Northern Ireland Assembly Flax Flower Logo

Northern Ireland Assembly

Monday 18 September 2000 (continued)

Fuel Costs


Mr Beggs:

I beg to move.

That this Assembly expresses its concern at the escalating price of fuel and calls on the Chancellor of the Exchequer to take measures to lessen the impact of high fuel costs on the economic well-being of Northern Ireland and its people, and to encourage other EU member states to bring their tax on fuel into line with that of neighbouring countries to allow fair competition and to discourage the illegal transportation of fuel across national boundaries.

I thank Nigel Dodds for agreeing to sponsor this motion along with me. I would also like to thank my Ulster Unionist Assembly Colleague Danny Kennedy, who worked with me on my original motion.

I first discussed the possibility of a debate two weeks ago. Since then the issue of high fuel taxes has been driven to the top of the United Kingdom's national political agenda. I am pleased that fuel distribution has resumed in Great Britain and that the protestors have ended their campaign, retaining the moral high ground and with public opinion on their side. The Labour Government appears to be in listening mode now. Neither the Labour Government nor Labour MPs have the same susceptibility to pressure here in Northern Ireland. Disruption to the economy was estimated to be costing £250 million per day and would eventually have brought the country to its knees. Given this and our own economic background, it would be neither appropriate nor effective to replicate such action in Northern Ireland.

I welcome the work of the fuel crisis group, which was hastily formed last week. I see some of its members in the Gallery today. The group represents a wide spectrum of Northern Ireland industry, including CBI Northern Ireland, the Northern Ireland Chamber of Commerce and Industry, the Federation of Small Businesses, the Petrol Retailers Association, the Oil Promotion Federation, the Road Haulage Association, the Freight Transport Association, the Ulster Farmers' Union, the Northern Ireland Fishermen's Federation and fish producers' organisations.

I hope that this debate, together with lobbying and the media event that I understand is being organised outside, will help focus our discontent about high fuel costs within Northern Ireland. I strongly support the view that there should be no traffic disruptions in Northern Ireland.

In the United Kingdom, petrol and diesel are supplied at competitive prices, before tax, compared to those in other European countries. Our Chancellor then applies the highest fuel taxes of any country in the European Union. We end up paying the highest fuel costs in the EU. Including VAT, tax accounts for some 75% of pump prices. Is it any wonder that the electorate does not believe Mr Blair when he tries to blame others for the high cost of fuel?

Some Members have pointed out that fuel tax is a reserved matter, but this debate provides a democratic outlet for discussion within Northern Ireland. Furthermore, we might be able to contribute to the change that is starting to happen in the rest of the United Kingdom. This same motion could very easily be put before the Welsh Assembly or the Scottish Parliament. That would build pressure on Labour Back-Benchers. I have received cross-party support in the Assembly. Should the motion be passed, I intend to seek support from other devolved bodies. This would undoubtedly have some effect.

The Chief Whip of the Ulster Unionist Party in Westminster, Roy Beggs MP, has confirmed that he will seek support for an early-day motion on this issue. The campaign may build from the regional Assemblies, gather cross-party support at Westminster and put pressure on the Government. It is important that we continue to add to this pressure to reduce the high fuel tax that distorts trade in Northern Ireland and encourages smuggling in this part of the United Kingdom. The Department of Environment may have some role to play. I have spoken to the Minister, Mr Foster, and some members of the departmental Committee.

I have been working on this issue for over a year. I highlighted the fact that the Department of Environment, which licenses road hauliers in Northern Ireland, had never revoked a licence as a result of smuggling.

12.00 pm

We wish to ensure that there is fair competition in Northern Ireland, and I understand that the Department has the power to consider the standing and reputation of an operator when issuing a licence. It would be in order to reassess whether some operators who have been caught smuggling should be allowed to trade legitimately in Northern Ireland.

On a wider issue, linkage between the various Departments is necessary. At present, if a haulier is caught smuggling, no record is made of his company's involvement and nothing appears on his licence, provided that the fine is quickly paid, and often it is paid in cash. The Departments need to liase with Customs and Excise, which should pass such information on. The Committee should also be dealing with this issue.

Driving around Northern Ireland, I occasionally notice signposts advertising diesel at exceptionally low prices, lower than our retailers can even buy it at. Is greater enforcement needed of the legislation on the licensing of retailers? There are safety and environmental issues involved as well as the problem of the illegal trading of fuel smuggled into Northern Ireland.

