knows that it will get no such response from the Government.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

The first thing to say about clause 2 is that it forms part of a Budget that sets a framework both for stable economic growth and for growth that will be sustainable. Secondly, clause 2 reflects the proper concern of Government, in framing Budget policies, to do so on the basis of a settled and balanced view of what is in the best long-term interests of the country as a whole, reconciling the complex and sometimes conflicting pressures of economic, social and environmental concerns. Clause 2 is not motivated by short-term political opportunism; it does not neglect the interests of any key stakeholders, although pandering to no one group; it does not leave out of account any key argument or fail to take fully into consideration any key facts.

Moreover, like other aspects of the Bill, clause 2 is notable for the fact that it does not cast aside every policy or measure introduced by the previous Government—although there was much in the Budget that is genuinely new. Therefore, it is all the more curious that the Opposition should have chosen to oppose that part of the Finance Bill that builds most directly on a policy that they introduced when in government—namely, the fuel duty escalator.

In the interests of constructive debate during Committee stage, I do not wish to provoke further the Opposition by repeating the oft-quoted remark that, by opposing clause 2, they are sailing dangerously close to hypocrisy. Instead, I invite them to apologise for having introduced the fuel duty escalator in the first place—after all, it is not hypocritical to admit that one made a mistake in the past and to try to put things right in the future. Perhaps Opposition Members would like to put it on the record of today's debate that they were wrong to support the introduction of the escalator under the previous Government. That would at least free them of the charge of logical inconsistency, if not the outright contradiction that has characterised the speeches of the Opposition Front-Bench spokesmen, whose argument appears to be that the road fuel duty escalator was right under the Tories, but is wrong under Labour.

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

Cannot the hon. Gentleman understand the difference between the introduction of an escalator when British fuel is among the cheapest in Europe and the Labour Government' saction of continuing with an escalator at a higher rate at a time when our fuel is the most expensive in Europe? Can the hon. Gentleman distinguish between the two?

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I thank the right hon. Gentleman for that clarification—of course I understand the difference. However, we have not heard any evidence to support the argument that now is the time to abandon the fuel duty escalator; instead, we have heard arguments for abandoning the escalator that would have been equally valid if they had been used to oppose its introduction in the first place.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

For the second time today—we heard it from the shadow Chancellor—we are hearing the myth that British fuel prices were low when the escalator was introduced. Figures from the Library for the third quarter of 1993 show clearly that Italy was the only country in the European Union where diesel prices were higher than those in Britain. By any reckoning, that means that the price of diesel in a significant number of countries was lower than ours, so the right hon. Member for Wells (Mr. Heathcoat-Amory) should either withdraw his comment or apologise to the Committee for misleading it.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I am sure that hon. Members on both sides of the Committee will continue to disagree on many issues, but I hope that we can agree on the facts. I am grateful to my hon. Friend for that intervention.

Precisely because the Government are building on a policy introduced by the previous Administration, I had hoped that the debate would focus more on the facts, the arguments and the issues at stake in the interests of preserving a cross-party consensus, rather than degenerating into party political—and occasionally opportunistic—rhetoric. The fact is that the fuel duty did rise significantly under the Conservative Government, as it has risen under Labour, in both cases at more than the rate of inflation. Under the previous Administration, the total rise was considerably greater than it has been under Labour.

Photo of Shaun Woodward Shaun Woodward Conservative, Witney

Would the hon. Gentleman care to speculate on the consequences for the haulage industry of the fact that, while excise duty on diesel fuel is about 20p per litre in Germany and between 20p and 25p per litre in France, it is now 51p per litre in the United Kingdom and is to rise to 60p per litre in the next year or two? What does the hon. Gentleman believe that the effect of that will be on that industry in the United Kingdom? Will it be good for the industry, or bad?

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon 7:30 pm, 27th April 1999

If the hon. Gentleman is so convinced that rising fuel prices will have a devastating effect on the competitiveness of the road haulage industry, why did the Conservative Government introduce the road fuel escalator in the first place? In an earlier intervention, the hon. Gentleman invited us to forget history—one can understand why he wants us to do that—but let us suspend our knowledge of history for a moment and examine the question from first principles.

The hon. Gentleman will know that the price of fuel is not the only consideration when it comes to the competitiveness of this industry. We must take into account other cost factors. The hon. Gentleman will know also that the British road haulage industry is competitive—in fact, there is overcapacity in that sector. There is great variation in performance and in the types of fuel used in the industry. This measure is designed to address those aspects, too. We are of course sensitive to the overall competitiveness issue—the road haulage industry is a valued and important industry—but, in assessing competitiveness, we must take account of all costs, and not just the cost of fuel.

I return to my basic point: if the Opposition are concerned about the impact of road fuel increases on competitiveness and they think that fuel is the overriding cost factor influencing competitiveness in the road haulage industry, why did they introduce the road fuel escalator in the first place? If, under the Conservative Government, the road fuel escalator and petrol price increases—

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

If the hon. Gentleman will allow me, I will respond to the first intervention before I give way again. Did petrol prices influence competitiveness less under a Conservative Government than under a Labour Government? Opposition Members are displaying the same logical inconsistencies in approach all over again.

I hope that the hon. Member for South Holland and The Deepings (Mr. Hayes) will allow me to make progress. The decision to pursue the fuel escalator has been conditioned not only by history and by policies inherited from the previous Government but by Britain's international obligations to reduce emissions in line with agreements undertaken by the previous Government at Rio and by this Government at Kyoto. The policy has also been conditioned by the need to reach a balanced view about reducing pollution while seeking to protect the interests of an important and valued British industry.

