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We think that amendment 13 represents the right approach and I hope to press it to a Division. As for amendment 11, although the Conservatives have historically resisted its proposals, they changed their minds last year. Their amendment uses different words, but its fundamental objective is the same: not the mitigation of all price rises, but the smoothing out of the spikes. They propose a two-way regulator, whereas mine is open. In other words, they propose reductions in duty when the price rises and increases when it falls. I am relaxed about that, because the purpose is to deliver stability.

Mr. Reid: The hon. Gentleman refers to a two-way regulator, but although his proposed subsection (1AB) in amendment 13 contains the words “reduce the rates”, the amendment does not make any reference to increasing the rate.

Stewart Hosie: I would leave the statutory instrument to decide that. As I have said, if the SI were to opt for a two-way regulator, I would be perfectly content, because this is about stability, not about who wins political points. As I said in last year’s debate, when the Conservatives changed their minds, I do not care whether we have a fair fuel stabiliser, a fuel duty regulator or the version proposed by the hon. Member for South Thanet (Dr. Ladyman), a former Transport Minister. We need to finalise a deal with families, hauliers and businesses to smooth out price spikes so that we do not experience the shocks to the system that we encountered in 2005, 2006 and 2008.

Mr. Jeremy Browne: I think that the hon. Gentleman should deal with the previous intervention in slightly
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more detail. He seems keen to give the impression that his amendment would benefit motorists and that, by and large, it would lead to them paying less duty. When it is pointed out to him that they might pay more in some circumstances, he is quick to say that all that will be dealt with by a statutory instrument and that we need not consider it at great length now. However, there is a real possibility that if we vote for his amendment, we will be voting for all our constituents to pay more for their fuel than they would otherwise.

Stewart Hosie: I have said four or five times that this is about stability, certainty and smoothing out the unexpected spikes that are so damaging. I know that there are Liberal Democrat Members who have supported that concept in the past. I know that there are others who have more difficulty because of their alleged green policy. If the hon. Gentleman—I say this kindly—wants an excuse not to vote for the amendment, he can have one, but I am putting forward a proposal that is gaining support from other parties. It was massively supported in the real world last year. I hope to press the amendment to a Division. With the greatest respect, I hope that he can see his way to support it, because his constituents would benefit from it.

The Second Deputy Chairman: I now have to announce the result of a Division deferred from a previous day. On the Question relating to the Equality Bill carry-over, the Ayes were 331 and the Noes were 136, so the Ayes have it.

[The Division list is published at the end of today’s debates.]

Mr. Gauke: It is a pleasure to follow the hon. Member for Dundee, East (Stewart Hosie), who rightly set out the concerns that exist about wanting to smooth over the oil price spikes that have an impact on our constituents as petrol and diesel prices increase. I say at the outset that Opposition Members support the objective of ensuring that a greater proportion of taxation is raised by environmental taxes, and fuel duty is the key, principal environmental tax that we have in the United Kingdom.

Angela Eagle: I wonder whether the Conservative party still supports the idea that that increase in money from green taxes should be put into a separately audited family fund, which was the original announcement?

Mr. Gauke: We want to reduce the tax burden on good things and we would pay for that by increasing the tax burden on bad things. We think that the proportional shift needs to be moved on to carbon and pollution. I am sure that the Minister will be delighted to learn that details of our policies will be made clear in due course.

We recognise that fuel duty is an environmental tax, that it is going to play a part in addressing carbon emissions and that it raises a great deal of revenue for the Exchequer. We do not in any way dismiss it, but we also recognise—I think hon. Members on both sides of the Committee do—that there are times when fuel duty causes considerable pain to our constituents. It does hurt.

We have already heard references to particular groups and rural areas. I know that we will be debating this matter at greater length later, but rural areas particularly feel the pain of higher fuel prices. We know that hauliers
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feel the pain. All of us can recall, especially those who were in the House at the time—I was not—the hauliers protest in 2000.

Mr. Jeremy Browne: In 2001.

Mr. Gauke: We have a dispute, but I think it was 2000. We also know that in the summer of 2008 there was a great deal of concern about fuel prices.