As fuel becomes prohibitively expensive, we all avoid unnecessary journeys, but protecting the environment is a Europe-wide - indeed, a global - issue. If fuel pricing is to be used to protect the environment, such a policy must also be adopted by our neighbouring European states, and this point is reflected in the motion.

However, pricing differentials which encourage drivers to travel considerable distances needlessly to buy cheaper fuel is wasting the Earth's resources, unnecessarily damaging the environment and contributing to traffic congestion. Pricing differentials also encourage smugglers to transport fuel tanks outside our natural port hinterland, which wastes precious hydrocarbon fuel. It is very expensive to carry heavy goods any considerable distance by road, whether from Cork or from Dublin - other areas from which fuel is imported to Northern Ireland. It is a waste of resources for smugglers to use fuel to travel that extra distance. It is in the interests of the economy that fuel should be efficiently distributed from the port of Belfast to our natural hinterland.

Pricing differentials also encourage smuggling by unsafe home-made fuel transporters, which put both the public and the environment at risk. This was highlighted about a year ago when a container was found in the Banbridge area. It was a curtain-sided vehicle carrying a man-made steel tank which contained illegal fuel. The tank was badly constructed, the vehicle was overloaded, and the brakes went on fire.

I asked an environmentalist to examine the motion carefully, as it has the potential to be both environmentally neutral and beneficial. Pollution must be addressed evenly and at a European level; the burden must not simply be placed on British taxpayers here in Northern Ireland. There is no environmental benefit to be gained from the current situation in which vehicles on our roads are burning cheap diesel, sourced from other European countries, to the disadvantage of local hauliers.

The high cost of fuel, which is out of line with the cost to our European competitors, is having a detrimental effect on the Northern Ireland economy and the welfare of the citizens of this part of the United Kingdom. I will attempt to highlight some of the problems caused to our economy, to our manufacturers, retailers, hauliers, small businesses, farmers, rural communities and fishermen.

Over the past 10 years, the Chancellor of the Exchequer has increased duties on unleaded petrol by 150·5% from 19·49p per litre to 48·82p per litre. Diesel has been similarly affected.

However, in the Irish Republic - our immediate European neighbour - duty in March was only 29·45p per litre and 25·62p per litre respectively. High fuel costs add to distribution costs, which must be added to the price of products. This affects every business in Northern Ireland. Our products are becoming less competitive and jobs are being lost. As we are a peripheral part of the European Union and of the United Kingdom, the cost of haulage is more significant to the people of Northern Ireland than to those in many other parts of the European Union. We are doubly disadvantaged.

In Northern Ireland there is no real alternative to the road haulage industry. How else can a container be moved from the docks in Larne, Belfast, Warrenpoint or Londonderry to an industrial estate? Rail transport is more efficient for longer distances, but the relatively short distances from our ports make it impractical. Diesel accounts for 25% to 40% of hauliers' operating costs and so can determine profitability. High fuel costs in Northern Ireland only encourage drivers and hauliers to obtain cheaper fuel.

Vehicle excise duty also discriminates against hauliers here. A 40-tonne articulated lorry is currently charged £3,950 per year for road tax, while hauliers from the Republic of Ireland - with whom our drivers must compete and who can travel on our roads freely as part of the European Union - are paying only £1,250 to their Government. This differential is forcing Northern Ireland hauliers out of business and causing others to register in the Republic of Ireland. This has no environmental gain and simply exports Northern Ireland jobs and businesses.

The Petrol Retailers Association has highlighted the difficulties being faced by its members. Deliveries of forecourt supplies have dramatically reduced over the past six years, down 52·79% in petrol deliveries and 41·56% in diesel deliveries. To appreciate the scale of the problem it must be remembered that since 1994 there has been a 21% increase in the number of registered vehicles in Northern Ireland. Where is all the extra fuel coming from?

The decline is worsening. According to the latest figures published by the Institute of Petroleum, in the first quarter of this year there was a 45·7% decline in deliveries of diesel into Northern Ireland compared to the first quarter of 1999, and an overall 33·9% decline in oil deliveries. Huge tonnages of fuel must be winding across border roads. Potentially a quarter of a million tonnes of oil products during the first quarter of this year, when compared to last year, have come by other means. With the approximate halving of turnover by volume, it is not surprising that many petrol stations in Northern Ireland have been closing. This loss of turnover is estimated to be costing the British taxpayer £310 million per annum as excise duty is not being paid to the British Exchequer.