It is true that I represent a London constituency and London, as no other city in Europe, knows the cost of road traffic pollution in terms of the quality of our environment, our urban landscape and, perhaps most importantly, in terms of our health and that of our children.

This Friday, the Wimbledon Civic Forum's Transport Forum will hold a public meeting to discuss how we can reduce traffic congestion and pollution in my constituency. Many of my constituents will attend that meeting to demand a change in the quality of the air that they breathe, a change in the transport system that still privileges the private motorist and road haulier at the expense of those who use the public transport network, and a change in the behaviour of those who use damaging, and ultimately dangerous, types of fuel. My constituents will not be indifferent to the needs of Britain's hauliers—neither am I—but they will point out that Britain's hauliers have an interest in ensuring a better environment and improved public health, too.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

Does the hon. Gentleman recognise that they do not tackle those problems on the continent simply by altering the price of fuel? They decide where lorries should go within European cities. If the quality of the environment is better without them, lorries are directed to avoid those areas.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I welcome that intervention. One positive outcome of this debate is the constructive remarks from the other side about the value of drawing upon the experience of other European countries when framing a national transport policy. We all have an interest in ensuring a better quality environment and better road transport policies. We must reduce reliance on diesel fuels, which are most damaging to our environment. The voices for change must be heard.

As in other parts of the Bill, the Government must adopt a balanced approach, taking account of as many interests as possible before deciding what to do. The previous Government recognised that fact when they introduced the road fuel escalator, and this Government recognise it as well.

Photo of John Hayes John Hayes Conservative, South Holland and The Deepings

I noted the hon. Gentleman's remarks about the need to achieve a "balanced" policy. The point is that that policy must be sensitive to the different needs and approaches of different areas. Fuel tax is a relatively blunt instrument, so we must develop and evolve policies that are sensitive to rural areas as well as to cities and towns. I have lived in both rural and urban areas, and 1 understand the hon. Gentleman's point about the city environment. However, his arguments ring pretty hollow in sparsely populated areas where there is a lot of clean air but a diminishing number of jobs due to the crisis in the haulage industry.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

The hon. Gentleman intervened on me, but he seemed to be posing a question to himself. If he believes that the road fuel escalator is a blunt instrument, is he prepared to say that the previous Government were wrong to introduce it? Does he rule it out for ever and a day? He has had plenty of opportunities to clarify his position in this debate, but he has not done so.

Perhaps the balance between the different arguments and interests involved has shifted since the last election. But, if it has done so, surely the balance of the argument has moved in the direction of giving greater weight to people's concerns about their health and their environment, not less. Therefore, there is now even greater public awareness of the need for an integrated public transport policy, in which rail can partially replace road as a means of haulage transport, and of the need to discourage the use of inefficient and damaging fuels.

My main point, however, is that the fuel escalator, combined with other measures, is the right way forward. It was the right way forward when the Conservative Government introduced it, and it is the right way forward now, as this Government pursue the same policies for the same reasons with the same objectives and obligations in mind. Clause 2 should stand part of a Finance Bill that seeks to recognise the demands of a growing economy, a fair society and a sustainable environment in the interests of us all. I urge hon. Members to support clause 2.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

I am glad to catch your eye in this debate, Mr. Butterfill. We have heard many facile speeches from the Government Benches this evening. Labour Members have referred to what has happened in the past, but my constituents are wondering what will happen to their businesses today as a result of the road fuel escalator.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Does my hon. Friend agree that the British electorate dispensed with the past on 1 May 1997?

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

I agree totally with my hon. Friend. Although he makes a jocular point, it has a serious edge.

The Government should be examining the facts of the case. The economic circumstances are different every year and in every Budget. My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) made it perfectly clear that the economic circumstances in this Budget did not warrant such a huge increase in duty.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

I will develop my theme and then give way happily to the hon. Gentleman.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman Conservative, Billericay

The hon. hon. Gentleman had loads of time in which to speak and many other hon. Members are waiting to contribute.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

I would be grateful if my hon. Friend will allow me to develop this point.

The economic circumstances are such that we have by far the highest priced diesel in the European Community. The current price is some 68p per litre, or £3.9p per gallon. The Budget introduced a staggering increase of 28p per gallon, which brings the total rate of taxation to £2.28 per gallon. That amounts to a rate of duty of 84 per cent. in this country compared with Belgium, which has a rate of 66 per cent. Let us look at our major world rivals, because that theme has not been developed in this debate. Siren voices from the Liberal Democrat Benches want the whole of Europe to increase road fuel duties. However, if the whole of Europe becomes less competitive with the rest of the world, there will be less and less trade in the European Union and more and more trade in the rest of the world, and unemployment in Europe will go up and up.

Photo of Derek Twigg Derek Twigg Labour, Halton

The hon. Gentleman made a distinction between what is right today and what was right yesterday, and said that he did not think that it is now right to have the fuel escalator. Will he confirm that he would never again vote for the introduction of a fuel escalator or an increase to it?

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

The hon. Gentleman obviously has not been listening to my speech. If he had, he would have heard me say that one should consider the rate of fuel duty in the light of the economic circumstances of the time. I cannot tell him what will be the economic circumstances after the Government have had a go at our economy. The economy may well be considerably worse off than it is now and, under those circumstances, we would probably be unable to increase the fuel duty as much as it would be prudent to do at the present time.

