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Complaints have been made about UK tax levels. The overall context, however, is that our tax burden is much lower than the European Union average. Indeed, 10 EU countries have higher tax burdens. Business tax rates are low, and our corporation tax rate is among the lowest in the EU and well below average. In addition, for small companies the rate is only 10 per cent. We can be proud of our record on reducing taxation on business. Our taxation rates are competitive when compared with those of comparable EU and other countries.
Let me talk about the Government's strategy on fuel duty. The appropriate duty rate will in future be decided Budget by Budget. Opposition Members have criticised that, and the right hon. and learned Member for Rushcliffe seemed to complain both that we had ended the escalator that he created, and that we had been on it at all. I am not clear what his argument amounted to. He may have been suggesting that we should have come off the escalator sooner--I see him nodding--but that policy would merely have added to the £16 billion cuts guarantee that his party must already explain to the people of the United Kingdom.
Mr. Clarke: The Minister cannot continue the debate using the totally bogus £16 billion figure that the Government keep contributing to an election campaign that is totally brain-free on many subjects, particularly economic policy. Would it not have been logical, having started the escalator when we had the cheapest fuel in western Europe, at least to stop its automatic increase once our fuel had become the most expensive in Europe? Did the Government pursue any logical policy, rather than staying on an escalator towards the stratosphere until civil disobedience on our streets sent them into a U-turn?
Miss Johnson: We had already announced the end of the escalator before then. The right hon. and learned Gentleman is obviously uncomfortable about the fact that he introduced the escalator and we ended it, but that is the fact of the matter.
We have used duty differentials to encourage the manufacture and use of cleaner fuels. We have encouraged the use of ultra-low sulphur diesel, which now accounts for 100 per cent. of the road diesel market. The incentives that we recently announced for ultra-low sulphur petrol mean that we expect that to account for 100 per cent. of the petrol market by the middle of June. The Budget introduced a comprehensive strategy to encourage cleaner alternative fuels. Our clear policy on fuel duty has several different dimensions, and it is important that we should maintain that.
Mr. Simon Thomas: Will the Minister address the recent report on fuel duty by the Select Committee on Environmental Audit? That report made it clear that the Government's thinking has been muddled and that not enough environmental modelling has been done on the effect of fuel duty and its relationships with traffic congestion and reductions in greenhouse gases. Does she accept that the Government need to make a far clearer environmental case if they intend to pursue the current rates of fuel tax in future? If they do not, the problems that arose in September will come back.
Miss Johnson: I do not accept that our position is in any way muddled. However, the Committee is fully entitled to its view. We have looked at the triangle of difficult issues and achieved the right balance between them--between the environment and environmental needs, the costs of motoring, and the revenues from fuel duty. We need to balance those issues and we have made those difficult decisions, leading to the 4p equivalent cut for motorists and the 7p equivalent cut for hauliers.
I point out to those Members whose memories seem remarkably short that the percentage of tax on a litre of petrol has not really changed. Indeed, in May 1997, tax was 77.5 per cent. of the cost of a litre of petrol, whereas it is now 74.7 per cent. on lead replacement petrol and 75.3 per cent. on ultra-low sulphur petrol. Several statistics were falsely bandied about by Members during the debate, and I need to put the record right.
Miss Johnson: I do not have that figure to hand. The point being made by the hon. Gentleman and by other Opposition Members is that the proportion is dramatically different. It is not dramatically different; it is almost the same--if anything, it is slightly lower--so the point is not relevant.
I remind hon. Members that the wider choice of cheaper motoring that we want to see has also been initiated through policies on car use. There is a reduced rate of vehicle excise duty on cars with smaller engines registered before 1 March 2001. It is being extended on 1 July 2001 to all cars with an engine threshold of up to 1.5 litres, and will eventually be backdated to November 2000. As hon. Members know, that will reduce the cost of VED by £55 a year for an extra 5 million car owners. In addition, all car and motor bike VED rates were frozen this year. Those are relevant considerations when considering the cost of motoring.
I accept, however, the comments made by several Members that for people living in, and travelling to work from, rural areas, motoring costs are more significant than they are for people in urban environments. However, we have introduced a 7p equivalent cut in the rate, and that is an especially big help to motorists in rural areas.