(Mr Deputy Speaker [Sir John Gorman] in the Chair)

The rural community in Northern Ireland, along with farmers and fishermen, is already struggling with reductions in earnings. The additional fuel costs add to overheads and cause difficulties to the rural economy by adding further transportation costs.

What can the Government do? Following the increase in world oil prices, North Sea oil revenue has contributed billions of extra pounds to exchequer funds.

I recently received advice from a local member of the Federation of Small Businesses that economic research shows that a cut of up to 8p per litre would have no implication for the Exchequer because of the additional revenue.

I also draw attention to comments in paragraph 62 of the Northern Ireland Affairs Committee report published on 29 July 1999:

"There is no doubt that the differential in fuel prices, across the land border in the island of Ireland, has serious consequences for fuel supplies and road hauliers. It is a wide problem, in that, besides distorting trading patterns, it appears to have become a means of funding for paramilitaries and racketeers. It is therefore damaging the social fabric of Northern Ireland."

This issue goes much further than our retailers and road hauliers. It is one which the Assembly will have to address through its Committees, and I encourage Members to apply pressure to the Secretary of State and the British Cabinet.

I advise the Assembly of a comment in paragraph 57 of the report, under the heading "Recommendations":

"The Committee recommends that Government investigate further the experience of other EU members in dealing with the problems of price and duty differentials across national borders in relation to road fuels."

That concept is contained in the motion. The same paragraph states

"It may be that at a European level a consensus might emerge on measures to mitigate the impact of road fuel duty and the price differentials between Member States which are both effective and consistent with the principles of the Single Market."

We will be following the deliberations of the Northern Ireland Select Committee on this issue.

Our Department should also be examining operators' licences if they are found to be smuggling. That is something our Minister can do. I urge the Department to investigate suggestions made by the Select Committee that we should be examining the viability of a licensing system for all fuel retailers in Northern Ireland.

I have spoken to the Minister, Mr Foster, and to some Ulster Unionist Colleagues on the Environment Committee, and I hope that they will pursue the matter. I intend to do so myself through questions.

The current high cost of fuel is out of line with those of our European competitors and is clearly affecting our economic well-being. I urge the Members to support the motion.

Mr Dodds:

I thank Mr Beggs for the way in which he moved this important motion. We both tabled motions on the issue of high fuel taxes and duty, and I was happy on this occasion to co-operate with the Member.

I do not intend to go over all the issues ably raised by him but want to highlight a number of them. Many Members will want to speak on these issues. First, this is not an issue for which this Assembly or any Member has any responsibility. That has not stopped politicians from Northern Ireland raising such issues in the past, and I am sure that it will not stop us in the future. Although responsibility lies with the Chancellor of the Exchequer and the Government at Westminster, it is extremely important that we should be having this debate and have this proposal passed this afternoon to give an outlet to the grievance felt by many sectors in our community.

This issue has touched virtually everyone, and there has been a great deal of support for the motivation of those who have taken action to highlight this issue on the mainland.

12.15 pm

It is important that the Chancellor and the Prime Minister hear directly and clearly from the elected Members of this Assembly, on behalf of all the people in Northern Ireland, how strongly we feel about the situation regarding high duty and taxes on fuel and how that affects this part of the United Kingdom.

While, thankfully, we did not suffer from the protests that were held across the rest of the United Kingdom, that should not disguise the fact that in Northern Ireland we are worse off in terms of the impact of high fuel costs on our people and economy. As Mr Beggs mentioned, the fact that the Northern Ireland fuel crisis group has been set up quickly and has been very active indicates just how important this issue is for business, trade and other sectors of the economy in Northern Ireland. Representatives have been extensively lobbying the parties.

The situation is worse here because we have higher fuel prices than other parts of the United Kingdom. The United Kingdom as a whole has the highest fuel prices in the developed world. For petrol, it is 10p per litre more than in the next-highest country, which is France. We in Northern Ireland, as many of our newspapers have shown over the years, are in many cases paying higher prices than the average in many other parts of the United Kingdom.