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

The hon. Gentleman seems to oppose the idea that other European countries should increase their petrol taxes. Why does he think that? Has he not met road hauliers who argue—they have put this argument to me—that all they that seek is a level playing field with European competitors, and they would like other European countries to put up their petrol taxes?

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

That argument is totally fallacious. We should be encouraging our European partners to put taxes down, not up, because we would then gain a greater share of world trade, and the number of unemployed people in Europe—18.5 million—would start to go down. Unless we consider those 18.5 million people, their lives will be made a misery and, if we are not careful, so will those of many more people who will also be unemployed as a result of higher taxation.

The Government have increased the road fuel escalator by 6 per cent. but that is not the only increase. There is VAT on top of that, so the increase is 6.2 per cent., and if that is compounded over 10 years, the rate of duty on a gallon of diesel will double over 10 years. The Government have a duty to tell the haulage industry when they will end that ridiculously high real increase in diesel duty.

Much has been made of history. Almost all contributions by Labour Members have been set in the context of how the road fuel escalator operated when we were in power. However, I recall that, when the whisky industry was subject to similar duties, we froze the escalator because the industry was in difficulty. I should have thought that the road haulage industry was facing similar difficulties, so the rate of increase should be reviewed, and I look to the Government to do so.

We can contrast the fuel duty escalator to the tobacco escalator. One of the Government's first moves was to increase the tobacco escalator from 3 to 5 per cent. The Government have a record of increasing customs duties. The effect of the fuel increase in the road haulage industry alone will push up the retail prices index by 0.25 per cent. When all the other increases are taken into account, the RPI will no doubt increase by considerably more.

The Chief Secretary made great play of the overall costs to hauliers, but the fuel element of most hauliers' business is about a third of their total costs. That means that all the other costs are much lower by comparison. When one considers that the price of a litre of diesel in the United Kingdom is 68p, compared with 39p in Belgium and, perhaps significantly, 44p in Ireland, one begins to realise how uncompetitive British haulage is compared to some of our competitors.

If Ministers, who are laughing, doubt the truth of what I am saying, they should consider the example given by the hon. Member for Workington (Mr. Campbell-Savours). He pointed out that one of this country's largest haulage companies, Eddie Stobart, is thinking of flagging out some 100 lorries to Luxembourg or Ireland. Those companies know their business backwards; they are voting with their feet as an indictment of the Government's Budget measure.

As I said, diesel costs 44p a litre in Ireland and, contrary to what is constantly asserted by those on the Treasury Bench, Ireland has lower corporation tax than Britain. Its large corporation tax rate is 28 per cent. and the small corporation tax rate is 25 per cent. In addition, Ireland has lower labour costs; they are 13 per cent. of total costs. That makes me wonder whether many more hauliers will flag out their lorries to Ireland and other EU countries with lower tax rates. 7.45 pm

Flagging out will undoubtedly result in a haemorrhaging of customs duties, so the revenue total in the Red Book will not be as large as the Government have claimed, but a much sadder result is that jobs will be lost to the continent. Even more importantly, the environmental benefits—which I shall address in detail in a moment—will not be as great as has been claimed because continental lorries coming into this country are not as well-regulated and serviced as British lorries and their emissions are likely to be worse than those of better-serviced British lorries.

Photo of Jeffrey M. Donaldson Jeffrey M. Donaldson Shadow Spokesperson (Trade and Industry)

The hon. Gentleman referred to the fuel price differentials between the United Kingdom and the Irish Republic. Is he aware that £100 sterling will purchase 139 litres of diesel in Northern Ireland and 229 litres of diesel in the Irish Republic and, as a result, haulage companies in Northern Ireland are now registering their business in the Irish Republic?

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

>: I am extremely grateful to the hon. Gentleman for that intervention, which precisely proves my point. I have no doubt that, when the haulage industry considers the Budget measures, more hauliers will transfer their operations to southern Ireland because, for many, that is much easier than having to transfer business to the continent. It is crazy that we are losing jobs and duties to other countries when those jobs should be based here and we should have a competitive haulage industry. When goods need to be moved here, that should be done by domestically based firms.

I shall deal now with the environmental improvements claimed by the Government. The Chief Secretary said in his opening speech that 12 million tonnes of carbon would be saved each year. I have been reading the Library brief, which claims that, between 1996 and 2002, the total saving will be between 2 million and 5 million tonnes of carbon, which is considerably less than the Chief Secretary's claim. I hope that, when the Economic Secretary replies to the debate, she will be able to clarify that serious difference of opinion.

Nobody has mentioned alternative forms of fuel, but they are covered by clause 2, which is the subject of this stand part debate, so I shall now refer to liquid petroleum gas. There is no doubt that liquid petroleum gas has considerable environmental advantages over petrol and diesel. Companies in that industry include MarketLine International, which says in its brief that, if we want to foster the market in liquid petroleum gas, the fiscal framework must be guaranteed for at least five years so that companies have the stability and encouragement to make the necessary investment to change their fleets from using diesel to running on liquid petroleum gas. I ask the Government to play a genuine part in improving the environment by making that five-year commitment to the fiscal regime, so that hauliers are encouraged to make that change.

There are considerable environmental gains to be made from using liquid petroleum gas. One has only to consider the carcinogenic compounds benzine and 1,3 butadiene. There is no safe level for those chemicals. I ask the Government to reconsider the claimed benefits of diesel over petrol because the amount of carcinogenic oleogens produced by diesel is considerably less than that produced by petrol. Liquid petroleum gas produces about half the amount of oleogens produced by diesel, but about one thirteenth of the amount produced by petrol. The proportions of those dangerous chemicals—which are probably the most dangerous emissions from vehicles because they are carcinogenic—are much higher in petrol than in diesel.

