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[Un-allotted Half Day] — Fuel Costs

Part of Opposition Day – in the House of Commons at 7:15 pm on 7th February 2011.

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Photo of David Gauke David Gauke The Exchequer Secretary 7:15 pm, 7th February 2011

As the Economic Secretary stated, the Government are engaged in informal conversations with the European Commission and we hope to be able to bring together our representations in a formal submission to take this forward, but this matter is not as simple as the hon. Gentleman might like it to be. We are considering the exact scope of the scheme, although the inner and outer Hebrides, the Northern Isles and the Isles of Scilly will certainly be included. May I say to him, and to other hon. Members such as my hon. and learned Friend the Member for Sleaford and North Hykeham and my hon. Friend Heather Wheeler, that we can go ahead only when we have got clearance from the European Union? It is important to set out proposals that will achieve that clearance and we can then obtain the unanimous support of the 27 EU member states, which is what we require. Productive discussions are ongoing and we will of course update the House whenever we have any further progress. I hope that we will be able to provide a further update at the time of the Budget. Hon. Members should note, as, to be fair, Mr MacNeil did, that at least this Government are trying to make progress on this area. The hon. Member for Bristol East did not even make it clear today whether she supports our even trying to do something on this issue, and that is a remarkable position.

The fuel stabiliser proposal was raised by a number of hon. Members, and Stewart Hosie, in particular, has taken a close interest in it for many years. There is an argument that higher oil prices will automatically lead to higher tax revenues. The Conservative manifesto said that the Office for Budget Responsibility would seek to review this policy to see what we could do in this area. We did ask the OBR to examine how the oil price affects our economy in order to determine how the Government could share the burden of high oil prices and see whether a fair fuel stabiliser could work in practice. The OBR's assessment was that increases in tax revenue received from oil and gas production can be easily offset by things such as higher inflation, which would lead to higher benefit payments and a further drain on the Exchequer. The reality, as set out by the OBR, is that there is no sudden windfall for the Exchequer as a consequence of higher oil prices. None the less, we recognise the strains that this situation causes and we continue to examine a range of options, including the fair fuel stabiliser. It is right that we must ensure that whatever we do is not only fair, but affordable.

This Government understand the problems people are facing and are taking every action possible to help those most in need, but we also know that we have to act responsibly and ensure that we tackle the record national debt. The increases in fuel duty result from the previous Government's proposals. Some people argue that we could abandon those proposals, but it is not clear whether that is the position of the Labour party. We need to strike a difficult balance, but our priorities are clear. We must get the economy back on its feet and we must have a private sector leading the recovery and creating new jobs. In contrast to our predecessors, we are seeking to address the genuine concerns that exist about rising fuel prices and we are determined to settle on a proposal that is fair, sustainable and fiscally responsible.