The Chancellor explained that oil prices had gone up to $35 a barrel, and the blame was being put on the Organisation of Petroleum Exporting Countries (OPEC) and the oil producers. However, the real villain is the Chancellor. The real villain is the taxman. Three quarters of the price of a litre of fuel is being handed over to the Treasury.

Added to the fact that we have such a high rate of taxation in the UK, we have the scandal of double taxation. For each litre of fuel, 48·8p goes in excise duty. Value added tax (VAT) is added not only to the cost of the fuel but to the duty as well. VAT is being levied on the cost of the fuel and the excise duty. You do not have to be a mastermind to work out that that is adding between 7p and 8p per litre to the price of fuel. It is a tax on tax and it is something that I always understood was anathema as far as taxation policy is concerned. Clearly, the Chancellor should do something about that iniquity.

Perhaps I am a bit old-fashioned, but one problem is that for many of us, who are used to dealing in price per gallon, the price per litre actually disguises the real rise in price. We are almost at £4 per gallon. Some have said we are heading towards five pounds per gallon. When it is put in terms of price per litre it does not seem so bad - 2p on a litre of petrol. However, that translates into almost 10p per gallon. Every time prices go up, you see the real cost of fuel in Northern Ireland and the UK.

The other major problem already highlighted is that we have a land boundary with another member state of the European Union. Cheaper fuel is available in the Irish Republic because of lower tax and duty rates and also because of the differential in the currency valuations.

Mr Hussey:

I welcome the fact that the Member is highlighting the particular difficulties faced by our petrol retailers. More than 60 petrol stations have already closed and many are facing closure. Does he agree that unless Her Majesty's Government address this issue properly they will be creating an exclusion zone for petrol stations within our own border?

Mr Dodds:

The Member is absolutely right, and I am sure that this issue will be highlighted by other Members. I understand that the most recent figures show that petrol sales by Northern Ireland retailers are down 42% on last year. That is a staggering figure that illustrates the real problem for petrol retailers, particularly in border areas, where traders are finding it impossible to continue to trade.

The increases in duty and taxes over the last decade reinforce the point. Petrol duty in the Irish Republic increased by 6% over that period, whereas in Northern Ireland it rose by 150%. Between 1990 and 2000, diesel increased by 15% in the Irish Republic, but in Northern Ireland it rose by 157%, so diesel now costs 83% more in Northern Ireland than it does in the Republic. The result of this is that business people are going southwards to obtain cheaper fuel, jobs are being lost and revenue is being lost to the exchequer. We also have the very serious problem of the smuggling that is lining the pockets of paramilitary groups, criminal groups and others.

While many of us feel that more could and should be done to tackle the problem in terms of Customs and Excise and police resources, clearly we will always have the problem while we have this massive cost differential. Therefore the solution lies with the Chancellor, who should take steps to do something about these tax differentials.

The University of Ulster report of February 2000, which I have looked at, indicates that 3,000 to 6,000 jobs have already been lost in Northern Ireland because of this problem, with revenue of up to £100 million having gone southward. While we have a differential of 23p per litre on petrol and 29p per litre on diesel, there is no doubt that the problem is going to get worse.

Mr Beggs mentioned that we are a peripheral part of the United Kingdom and of Europe. We are therefore highly dependent on road transport and face higher transport costs. The announcement that a new working party is being set up in the Irish Republic by the Irish Prime Minister to look at the rates of excise duty in the South will send alarm bells ringing in Northern Ireland, because the problem that is bad now has the potential to get even worse.

When the Chancellor of the Exchequer is looking at the question of tax he will have to bear in mind the impact his tax policy will have on the regions. He cannot simply ignore the fact that we in Northern Ireland face the problem of sharing a land boundary - a problem which does not arise in England, Scotland or Wales. As a result of these problems, as has already been mentioned, our haulage industry also faces problems. Thirty-five per cent of its operating costs goes on fuel duty; it faces vehicle excise duties; it contributes in terms of operator licence fees, VAT, income tax and corporation tax; and, sooner or later - if we are to have a viable road haulage industry in Northern Ireland - the Chancellor will have to act. The question is whether we will have an industry left. Or will it be permitted to go to the wall?

We have already mentioned the position of petrol retailers, who face severe problems in Northern Ireland, particularly in border areas. When we talk about border areas we must consider the fact that business people in Northern Ireland are becoming prepared to travel further and further to get cheaper fuel. This is a creeping problem. I know from talking to some petrol retailers who are suffering, and who are located many miles from the border, that something has got to be done about that distortion of trade and competition issue.