There are other environmental gains to be had from LPG as opposed to petrol or diesel. They include reductions in CO2 in lead, in oxides of nitrogen, in particulates—PM10 in sulphur dioxide and in carbon monoxide. There is obviously a considerable environmental gain in switching to LPG. The Government have not created a sufficient differential in the Budget, and they have not created enough long-term stability to encourage haulage firms to transfer to liquid petroleum gas.

In summary, I believe that the Government are wrong to have increased the fuel escalator to the extent that they have. Jobs will be lost, the country will lose revenue and the environmental gains will not be as great as claimed. I urge the Government to consider the matter carefully because, if they go on compounding 6 per cent. plus VAT on 6 per cent. plus VAT, I doubt that we shall have much of a haulage industry left by the time that they leave office at the next election.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

I am grateful for the opportunity to participate in the debate. I make no apology for the fact that it has been necessary for my colleagues and I to use every opportunity to draw attention to the plight of the road haulage industry in Northern Ireland, and of the families who have been operating petrol and diesel retailing outlets.

In Northern Ireland, there is hardly any alternative to road haulage for the transport of raw materials shipped into the Province to our industry; for the movement of manufactured goods back to the ports of Belfast, Larne, Warrenpoint and Londonderry for export; and for conveying exports to the Irish Republic. I believe that we have only one regular freight train—from Belfast to Dublin and some of the southern ports.

Therefore, the transport of goods by rail does not provide a realistic option; indeed, most parts of Northern Ireland have no rail infrastructure. The situation is similar to that which prevails in many rural areas of England, Scotland and Wales. People are obliged to provide their own means of transport, and rely on it totally.

Road haulage in Northern Ireland is the life-blood of our industry and our agriculture. The roads are the veins and arterial routes, along which we must move raw materials and manufactured goods. We need a competitive road haulage industry—an industry that helps us in our economic development, so that we can become less dependent on support from United Kingdom taxpayers.

We understand Her Majesty's Government's objectives of protecting the health of the nation throughout the United Kingdom and protecting our environment, but there must be greater balance in taxation than there has been in road fuel and vehicle excise duty, which is causing severe economic damage to legitimate businesses and having painful effects on families. Plainly, many filling stations in Northern Ireland within 10 or 15 miles of the border have had to be closed. The additional costs to our industry, and for everything that we buy, arising from increased vehicle excise duty and increased fuel duty, represent a double whammy. We are all paying additional taxation. Rural dwellers are doubly disadvantaged.

Throughout the debate, the Conservatives have made much play of the effect of the fuel duty escalator. Although that is obviously an effective and useful means of drawing down tax, they must accept some responsibility for the position that we are in. But it is even more important for the present Government to stop blaming the Conservatives when they, by the fuel duty escalator, are adding insult to injury and increasing everyone's pain by introducing punitive increases in fuel duty.

On 11 November 1998, in her reply to an Adjournment debate on the costs of the haulage industry, the Economic Secretary remarked: looking at business as a whole, transport is a relatively small part of total business costs."—[Official Report, 11 November 1998; Vol. 319, c. 347.] That may be a backhanded compliment to the efficiency of our road haulage industry, but I felt that it was dismissive of the serious problems faced by the business of road haulage—problems that remain to be satisfactorily addressed.

The Freight Transport Association, which represents 12,000 members in Great Britain and Northern Ireland, of whom about 300 are in Northern Ireland, says that fuel costs are a substantial element in overall vehicle operating costs … The additional 6p per litre imposed in the recent Budget will make matters worse for the road transport industry with operators in Northern Ireland finding it virtually impossible to compete with firms in the Republic. It will also encourage more smuggling and therefore increase the unfair competition by those using illegal fuel to undercut haulage rates. The Petrol Retailers Association and the Freight Transport Association believe that more and sufficient resources must be made available to Customs and Excise to enable effective enforcement action to be taken to eliminate smuggling. As Northern Ireland is the only part of the United Kingdom with a land frontier with another European Union state, the increases in fuel duty have made smuggling extremely profitable and provided a real incentive to smuggling. There are huge profits to be made; that gravely concerns us in Northern Ireland. The increase in the 40-tonne, five-axle vehicle tax to £5,750 also means that it costs £4,000 less to tax a vehicle in the Irish Republic. That means that hauliers—legitimate business men in Northern Ireland—have no alternative, if they are to survive, but to flag out.

Operators in south-east England may be only threatening to move to the continent. It is a fact that an operator in Northern Ireland need move only 40 or 50 miles to set up an operating haulage business, legitimately, across the border in the Irish Republic to benefit from flagging out in the Republic. Huge savings will be made on every vehicle. The operator will benefit from the extremely cheap—in our terms—fuel, and the value of sterling over the punt gives an advantage of nearly 20 per cent., as my hon. Friend the Member for Lagan Valley (Mr. Donaldson) pointed out.

8 pm

The ingenuity of the smugglers in the border areas between Northern Ireland and the Irish Republic knows no bounds. My hon. Friend the Member for East Londonderry (Mr. Ross) has referred to the fitting out of a cattle or livestock lorry with a huge tank. The ventilator shafts were stuffed with sheep fleeces, and a few bleating sheep were put in the front of the lorry. Each time it came to a checkpoint, the sheep attracted the sympathy of the police man or the Customs and Excise man and, time and again, it was waved on.