In recent years, the Government have lacked a clear framework on how fuel duties should be raised. They continued the fuel escalator that was brought in by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), but that in turn had to be abandoned when it was no longer sustainable. Having stepped on and then off the fuel escalator, there have been times when the Government have announced a fuel duty increase only then to postpone its implementation. At other times, they have introduced unexpected increases, as we see in clause 16 and the announcement to move back on to the fuel escalator with substantial increases in fuel duty both before and after the next general election.

The problem with the Government’s position is the lack of a framework, which is why we opposed their Budget resolution measures. Essentially, we think that the Government policy on fuel duty is unsustainable in the sense that it is not possible to bring along public support unless the oil price remains low. In a period during which the oil price rises, there is a distinct risk that the strength of public opinion will lead to any Government feeling under great pressure to abandon the fuel escalator. We will then be left once again in a period in which there is no stability or certainty about the direction we are going in.

4.15 pm

We share the objective of the hon. Member for Dundee, East of trying to address what we should do when there is a spike in the oil price. Our proposal is the fair fuel stabiliser. The intention of amendment 11 is to ask the Government to review how this policy could be implemented, just as we are doing in consulting on the issue. In essence, what we are looking for is a mechanism whereby when fuel prices go up, the fuel duty will fall, and when fuel prices go down, fuel duty rises. It is not a blinding revelation to state that fuel prices hurt people when they are at their highest, and that is when the political pressure in respect of fuel duty is at its greatest. There are a number of advantages of going down this route.

Mr. Alan Reid: As the hon. Gentleman well knows, the price of fuel was considerably lower at the time of this year’s Budget than at the time of last year’s Budget. Therefore, if this fuel stabiliser had been introduced last year, how much higher would the price of fuel at the pumps be now compared with the actual current price?

Mr. Gauke: I will not give precise figures, as we are consulting on this. The principle the hon. Gentleman puts forward is absolutely right, however: when fuel prices fall, the duty will increase. It will not do so to the extent that the actual fuel price will increase; it will just not fall as much. Equally, when fuel prices are rising,
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there will still be an increase, but not by as much. This is a stabiliser, but it is not an attempt to fix a price—so that it shall be 97p a litre for ever more, for instance. The price will still vary, but we will smooth out the bumps. I think that that is an objective that the hon. Member for Dundee, East has set out. We have also identified it as a laudable objective, and we think that there is a practical way of achieving it.

Sir Robert Smith: What the hon. Gentleman is identifying is the fact that fuel duty is a very crude method of sending an environmental message to motorists. Does he think that, in the long run, the best way of smoothing this out and sending that signal to motorists will be to move towards introducing road user pricing, not fuel duty, as a mechanism? That will also deal with the rural and haulage issues, as well as the level playing field issues.

Mr. Gauke: I note the hon. Gentleman’s point, but I am focusing today on fuel duty. I think we can address that in the short term. There are various issues to do with road pricing, and it needs to be looked at in more detail. I do not want to go too far down that road—whether it is priced or otherwise. I take on board his point, however.

Angela Eagle: The hon. Gentleman is talking about smoothing out bumps, which I am always in favour of doing, especially when I am doing my ironing. Will he tell us a bit about where he would set the baseline, because that is important? If one is smoothing out the bumps, one has to have a place where one thinks the price is reasonable, and that is a very difficult area of this entire debate. We all have to remember that we are dealing with a very volatile commodity price.

Mr. Gauke: The Exchequer Secretary makes a good point; one of things that we have asked in our consultation is where and how one sets that baseline. It is possible to find a baseline that recognises where the burden falls on the motorist and what an acceptable level is. That is not an insuperable difficulty.

Stewart Hosie: I agree that it is not insuperable. Once the baseline is identified, the real key is the ability to reset it at regular intervals. One of our suggestions was that at the Budget and the pre-Budget report the ticker could be reset, so that if we found that there was a structural increase, the baseline would be reset, whereas if we found just a cyclical change or a spike, it might not need to be reset. The timing is as important as the baseline figure.