Mr Poots:

Is the Member aware that about three quarters of a billion litres of the fuel used here is bought outside the Province, with a loss to the economy of about £460 million? The high-taxation policy is detrimental to jobs and reduces the amount of revenue that is raised in the Province.

Mr Dodds:

I think that all Members would agree, and I thank the Member for drawing those points to our attention.

I also wish to speak on behalf of the hard-pressed motorist. It is sometimes unfashionable to point out the difficulties that motorists face. The reality is that for many people in Northern Ireland - the disabled, the elderly and people in rural areas - there is no viable alternative to using their private cars. The fact that only 15% of the tax on petrol and fuel goes into public transport infrastructure in Northern Ireland and across the United Kingdom brings home a point about which many motorists and other people who buy fuel feel very strongly - namely, that they do not believe they are getting a proper return in the shape of money being invested in the public transport and transport infrastructure of the Province.

Points have been highlighted about agriculture and the rural economy. Our fishing industry is no different, having seen a 155% increase in the cost of fuel for the fleet. That means that 30% of a vessel's entire earnings are now taken up by fuel costs. There is another issue which we should not forget, that of the heating oil and kerosene used by home owners and tenants in Northern Ireland. Its price has escalated rapidly, on average going up 115% over the last two years, so that at the moment 900 litres costs £215. Only 5% of homes in the rest of the United Kingdom are centrally heated by oil, whereas here the figure is over 50%. Once again, one sees the massive impact in Northern Ireland.

What is to be done? It is essential that the Chancellor of the Exchequer act to bring down excise duty - and, by extension, VAT - on fuel. He says he needs money for health and schools and all the other major projects the Government have. We accept that there must be major investment in those areas as well as others. However, the reality is that he is reaping a windfall. The money he is getting now through excise duty and VAT is over and above that which he had already calculated and figured into his expenditure plans. He cannot therefore claim that cutting this tax will be detrimental to expenditure plans.

Mr McCartney:

I am sure the hon Member is aware that, at the time the Chancellor made those provisions, the price of a barrel of oil was $22. It is now $35. I think the Member will agree that the fact that Britain is also a net producer of oil, receiving additional revenue of between £4 billion and £8 billion, totally explodes the Chancellor's figures.

Mr Dodds:

That is absolutely right, and it is essential that it be pointed out. Not only is this a taxation windfall, but there are booming revenues from North Sea oil production. We have seen a massive influx into Government coffers from the mobile phone licence competition, and it is clear that the Chancellor has the room to act. There is a moral imperative for him to do so, and I hope now that instead of sympathy and nice words from the Government, action will be taken. I fear that if that is not the case the disruption we have seen across the United Kingdom will have been a picnic compared to what is to come. It is vital that the Chancellor and the Prime Minister, Tony Blair, start to listen, rather than offer sympathetic, sugar-coated words. They must take action to reduce tax on fuel, and they must do it as soon as possible.

12.30 pm

Mr McGrady:

It goes without saying that all parties in the Assembly welcome and support this motion. It has two basic parts, the first being to call upon the Chancellor of the Exchequer to reduce the burden of fuel duty. The second element is to encourage other EU member states to bring their taxes into line with those of neighbouring countries. I should like to deal with those two issues individually, for they are separate and distinct. We must be careful not to confuse one with the other.

The events of the last week have highlighted what was already known, but perhaps not realised - the enormous effect of higher fuel costs on our economy. By "economy" I mean all the strata of society in Northern Ireland - the hauliers, the manufacturers, the fishermen, the farmers, the home fuel distributors and the road users. We are only now beginning to realise just how enormous this tax is. However, it is not a new tax; it has been going on for a considerable time.

I observed with some amusement the hypocrisy of certain previous Government spokespersons who were castigating the current Government for their dereliction of duty in imposing additional taxes. The year-on-year, tax-on-tax approach of the previous Government increased this tax enormously. The irony is that it was the Conservative Party, when it was in power, which introduced the escalator tax, over and above the excise duty, thus adding to the cost of fuel. Indeed, the last budget was the first time in years that the escalator tax factor was not applied.