Tractor, car and Land Rover trailers are fitted out with tanks, and a load of peat is spread over the top to give the impression that peat is being transported innocently from the bogs for domestic use. So it goes on. Grain lorries capable of carrying 40 tonnes are fitted out with huge tanks and carefully disguised. They then fill up and move on.

Oil storage appears to be a growing and thriving industry in the border areas, especially in Northern Ireland. There are more oil storage tanks in some agricultural areas than there are cattle, sheep or pig units, and cowboy hauliers can make even greater profits by using red diesel, on which no duty is paid. They have an even greater incentive, because there are so few customs officials on the ground. We reckon that hundreds of millions of pounds must be being lost annually to our Exchequer, which is very painful—that money should have been providing us with schools and colleges and would have helped to take the pain out of present policies, which are almost bankrupting every school under local management.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

Has the hon. Gentleman calculated the loss to the Exchequer when a big lorry fills up in the south of Ireland? Big lorries can take 400 litres, which represents a saving of £240 on the increased costs in the Budget. That would more than pay the cost of ferrying such a lorry to the mainland.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

I thank the hon. Gentleman for that intervention. What he says is quite true, but think how easy it is in Northern Ireland to take a trip across the border, which is only 40 miles away. The trip takes only five gallons of fuel and drivers save hundreds of pounds by tanking up. That is being done legitimately by many operators. I am amazed that the Government have given us no indication that research is being carried out into how many million gallons of fuel have been delivered into Northern Ireland over the past few years and how those supplies have been replaced surreptitiously by supplies coming in from the Irish Republic.

Photo of Mr William Ross Mr William Ross UUP, East Londonderry

My hon. Friend may not be aware that I have recently questioned the Treasury on this matter. I am told that it does not know how much it is losing—it does not seem to be able to work it out—but I note that one of its replies said that deliveries dropped by 30 million litres of petrol and 40 million litres of diesel in one three-month period between 1996 and the end of last year.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

That is indicative of the scale of loss to our Exchequer. It also reflects the damage being done to legitimate businesses in Northern Ireland. I welcome the recently reported crackdown by Customs and Excise in Northern Ireland, but it seems strange to some of us that it is possible for it to report a successful knock operation and show us the impounded vehicles only when the Northern Ireland Affairs Committee visits Belfast for an appointment with Customs and Excise. It is quite remarkable—

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

Vans of all kinds are filled up, and even bread vans are running out of the Irish Republic in disguise. Every disguise is used.

It is surprising that a knock operation can be arranged to impress the Northern Ireland Affairs Committee when it visits Belfast—those matters were debated last week—and it was also surprising to read the Belfast Telegraph on 21 April. It said: Customs officers have cracked down on illegal fuel by seizing nearly 30 vehicles over the past week. That was good timing. We welcome those seizures, but they come a bit late, considering how many legitimate petrol and diesel retailers have been put out of business. Any operator who is in tow with smugglers can set up a portakabin as an outlet retailing cut-price fuel and move on to another site the next day, repeating the cycle. Punitive action must be taken against those involved in illegal practices.

There are also losses to the Irish Republic's economy, because many operators get a double benefit; they receive thousands of pounds for delivering diesel or petrol to Northern Ireland, and they return with loads of heating oil, which is at a premium in the Republic. They have nothing to learn, and I hope and trust that the Government recognise the seriousness of the threat to our legitimate haulage industry and the damage that recent Budget tax increases have caused.

I also hope that the setting up of the haulage forum will not be typical of the Government. People are becoming sceptical, because the Government are interested in soundbites and catchy headlines. They continue to take advantage of promises of additional expenditure, getting three or four times the mileage from the same money, although it is still not spent. I hope that they are sincere in setting up the haulage forum and that the consultation will be meaningful. If it is to be meaningful, positive action has to be taken to protect our haulage and freight industry within the United Kingdom.

Bearing in mind the specific and serious problems within Northern Ireland, I appeal to the Government to look at those special circumstances and to take specific measures to protect legitimate haulage businesses and petrol retailers in Northern Ireland. The Government must prevent those with paramilitary links from gaining huge profits, which are so accessible to them, and transferring them for use in future terrorism. The situation is serious and requires urgent attention. I appeal to the Government to show us evidence that these real problems are being addressed.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

I am pleased to follow the hon. Member for East Antrim (Mr. Beggs), who will not mind me saying that he could never be accused of talking in sound bites. I am sure that he was not suggesting that smuggling between Northern Ireland and the Republic is new, or that many of the trickeries that people get up to in smuggling across that border have occurred only since 1 May 1997. Not long ago, the traffic was in the opposite direction: ordinary car users as well as those in the haulage industry would pour out of the Republic to fill up in the north and then go back again.

I take the hon. Gentleman's point about the lack of infrastructure within both the north and the Republic. Apart from one railway up the east coast, there is not much at all. I have strong connections with the county of Donegal. After the introduction of the punt, I spent 10 or 15 years deciding whether to fill up in Monaghan Town or Aughnacloy, or to stop at Strabane and then go over the bridge and fill up at Lifford, or the other way round. Thus the problem is not new. It would be a misrepresentation of the hon. Gentleman's comments if anyone were to suggest that the difficulties in Northern Ireland occurred because of this Budget or previous Budgets. I know that that is not what he was saying.