Mr. Gauke: The hon. Gentleman makes a good point. I agree that there needs to be flexibility on the baseline and that it needs to be reviewed regularly, but that in no way undermines the stability that could be brought to fuel prices. The stabiliser has a number of advantages. Leaving aside the big advantage that it protects the public from spikes in oil price, it helps price stability as a whole. Fuel prices can contribute to inflation significantly, so the stabiliser would assist the Monetary Policy Committee of the Bank of England in ensuring that its attempts to target inflation were not affected by volatile international markets.

We have some difference with the Scottish National party on how we would pay for and justify our approach. The hon. Gentleman makes the case in his amendment
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that the Government benefit from increased VAT when oil prices increase and that that windfall can be used to reduce fuel duty. I am sure that the Exchequer Secretary will make the point—that, in itself, does not make it wrong—that consumers then spend less on other things. With an increase in the VAT revenue obtained from fuel, there tends to be a decrease in revenue from other areas. However, there is a link with North sea oil production and the revenue that comes from it. When oil prices fall there is a shortfall in that duty, but when they rise there is an increase in that duty, as the numbers for the past couple of years show. In 2008-09, the revenue from North sea oil increased by 66 per cent. when oil prices were increasing, whereas the revenue will halve for 2009-10—at least that is the Treasury’s estimate—as oil prices fall. That is what happens when fuel prices move in opposite directions. Thus, we believe that over a cycle—over a reasonably long period—this proposal would be revenue neutral, and that we can do things in a more cautious way. The proposal would provide stability to not only personal finances, but the public finances.

The environmental case is that if the price of carbon were stabilised, it would be easier for businesses to plan ahead. Environmental taxes work most effectively when they are kept stable—a point made by the Stern review—and there are no risks of fluctuations in the marginal costs that could increase the total cost of any mitigation policy. As far as our carbon emission target is concerned, it would be beneficial to have a mechanism ensuring that we were not quite so dependent on volatile international oil markets.

Finally, some 20 businesses cover 99 per cent. of fuel sales. They should be able to administer a fuel stabiliser, and we want the Government to investigate whether that would be practical. Consultation would be needed as to how that would work precisely—for example, how frequently it would need to be reset, as the hon. Member for Dundee, East mentioned.

This proposal could be a useful addition to the fuel duty structure—

John Thurso: The hon. Gentleman has not touched on the differential in price in remote areas. How would his stabiliser help those people who are paying 14p, 20p or even 25p more a litre than those in metropolitan centres?

Mr. Gauke: We will turn to the issue of remote areas in the next debate, and I see that the Liberal Democrat Benches are filling up, as they traditionally do at this point in deliberations on the Finance Bill— [ Interruption. ] My hon. Friend the Member for Poole (Mr. Syms) will have to spread out a little.

Mr. Alistair Carmichael (Orkney and Shetland) (LD): Is the hon. Gentleman saying that the Liberal Democrat Benches are filling up because this is an issue about which we care? Should we infer from the state of the Conservative Benches that this is an issue about which the Conservatives do not care?

Mr. Gauke: I think that we should infer that this is an issue on which many Liberal Democrats will be sending out press releases to their local press. I suspect that many Conservative Members will be sending out press releases on amendment 5—

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Mr. Syms: My hon. Friend should take the lack of support as a sign of confidence in his ability to command the Committee.

Mr. Gauke: I am very grateful for that intervention and I am sure that my hon. Friend speaks not only for himself, but for the party as a whole.

We urge the Government to investigate the fair fuel stabiliser with a view to implementing it. Their approach to fuel duty has been ad hoc and haphazard and there is a lack of certainty about where we will be in future. To some extent, the Government are reacting to fuel prices and pursuing a fuel stabiliser policy almost by default—when fuel prices fall, they are bolder in their increases, but when fuel costs rise they hesitate to raise duty. That is understandable, but we think that such decisions should be made within a proper framework. It would be good for inflation targeting, public finance stability and the environment. I hope to have an opportunity to press amendment 11 to a Division.

