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By Tim Montgomerie
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PetrolPrices

Robert Halfon MP wins front page attention in today's Mail and Times (£) for his campaign to lower fuel prices. More than 100 MPs (including 81 Tories) have signed his ePetition which will be debated today. My guess is that this debate and the issues it raises will be of more relevance at Number 22 Acacia Avenue than the recent ePetition on the EU (although I make no comment on the public's priorities).

The Sun – which has been the campaign's most consistent backer – notes how high fuel prices hit the poorest most:

"The poorest fifth of households spend 3.5% of their disposable income on fuel duty, while the richest spend 1.8%."


The Conservative Research Department has sent out this briefing note for MPs to use in the debate. It's fact-rich and we thought readers would be interested in what the centre is wanting Tory backbenchers to say. Most striking is the claim that – over the course of this parliament – motorists will pay £274 less on fuel duty than if Labour had been re-elected and stuck with their plans.

"Supportive interventions

  • Can my RHF [Right Honourable Friend] confirm that fuel duty is currently 6p lower than it would have been under Labour?
  • Can the minister tell the House how much higher fuel duty would be were it not for action taken at the Budget?
  • Can my RHF confirm that fuel duty was increased 12 times by the previous government and that they had planned 6 further increases?
  • Can my RHF tell the House whether it would be possible under EU law to cut VAT on fuel, as the Party opposite have called for?
  • What lessons does my RHF draw from the letter sent by the European Commissioner for tax to the Member for Devizes, in which he said that the Labour proposal for a VAT cut would be incompatible with EU law?
  • Does my RHF think that given no other EU country has a reduced VAT rate on fuel, and it took the French 7 years to get a VAT derogation on restaurants, that we should abandon any efforts down this path?
  • What representations has my RHF received from the European Commission about the legality of a VAT cut on fuel?
  • Does my RHF agree that as well as taking action to help drivers, it is also important to remember that sticking to our credible deficit reduction is helping to deliver record low interest rates?

Hostile interventions

  • Can the Shadow Minister tell the House how much higher fuel duty would be now if it wasn’t for action by the Government at the Budget?
  • Will the Shadow Minister welcome the fact that fuel duty is 6p lower now than it would have been if we had stuck to the plans of the previous government?
  • Does the Shadow Minister still think we should be arguing for a VAT cut on fuel when this would be illegal under EU law?
  • When Labour came to power in 1997 fuel duty on unleaded petrol stood at 36.86p per litre. When they left office in 2010 it had risen to 57.19p per litre (HMRC, Hydrocarbon oils: historic duty rates, link). Shouldn’t Labour take responsibility for raising fuel duty by over 20p per litre?
  • Labour’s final Budget, which the Shadow Minister supported last year, said that ‘Fuel duty will… rise by one penny per litre in real terms on 1 April each year from 2011 to 2014’ (HM Treasury, Budget, March 2010, p. 8, link). Does the Shadow Minister now regret supporting this Budget?
  • Has the Shadow Minister read Annex 3 of the EU directive on VAT? This lists the categories of goods for which a reduced rate of VAT can be levied – fuel duty is not one of them.
  • I am confident of the Shadow minister’s support for international law. Is s/he aware that their proposal on VAT on fuel would be illegal under EU law?

Political points to make

  • Fuel duty is 6p lower per litre this year than it would have been under Labour. This is because of an immediate cut of 1p per litre on Budget day, and the deferral of the inflation increase in duty that amounted to around 5p.
  • Even after taking into account the effect of the VAT rise, tax on fuel is still 3p lower per litre than under Labour. This is because the VAT rise only added 3p per litre, while Government measures mean fuel duty is 6p lower than it would have been, giving a net reduction of 3p per litre.
  • Labour raised the rate of fuel duty 12 times while in office. When Labour came to power in 1997 fuel duty on unleaded petrol stood at 36.86p per litre. When they left office in 2010 it had risen to 57.19p per litre (HMRC, Hydrocarbon oils: historic duty rates, link).