Arguments were made about smuggling in Northern Ireland, and the differentials in duty rates between Northern Ireland and the Republic of Ireland. Those arguments always strike me as curious. UK rates are set for good reasons. The Government are well aware of the smuggling problem in Northern Ireland, but we shall not allow our policies--or the livelihoods of legitimate traders--to be undermined by the activities of criminals.
I am puzzled by those arguments, because they sometimes seem like arguments for tax harmonisation, which the Government completely reject. Instead, Customs and Excise has developed a strategy to tackle oil fraud. In Northern Ireland, that strategy includes significantly increased resources, which have been in operation since 25 September last year and have resulted in greatly enhanced enforcement activity. The aim of Customs and Excise is not only to seize more smuggled petrol and diesel but to ensure that its activity has an impact on the illicit market.
A question was put about the hypothecation of fuel tax for investment in public transport. For the pleasure of the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore), I reiterate that we do indeed have a £180 billion, 10-year public investment strategy plan--we are extremely proud of it. The plan represents an increase of current expenditure by about three quarters. In the pre-Budget report in 1999, we agreed that any money derived from any future real-terms increase in fuel duty should be hypothecated for transport spending. That point has already been taken on board by the Government.
I conclude by reminding hon. Members that, as I have said before, if they support the amendment, which is irresponsible, they should say where the money would come from and what would be cut. We have ensured that our monetary and fiscal policy adds up, that we are making the key investments in public services, and that we are tackling the disadvantage that some hon. Members have highlighted.
In talking about some of that disadvantage, especially that in rural areas, Opposition Members forget the importance of the work being done for those on low and average incomes through the introduction of the working families tax credit, the national minimum wage, the children's tax credit and the cuts that we have made in direct taxation. In all those ways, Opposition Members have neglected to view the Government's policy in its wider context, so I recommend that the House oppose the amendment.
Mr. Salmond: I assure the Economic Secretary that 75 per cent. of almost £4 a gallon amounts to more in monetary terms than 77 per cent. of less than £3 a gallon. She must take my word for that, but it is absolutely true. She may want to ask the mighty expertise at her disposal in the Treasury to work out that sum, but I can give her an absolute assurance that the sum that the Government are taking in petrol duty has vastly increased during the new Labour party's term in office.
What does the Economic Secretary's speech amount to? She suggests that the Government's proposed 2p cut in the price of ultra-low sulphur is a wise act of policy, but that the 4p cut proposed by the Scottish National party is wildly irresponsible. However, the reality is that the cut proposed by the Government--and, indeed, the decision to step off the fuel price escalator--were brought about by force majeure, because of the impact of a massive fuel tax protest. That was not an act of policy; it was an act of panic, and everyone knows it.
If the Economic Secretary cares to check the record, she will see that the SNP has consistently opposed that approach to petrol taxation, which was, I agree, started by the Conservative party--but it was continued by the new Labour party. The reason why we oppose the policy is simple: it is a blunt instrument. In pursuing the policy that the Government inherited from the previous Government, they tax most the people who do least environmental damage to the overall economy.
Not only is the price of petrol higher in rural areas, but the taxation on every gallon of petrol is higher, because the element of taxation depends on the overall price. The policy is perverse. There are much better and more sophisticated ways to approach environmental taxation.
Matthew Parris wrote an interesting article today, in which he speculated that if the new Labour party won the election, every Minister and Labour Back Bencher would have to get used to the fact that they would no longer have the luxury of blaming the previous Government for their mistakes, because, of course, they themselves would be the previous Government. I hope that when the Economic Secretary has had time to think about some of the arguments that she has used today, she will realise their fragility. Despite being totally unable to tell us what the Government's expectation was in 1999 of what the price of a gallon of petrol would be now, she argued that the policy was based on environmental grounds.
That idea was always a phantom. The policy was always about cash for the Treasury, not about concern for the world environment. It was never green; it was always Brown. That is the reality of the policy, and it does huge damage to the rural economy, in particular, and to every consumer and everyone who depends on the price of transport when purchasing goods in the shops. The Government have not gone far enough to draw the sting from this as an election issue.
If proof positive of that final statement were necessary, the fact that five Labour Members from Scotland have attended the debate without one of them indicating a wish to speak shows that they understand that when people--