I agree with the hon. Gentleman that, if productive work is to be done at the road haulage forum, there might be scope for looking at the specific concerns of Northern Ireland. Because of the nature of its geography and infrastructure, those concerns are very real and different. However, adjusting the level of fuel duties in the Finance Bill will not solve the problem of smuggling, whichever way it is going across the Irish border. The Irish haulage industry did not collapse when things were considerably cheaper in the north.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

The seriousness of the situation in Northern Ireland is such that the Exchequer could be losing as much as £400 million. It has been suggested that the legitimate industry could have rebates for the fuel used, which would then do away with the huge differential. Never in the history of differentials in fuel rates between the north and the south have we had as big a gap as there is now.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

I take that point. If I wanted to be facetious, I would say that that makes a strong argument for, if not the unification of Ireland, at least the unification of tax rates and fuel rates within Ireland. I accept that there is a specific context, and if the road haulage forum looks specifically at Northern Ireland's concerns, that would not be overdue. I appreciate the candour with which the hon. Gentleman spoke—unlike most Opposition Members.

Earlier in the debate, I got a facile little knock back from the shadow Chancellor, who told me that I had not been in Parliament long. I wanted to know why there was no mention of the road escalator in the Conservative motion last Wednesday—not weeks or months ago, but last Wednesday, when the Conservatives could have at least have flagged up their concern about the abolition or otherwise of the fuel escalator. Given that there was nothing in their motion, I thought that they would at least table an amendment to clause 2 tonight. We now know why nothing has been tabled: it is because we have heard almost as many positions on the fuel escalator as we have had Conservative speakers. They are not sure whether they want to get rid of the fuel escalator completely, get rid of it next year, freeze it this year, freeze it for ever, think about it or do nothing with it. None of them will commit themselves to saying what they will do by the time the next election rolls around. They will go into that election committed to a fuel escalator. They do not have a clue.

Photo of Owen Paterson Owen Paterson Conservative, North Shropshire

What will the hon. Gentleman say to the hauliers who will be closed down and put on the dole by the fuel escalator? Will he explain to them that he voted for the fuel escalator tonight?

Photo of Tony McNulty Tony McNulty Labour, Harrow East 8:15 pm, 27th April 1999

The very first thing that I shall say is, "Don't look to your friends in the Conservative party, because they put 5,000 people on the dole, and no one who has gone on the dole so far has done so because of this measure."

We are told that it was all right for the previous Government to introduce a fuel escalator—I shall not go into history—because our fuel prices were the lowest in Europe. Figures from the Library, which I quoted in an earlier intervention, show that, short of Italy, of the 12 member states of the EU at the time, Britain was second. Ten other countries had lower fuel rates. [Interruption.] The right hon. Members for Wells (Mr. Heathcoat-Amory) and for Horsham (Mr. Maude) are not interested in the truth. Those are House of Commons Library figures. That is the second time that Conservative Members have challenged figures that come not from me, other hon. Members or vested interests, but from the Library. I thought that the Library's neutrality was recognised and that it was against the conventions of this place to challenge its figures.

The little schoolboys opposite giggled when I suggested earlier that it does matter that for every £10 spent on fuel, we accept that £8.50 is tax. However, £7.70 of that £;8.50 is down to the previous Government. I say that with no malice; it is just a fact. Conservatives should remember that we are talking about the small differential between £;7.50 and £8.50.

I go further and say that, since the introduction of the escalator—

Photo of Tony McNulty Tony McNulty Labour, Harrow East

Of course—it is always fun.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

Is the hon. Gentleman really suggesting that in 1979, the level of duty was zero?

Photo of Tony McNulty Tony McNulty Labour, Harrow East

I shall not bother letting the hon. Gentleman intervene again if that is the best that he can do. He has said nothing.

Since the escalator was introduced, 26p on each litre is accounted for by what one might call the Tory escalator, and only 7p is accounted for by the last three Budgets. Conservative Members do not dwell on the fact that the Treasury has picked up on the Select Committee's suggestion and will review the entire use of this tax next year. [HON. MEMBERS: "Ah."] There is no "Ah" about it. My hon. Friend the Member for Brent, North (Mr. Gardiner) said that, and there was simply no dissent. Listen to this line very carefully: I should like to congratulate the previous Conservative Government on introducing the fuel escalator.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

On what? On congratulating the Conservative Government? Of course I will.

Photo of Mr Tim Collins Mr Tim Collins Conservative, Westmorland and Lonsdale

If it was such a good idea, why did Labour Members oppose the fuel duty escalator? Why did they go around the country attacking the so-called 22 tax increases from the Tories, five of which were that?

Photo of Tony McNulty Tony McNulty Labour, Harrow East

I repeat: I should like to congratulate the previous Conservative Government on introducing that tax—not all 22 taxes and the handful that were not counted in that figure. That tax made sense. It also makes sense within the context of clause 2, not least for the environmental reasons suggested by hon. Members, but because the increases are an important part of our strategy to reduce carbon dioxide emissions.

Let us listen to the complacency of Conservative Members: "We have done that. Tear up the Kyoto agreement. It no longer matters. Tick the little boxvdone." What a deep understanding that shows of the environmental impact of those emissions. One right hon. Member said that transport must contribute to any strategy to reduce carbon dioxide emissions. Who can disagree with that? Certainly not the right hon. Member for Wells as those are his words.

This issue is and must be about balance. That argument has been sadly lacking in this debate. Everyone accepts that it is about balance. Although it is about environmental concerns, it is also about keeping people in business and keeping freight running around the country, whether by road or by rail. It is also partly about revenue for the Exchequer, but as has been said, I know that a car is often a necessity, but all motorists must think about the environmental consequences of what they do."—[Official Report, 23 January 1995; Vol. 253, c. 103.] Who would disagree with that statement? It is as relevant now in 1999 as it was in 1995 when, again, the right hon. Member for Wells said it.