1.      02/07/97 – fuel duty rose to 40.28p per litre
2.      17/03/98 – fuel duty rose to 43.99p per litre
3.      09/03/99 – fuel duty rose to 47.12p per litre
4.      21/03/00 – fuel duty rose to 48.82p per litre
5.      15/06/01 – fuel duty rose to 48.82p per litre (having briefly been 46.82p)
6.      01/10/03 – fuel duty rose to 50.19p per litre
7.      07/12/06 – fuel duty rose to 51.52p per litre
8.      01/10/07 – fuel duty rose to 53.65p per litre
9.      01/12/08 – fuel duty rose to 52.35p per litre (having previously fallen to 50.35p)
10.  01/04/09 – fuel duty rose to 54.19p per litre
11.  01/09/09 – fuel duty rose to 56.19p per litre
12.  01/04/10 – fuel duty rose to 57.19p per litre

Labour also planned for six further fuel duty rises after the election. Labour’s March 2010 Budget, delivered by Alistair Darling set out seven further rises, one in April 2010, with six planned for after the General Election (HM Treasury, Budget, March 2010, p. 8, link).
 
13.  01/10/10 – 1p rise
14.  01/01/11 – 0.76p rise
15.  01/04/11 – 1p rise in real terms
16.  01/04/12 – 1p rise in real terms
17.  01/04/13 – 1p rise in real terms
18.  01/04/13 – 1p rise in real terms

  • Ed Balls was wrong to say that we can reverse the VAT rise on fuel – doing so would be illegal under EU law.

Claim: ‘cut VAT of fuel and get people back to work and get the economy moving’ (Ed Balls, Daily Politics, 14 March 2011).

Truth: This would be illegal under EU law. The EU Directive on VAT states: ‘Member States may apply either one or two reduced rates. The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III’. Annex III does not list road fuel. Other amending articles do not permit a reduced rate or an exemption to be applied to transport fuel (OJEU, COUNCIL DIRECTIVE 2006/112/EC of 28 November 2006 on the common system of value added tax, Article 98 and Annex III, link).

Ed Balls claims that we could get a derogation from the EU to reduce VAT on fuel.
 
EU tax chief said that this would be incompatible with EU law: Algirdas Semeta, the European Commissioner responsible for taxation and customs said that ‘derogations are only possible in very specific cases’ and that ‘it it difficult to see how a reduced rate for motoring fuel is compatible with these requirements’ (Algirdas Semeta, Letter to Claire Perry MP, 4 May 2011).

But the head of the Office for Tax Simplification said this would be unlikely to be granted. John Whiting, the head of the Office for Tax Simplification, said it would be ‘unlikely the EU would grant a derogation on something as fundamental as petrol’ (CityAM, 15 March 2011, link).

No country in the EU has a reduced VAT rate on fuel. That is explains why no EU27 member has a VAT exemption or reduced rate on petrol (EC, VAT Rates Applied in the Member States of the European Union, p. 16, link).

France took seven years to get a derogation on VAT for restaurants. And it took France seven years to secure their derogation on VAT for restaurants (The Times, 28 April 2009, link).

  • The Budget’s Fuel Duty changes will cut every motorist’s Fuel Duty bill by almost £300 by 2015
  • The Coalition’s Fuel Duty cuts will save motorists £9.4 billion. The Coalition’s Fuel Duty cuts and Fuel Stabiliser will ensure Fuel Duty receipts will be £9.4 billion lower between 2010-11 and 2015-16 (OBR, Economic and Fiscal Outlook, March 2011, Chart 4.3, p. 114, link).
  • 34.3 million licensed motor vehicles are affected. There are 34,257,529 licensed motor vehicles according to the latest official figures (DfT, Vehicles: at a glance figures, 2009, link).
  • So the Coalition has saved every motorist almost £300 in Fuel Duty relative to Labour’s plans. £9.4 billion is £274 per motorist."

38 comments for: Tories claim motorists will save £274 on fuel duty compared to Labour’s plans

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