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[Un-allotted Half Day] — Fuel Costs

Part of Opposition Day – in the House of Commons at 7:04 pm on 7th February 2011.

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Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales) 7:04 pm, 7th February 2011

Diolch, Madam Deputy Speaker. I am delighted to have the opportunity to close the debate on behalf of the Plaid Cymru and SNP group. Our combined parties have campaigned on this issue for a number of years, not least in tabling amendments to Finance Bills in 2005 and 2008. It is somewhat disappointing that, in our first Opposition day debate of the Session, we must once again highlight the need for Government intervention to stabilise fuel prices.

Fuel prices are driven by the global price of oil and by domestic taxation. In the case of global oil prices, the trajectory is likely to go in only one direction, as oil is a finite resource. It is already being traded at over $100 a barrel. As the world economy recovers, the price will rise further as a result of increasing demand, especially from the emerging countries and, in particular, China. Volatility will only be exacerbated as we reach peak oil. Oil prices will also inevitably increase as a result of the long-term deflationary policies of the United States Government. Oil is traded in dollars, and a weakening dollar pushes up oil prices as producer countries try to make up for the shortfall of a currency whose value lessens. I echo the call of the French President, Mr Sarkozy, for a long-term agreement between oil-producing and consumer countries to offer more stability on prices.

Fuel prices are obviously influenced by domestic taxation, and it is with that element that we are concerned today. Duty on fuel in the UK represents about 65% of the price of fuel at the pump, if my sums are correct. Clearly, the higher the price of wholesale oil, the higher the tax receipts raked in by the Treasury. As is shown by an excellent House of Commons Library research paper, petrol duty in the UK is the second highest in the European Union, and the duty on diesel is by far the highest. While most other countries impose different levels of duty on road petrol and diesel, the UK's rates are exactly the same, which means that the UK's diesel prices are far higher than those of our European partners.

There are three general reasons for the need for a mechanism to stabilise fuel prices via control of duty. First, the volatility of fuel prices has far-reaching social and economic consequences, and we therefore need a mechanism to dampen the peaks and troughs. Secondly-as we have heard in a number of notable speeches today-surges in prices have a disproportionate effect on some sectors of the economy, some sections of society, and some geographical parts of the state. Thirdly, green taxes must be linked to clear environmental criteria, because otherwise the public will believe they are just another cash cow and there will be a loss of support for environmental taxation. That would be a disaster, in view of the challenges that we face as a nation and, of course, throughout the world.

Let me stress that we are not arguing for the introduction of something new and untested. Many OECD countries have mechanisms to regulate the price of fuel. France has a fuel regulator, and Canada even has a regional fuel stabiliser. If we were to adopt a similar system in the United Kingdom, I should like to advance a special case for south-west Wales.

In adopting our policy following the Finance Act 2008, the Conservative party's 2010 general election manifesto stated:

"We will consult on the introduction of a 'Fair Fuel Stabiliser'. This would cut fuel duty when oil prices rise, and vice versa. It would ensure families and businesses and the whole British economy are less exposed to volatile oil markets, and that there is a more stable environment for low carbon investment."

I could not agree more, and I look forward to the support of hon. Members who stood for election on the basis of that manifesto commitment when the House divides later this evening.

We have had a very interesting debate, featuring many positive and informative contributions. Stewart Hosie, in his usual ultra-detailed opening remarks, made a comprehensive case for the need for a stabilising mechanism. I urge those who missed the beginning of the debate to read his speech, and I hope one day to be able to rival his knowledge of these matters. He made the specific point that rising fuel costs constituted a significant economic head wind. Given the recent deliberations about the Government's lack of a growth strategy, I humbly suggest that that is one idea that they should fully embrace.

The Minister defended the Government's position admirably by blaming the previous Administration, but while we welcomed her comments about the rural derogation pilot and look forward to further progress her suggestion that the devolved Governments could intervene to reduce the burden on families was somewhat weak. Much as I should like the Welsh Parliament to have the taxation powers that would enable it to intervene, this is a matter for the United Kingdom Government. They need to take the necessary responsibility and introduce proposals of their own, rather than blaming the previous Administration and placing the onus on the devolved Governments without giving them any power. That seems to have developed into a growing theme in recent months.

Kerry McCarthy confirmed that the Labour party opposes any stabilising mechanism. I am sure that colleagues who will fight Welsh Assembly elections and Scottish parliamentary elections in a few months' time will remind electors of Labour's policy.

David Morris noted the problems that small companies-notably the haulage industry-face in his constituency.

As usual, Paul Murphy spoke with great authority. He concentrated on the importance of small and medium-sized enterprises to the Welsh economy. I echo his views and look forward to his support in the Lobby later.

Mr Reid highlighted the specific problems faced by communities in the Scottish islands, and I thank him for his contribution.

My hon. Friend Dr Whiteford made a strong case for the food processing industry in her constituency. She discussed the added burden that that industry faces as a result of spikes in the price of oil.

Stephen Phillips made a staunch defence of the Government's position. We would welcome a derogation pilot in England, as he suggested, because if it worked in remote parts of England it would work in Wales and mainland Scotland, too.