We are lost in the mythology that, since 1 May 1997, everything in the rural economy has been destroyed and put asunder, which is absolute nonsense. We accept that some things are more expensive in rural areas, but others are more expensive in urban areas. Four years ago that did not matter at all, but now, in the Conservatives' feeble attempt at opposition, it does. They argued then that that was the interplay of the market; now, who knows what they argue?—it depends who one talks to.

There are three key elements of Conservative Members' opposition. I am grateful to my right hon. Friend the Minister of Transport, who explained them far more accurately than I last Wednesday. The same is true of clause 2. To sustain their opposition to clause 2 and, sadly—depending on whom one speaks to—their complete opposition to the road escalator, the Tories have had to bad mouth the haulage industry by calling it uncompetitive. In the round, it is not. I was present last Wednesday and I have been here for much of tonight's debate, and apart from some hot air, no Conservative Member has suggested that the costs of British haulage companies compared with those of companies on the continent make British companies anything other than extremely competitive.

Photo of Owen Paterson Owen Paterson Conservative, North Shropshire

Will the hon. Gentleman name one Conservative Member who has accused the road haulage industry of being uncompetitive? I remind him that the Minister of Transport in Wednesday's debate and the Chief Secretary today went on about the 30 per cent. empty loads run by the haulage industry and accused it of being uncompetitive. No Conservative Member has said anything about that.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

That takes disingenuousness to a higher plane than I ever could. The underlying assumption of much of what Conservative Members have said today and of what they elaborated on last Wednesday is that—as one of them said, but I cannot remember which one—this is the straw that breaks the camel's back. They argue that the industry is hobbling along, and that the provisions outlined in clause 2 will mean death and destruction to the business of the haulage industry up and down the land. If that is not implying that the industry is not competitive and robust, I do not know what is. Every Conservative Member has suggested that in one form or other. They are completely wrong.

Conservative Members also argue that all the difficulties ever laid at the door of the British road haulage industry began on 1 May 1997 or thereafter with the three Budgets that the Government have introduced, including this one. That is at best a gross over-simplification of the prevailing situation, and at worst extremely misleading.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

Is the hon. Gentleman waving at me or does he wish to intervene?

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I hate to disrupt the hon. Gentleman's flow, but he says that things have not changed since 1 May. Does he acknowledge that on 1 July 1998, with the ending of cabotage restrictions in the European Union, European lorry drivers were able to pick up British loads and take them to British destinations? That made the competitiveness argument that he is trying to espouse entirely fallacious.

Photo of Tony McNulty Tony McNulty Labour, Harrow East

With the greatest respect, the hon. Gentleman is being fallacious. He knows as well as I do that that had an insignificant and minimal effect on penetration into the British market. It would go beyond the scope of the debate to talk about Brit sign or Brit pop and the other matters that Conservative Members were discussing last week, but we could go into further detail and expose the hot air that Conservative Members produce. They have no response at all. Blaming Government policies is, at best, an over-simplification and, at worst, extremely disingenuous.

Others have waxed lyrical, so I shall not dwell on this point, but the third key pillar of the Conservatives' opposition to clause 2—they cannot be bothered to table an amendment, so they are not that bothered—is the "not me guy" approach that they have rehearsed at length. They argue that it is nothing to do with them, and that the world stopped on 1 May 1997. The £7.70 out of £8.50 tax for every £10 of fuel is nothing to do them: it was all invented on 1 May.

The substance of the Conservatives' opposition is meaningless. They offer no alternative. No one would dispute that many industries go through cycles and have difficulties. We accept that the road haulage industry has difficulties, which is why we have listened and have set up the forum. In a range of other areas, such as corporation tax and the freeze on road tax for 98 per cent. of lorries, which is unfortunately beyond the scope of the debate, we are tackling many of the industry's concerns.

It is not enough to pooh-pooh environmental concerns, because they remain important. Clause 2 needs to be seen in the context of the Government's efforts to improve transport, the environment and the general corporate taxation regime. It is a matter of balance, but to say, as Conservative Members have said, that the road fuel escalator causes all the difficulties throughout the road haulage industry is absolute bunkum. To imply that freezing or getting rid of the escalator, as they do, would eradicate all the problems of the road haulage industry is hogwash.

If the Tories are the best that the haulage industry can do for friends, it is in very real peril. Conservatives Members have shown, by tabling no amendment tonight and by offering no suggestions last week, but merely carping, that despite their weasel words, they care nothing at all for the haulage industry. By their actions tonight, they could not care less about the environment. They are simply exploiting the haulage industry in yet another sadly feeble, two-faced attempt at opposition, and they are pathetic.

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

Listening to this debate, I am surprised that the Labour party continues to press the claim that what the Government are doing in this clause is not so very different from what the previous Conservative Administration did. I remind hon. Members that the Government introduced three important changes after 1 May 1997, which have considerably increased the road fuel tax burden in this country. Those changes were nowhere listed in what is laughingly referred to as the Labour party's 1997 manifesto. The Labour party gave no indication to the voters of the impending road fuel hikes that awaited them.

The first change was the increase in the road fuel escalator to 6 per cent. I shall later address the fact that it was increased from 5 per cent., but it was a significant increase.

