Parliament is currently debating how best to power Britain over the next fifty years. As part of the Government’s Energy Bill we have been discussing issues of Carbon Capture and Storage and Offshore Gas Supply infrastructure, of the decommissioning of offshore renewable, oil and gas installations and Nuclear Waste. They are certainly crucial to the national interest but they also impact upon every business in the land.
However the most important issue occupying the minds of local businessmen and women at this moment revolves around the price of energy. In the last month alone, road hauliers have expressed outrage at spiralling fuel prices, residents have been in uproar over wind turbines in Northampton and the Government has made pledges to abolish fuel poverty. I wanted to use this article to touch on the way that our changing energy needs are affecting local businesses.
Petrol price inflation has run at three times the official rate of inflation since 1997. Whilst it is true that international oil prices are rising, a key part of the reason why the cost of fuel is increasing is the amount of tax taken by the Chancellor in fuel duty.
Tax constituted 86% of the total cost of fuel as recently as 1999 and the fact that the percentage has now fallen to 60% for petrol (56% for diesel) is more attributable to the spiralling cost of oil, although it must be recognised that the actual tax take has increased sizeably. In other words the Government is doing very nicely thank you.
In the UK petrol consumption fell in each year between 1998 and 2007, while diesel consumption increased in each year. The total drop in petrol consumption over this period was 18%, while diesel consumption rose by 40%. In fact, diesel became more popular than petrol in 2007.
The combination of record world oil prices and high fuel duty represents a serious problem for companies up and down the country. Bulk diesel has soared by 40% in the last year, a figure which is artificially high compared to other EU countries. The UK still has the highest diesel prices in the EU despite having the fifth lowest pre-tax price. In fact the diesel duty rate in the UK is 12.8 pence per litre (or 25%) higher than any other EU country and 80% above the simple (unweighted) average for the other 26 countries.
The Government has been repeatedly criticised for not being clear about how it is using the additional revenue levied from taxes on motoring. In 1999 Gordon Brown, then Chancellor, promised that if there were any real term rises in road fuel duties, the revenues would go straight to a ring-fenced fund for the modernisation of roads and public transport. This has not happened, and the Government has failed to deliver improvements in alternative forms of transport - compounding the difficulties for millions of people across the country.
The Prime Minister blames the rising price of fuel on global oil prices, but forgets to mention that 66p of the average price of 110p a litre is Treasury tax. As a percentage the UK taxes motorists more than the USA, France, Germany and Italy.
As my Conservative colleague, Alan Duncan, pointed out, ‘economic grievance is the greatest threat to electoral popularity, and so politicians are thrashing around for someone to blame. That blame has settled on OPEC.’
My own party will shortly announce plans to address this situation by improving public transport and the transport infrastructure in the UK but apportioning blame to OPEC is not the answer. Finding a way to help businesses is. In the past month two trade groups have approached me over problems these inflated prices are causing.
Northampton’s Hackney Cab Association can not be alone in finding the costs hard to bear. Unlike Private Hire firms Hackney Cabs are licensed by Councils and have their fares set. I know first hand of some drivers on the verge of quitting the industry because the recent permitted rise in fares has hit their already small profits. They have lobbied hard for bigger increases but so far they have achieved little improvement.
Hauliers face similar problems. The campaigns that are currently underway are to petition the Chancellor to put off the proposed 2p fuel duty increase scheduled for October. The truth is that the extra 2p will provide another spur for increased prices and bearing in mind the Government’s windfall, to my mind, should be scrapped. Many firms will be unable to assimilate the increased costs and will be forced to pass those increases onto the customer, adding yet further to family bills. But more importantly, given the massive competition from overseas hauliers who operate under more lenient conditions enjoying cheaper fuel and labour costs and who have been given much more freedom recently by the EU to exploit the British market, our hauliers will come under even greater competitive pressure through not fault of their own and many could go to the wall. Our Government needs to take urgent action to more robustly protect them against the onslaught of this unfair competition.
In Northamptonshire there is a particular problem which we referred to the Office of Fair Trading. It was noted that petrol prices in the County were consistently 2-6p higher than surrounding areas, such as Milton Keynes, Peterborough, Nottingham and Leicester. I raised the issue in the House recently and was delighted that the Minister agreed to meet with me on this issue. It is a promise I will pursue.
The problems such prices create hit all consumer based businesses, who in turn are likely to pass those costs on to the consumer. So it is in the Government’s interest to ensure that it does all it can to keep the price of petrol down to a minimum.
It is of course important that we all do what we can to help the environment, but taxing the small business is not the answer. I have always favoured incentivisation rather than punishment, especially when you threaten budding entrepreneurs. I do hope that it is not too soon before the Government realise the damage being done to businesses in this country by the fuel costs but until they do, and take action to help it, I will continue to raise the issues in the House of Commons.