Mr. Jeremy Browne: Thank you, Sir Michael, for giving me the opportunity to speak on this group of amendments. I echo the concerns expressed about the difficulties faced by motorists and businesses when fuel prices rise and when they are high, as well as about the impact on businesses of other higher commodity prices. It is advantageous to businesses and individuals if budgets can be planned in advance; price volatility makes it harder for any individual or organisation to plan to such a level.

4.30 pm

I have sympathy for the hon. Member for South-West Hertfordshire (Mr. Gauke). I know that he instinctively believes in free-market economics, yet he has been overruled by people in his party who have required him to come here and give us a sort of reheated 1970s form of socialism. He made a good attempt to argue for it. He said that the Government arrangements were ad hoc and haphazard, but that is called the free market. He seems to want prices to be determined not by supply and demand but by the wisdom of the shadow Chief Secretary to the Treasury. That is not the intellectual case that the Conservative party has made for the past 30 years.

The Conservatives say—this is essentially the point made by the Scottish National party, too—that oil price variants are potentially problematic, which is why they would introduce a fair fuel stabiliser. However, when food prices vary or are volatile, that can be problematic for consumers or businesses. A huge increase in the price of milk or bread has an impact on the bottom line of a catering business, so I look forward to the Conservatives’ fair food stabiliser. What about the effect on businesses when energy prices vary or when gas or electricity prices go up? That will have an impact on nearly all businesses, but it will have a profound impact on those that are particularly energy intensive. When will the Conservatives introduce their fair energy stabiliser? The truth is that they regard those matters as less politically sensitive and, as a result, they do not have stabilisers. That is not because of intellectual coherence, but because they think that it is not electorally expedient.

Mr. Gauke: The distinction is very clear. The majority of the cost of fuel is a duty of tax, but the same does
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not apply to food or energy. We are not trying to set a price that everyone must sell at or intervening in the contractual relationship between a buyer and a seller with some sort of price policy. We are simply varying that element that is within the Government’s control—the duty—depending on what we think individuals and businesses can bear.

Mr. Browne: In that case, I look forward to the fair alcohol stabiliser that the Conservatives will no doubt introduce in due course when the core ingredients of beer, for example, go up, as commodities do in the market place.

Both the Conservatives and the Scottish nationalists are extremely coy about the downside of their proposals. I noticed that the hon. Member for Dundee, East (Stewart Hosie) said that the purpose of amendment 13 was to smooth spikes in oil prices. What he did not say—I can only infer that this must be the case—was that he would also smooth out the troughs: that is, that he would put prices up. Otherwise, he would not be smoothing out anything at all. There has to be a downside as well as an upside. The Conservative spokesman, using almost exactly the same language, said that his amendment would smooth out the bumps. That is the difference between the SNP and the Conservatives; the Conservatives deal with bumps, not spikes. Presumably, he would also smooth out the dips at the same time.

My hon. Friend the Member for Argyll and Bute (Mr. Reid), with characteristic diligence, has done some more research into the effects of Conservative party policy. I must admit that I look forward to the Conservatives distributing leaflets on the issue in my constituency—as Michael Ashcroft put so much money into their endeavours, they must be able to afford to do so. Let me run through the effect of their policy. This is not a party political point—it is central to amendment 11.

According to the average UK fuel prices published on the AA website, at the time of last year’s Budget, March 2008, a litre of unleaded petrol cost 106.8p. It cost 118.2p in June, when the House had the opportunity to vote on the Budget proposals. The price rose by 11.4p between the Budget and the vote in the House, which allowed the shadow Chief Secretary to the Treasury to say that the fair fuel stabiliser would cut the cost of petrol by 5p a litre.

However, with his characteristic generosity, my hon. Friend the Member for Argyll and Bute said that he had calculated the saving to the motorist of last summer’s Conservative party policy at 5.7p a litre. That seemed very popular, and people asked me why the Liberal Democrats opposed the policy. They said that the rises in prices were extremely unpopular, and that the Conservatives seemed to have reached a brilliant conclusion. They seemed to know better than the market, and to have an electoral advantage in pursuing that option.

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