The second increase was through the reduction of the differential between diesel duty increases and increases in ordinary fuel duty. It was about 5p per litre in 1994, and it was reduced in March 1998 by 1 p and to 2.5p in this Budget. That has led to a huge increase in diesel duty for road hauliers and other users of diesel.

The third change from Conservative party policy was the timing of road fuel duty changes in the Budget, which has increased the tax take. That is a sleight of hand worthy of a party that is a specialist in stealth taxation. The Government introduced a change in road fuel duty in their emergency Budget on 2 July 1997 to take effect that day, bringing it forward from the November increase that everyone had expected. They introduced an increase in the March 1998 Budget, bringing forward the changes that would otherwise have taken place in November 1998. Those timing changes have resulted in huge increases.

Let us examine the nature of those increases. In a parliamentary answer on 19 March this year, the Economic Secretary told my hon. Friend the shadow Financial Secretary that the extra revenue taxation from road fuel duties on unleaded petrol since July 1997 was £350 million in 1997–98. On the hon. Lady's figures, in 2001–02 that will rise to a massive £1,000 million—£1 billion—extra, over and above the Conservative plans, as a result of the tax changes that the Government are making.

8.30 pm

We should also look at an answer that the hon. Lady gave on the same day, which reveals the extra revenue raised by the diesel tax changes. It is clear that, in the first three years of the current Parliament, an extra £0.9 billion will have been raised by the Government's changes relating to DERV; and it is possible to deduce that, over the last two years of the Parliament, an extra £1.9 billion will have been raised in diesel duty revenue.

Any suggestion that the plans the present Government are introducing, and have introduced, are comparable to taxation introduced by the last Administration is exposed by the Government's own figures. It really will not do to suggest that there is little difference between us.

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

I give way to the hon. Gentleman, with a due sense of anticipation and dread.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

The hon. Gentleman has made much of the assertion that timing changes were critical, as was the stealth with which those changes were introduced. Does he accept that, in their 1992 manifesto, the Conservatives campaigned against the introduction of an escalator, that they introduced it in March 1993, in their first Budget, and that in November of the same year—in another timing change—they increased the duty by not 1 per cent. but 2 per cent.? What the hon. Gentleman has accused us of doing in the first year of our Government is exactly what the Conservatives did in 1993. Has he dared to calculate the increase in the revenue taken by the Chancellor at that time?

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

I deduce from what the hon. Gentleman has said that he accepts that this sleight of hand is a stealth tax, and that the timing change has increased road fuel revenue far above the level at which it would have been had Conservative plans and policy been maintained. The truth is that his Government have increased the tax. But there is another respect in which the Government's road fuel taxation policy differs from that of the last Conservative Administration—

Photo of Mr Tim Collins Mr Tim Collins Conservative, Westmorland and Lonsdale

On a point of order, Mr. Lord. Is it in order for the usual parliamentary convention that an hon. Member remains in the Chamber to hear the speech after his to be broken by the hon. Member for Harrow, East (Mr. McNulty)—especially when so many hon. Members have remained in the Chamber for so long in the hope of speaking?

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Who remains in the Chamber and who does not is not a matter for the Chair, although, as the hon. Gentleman says, it is a convention for hon. Members to stay.

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

The Government's road fuel taxation policy differs from that of their predecessor in another respect. We had realistic ways of meeting the environmental objectives that were a treaty obligation of this country, Kyoto being the most notable example. It is entirely right for environmental targets to be met, but, as I say, our policy was founded on realistic, pragmatic taxation solutions.

The Minister has specific objectives. She herself has said that the increased road fuel duty escalator introduced by her party will result in—I cite a parliamentary answer—an 8 per cent. reduction in greenhouse gas emissions between 2008 and 2012. Indeed, the parliamentary answer is more specific: it states that, as a result of the road fuel duty escalator, on the assumption that it will continue until 2002, between 2 million and 5 million tonnes of carbon will be reduced per year.

How can the Labour party be so specific? It is asking us to believe that a 6 per cent. real-terms increase in road fuel duty will hit the target: not 7 per cent., not 8 per cent., not 4 per cent., but 6 per cent. Let me say to the Minister, for whom I have some regard, that the basing of the objectives that she has mentioned in the House on such indicators as the Department of the Environment, Transport and the Regions' 1997 national road traffic forecast is viewed with considerable scepticism by independent commentators and Conservative Members. If she is asking the public to believe that a 6 per cent. increase is the way in which to deliver those rather spurious targets, she must be living on another planet. It is on that basis that we can say that 6 per cent. is wrong, and that we will vote against it tonight.

Photo of Mr William Ross Mr William Ross UUP, East Londonderry

I shall be happy if the Minister confirms this in her winding-up speech, but it appears to me from what the hon. Gentleman has said that the savings would arise if all the fuel was burned in British lorries. Not all that many trucks are made in the United Kingdom. Surely the fuel will be burnt at the same rate, regardless of who is carrying it, but it will not be carried in British-owned lorries any more; it will be carried by those who are buying the cheapest fuel.

Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds

The hon. Gentleman makes a good point. I trust that the Minister will address it when she winds up the debate.

I believe that the assumption that only a 6 per cent. increase will hit the environmental objectives is bogus; but the problem gets worse. In its "green Budget" report in January, the Institute for Fiscal Studies—a distinguished independent body, as we all know—said that there was an inherent contradiction in the Government's excise duty policy. On the one hand, they see it as a revenue raiser; on the other, they want to affect behaviour. They want to cut down car use and emissions; they want to persuade people to use less petrol and other fuel. Both cannot be right, opines the IFS.