That does not in any way exonerate any Government of responsibility for the position we are in today. It is extraordinary how communities throughout Europe have spontaneously and suddenly realised the position that they have been brought to as a result of oil production prices from the OPEC countries and the internally imposed problems of the revenues which successive Governments in many countries have imposed.

In Northern Ireland we suffer a double jeopardy - excise duty on fuel and a peripherality that adds to transport costs. We also suffer from the fact that we have a land border with a country that has a much lower rate of fuel tax, and that is exacerbated by the exchange rates between the punt and sterling and between the euro and sterling - two entirely different economic systems.

Many statistics have been well presented by the joint proposers of the motion. All of us can rehearse these in our subsequent contributions, but it is sufficient to emphasise them. No matter what industry you look at, you will clearly see the effect that fuel prices have had on transport, production costs, home fuels, motor cars and everything else that modern society depends on.

Much has been said about the question of the escalator tax. It was a green tax, designed to somehow assist environmental protection by taxing the motorist. It is a fraction of the excise duty and, like the old road tax which was referred to, is not even given over to environmental protection matters. It is simply another revenue-producing mechanism that increases the general taxation.

The most dramatic statistic I saw was that over the last 10 years, fuel duties increased in the Republic of Ireland by 6% and in the UK by 242% - an enormous differential. We must be careful how we address that issue. It is not just as simple as some of the suggestions that have been made. Perhaps Mr Beggs overemphasised the differential between the North of Ireland and the Republic of Ireland as the main, or a substantial, cause of our problem. That is not necessarily correct. By the way, I welcome, and cannot help referring to, the fact that he is totally opposed to traffic disruption. Long may that continue in all its aspects.

Mr McCartney:

I thank the hon Member for permitting me to intervene.

Every citizen knows that the blockade will have an immediate and horrendous effect on our commercial base. But if nothing is done soon, those who are most grievously affected, who see their livelihoods and their businesses disappear, will come to the point where they have no alternative.

Mr McGrady:

Was that a question?

Mr McCartney:

It was not a question. The Member invited the intervention.

Mr McGrady:

I prefer to hear what a person has to say rather than let him go unheard in a sedentary position, but that is par for the course for the Member.

The target that we must concentrate on, as Mr Dodds said, is the exchequer in London. The tax burden we suffer in Northern Ireland is the result of successive Chancellors adding to and imposing taxes. As Mr Beggs said, three-quarters - actually, 71% - of our fuel expenditure goes to the general exchequer. That situation cannot be allowed to continue. It is difficult for Northern Ireland, susceptible as it is to the additional difficulties of peripherality and proximity to a cheaper fuel regime, to take direct action that will not be detrimental to our own economy, as well as the greater economy, including tourism.

This is not a new situation. Northern Ireland has had this problem for a very long time. I first took the issue up with the Minister responsible, Mr Adam Ingram, in March 1999. He told me that the Government was concerned about the problem and taking firm action to address it. Eighteen months later, no action whatsoever has been taken, never mind firm action.

The differential causes exceptional difficulties for trade in Northern Ireland. The oil industry itself has been decimated by these events. Here are some statistics on petrol station closures. One company has closed all 28 of its sites, another has been reduced from 28 sites to nine, another is selling three, and others are considering pulling out altogether. That is allied to the great difficulties retailers have across large areas of Northern Ireland. It is not just a border issue any longer. The differential is so great that traffic can travel a long distance and still make it profitable.

I have met Patricia Hewitt, who is the Minister responsible, and the previous Ministers, Lord Dubs and Adam Ingram. The issue has been raised in the Northern Ireland Affairs Select Committee as an urgent matter affecting the economy of Northern Ireland. I have taken party delegations to the Chancellor of the Exchequer. The tragedy of it all is that nothing has moved them, for one very simple reason: in spite of the loss of revenue through smuggling, paramilitary and other criminal activities, and the additional costs incurred by Customs and Excise in increasing their staff from 23 to 35 and appointing specialist officers, it is not a significant loss to the Exchequer. The loss of revenue in Northern Ireland is not a significant loss, and therefore it does not attract their attention.

It is not an argument that we are going to win. As the proposal suggested, we have to harness our arguments with those of Welsh Assembly, the Scottish Parliament, and Members at Westminster to lobby the Government, on a nationwide basis, to reduce fuel duties and road taxes to a reasonable and acceptable level.

Only through a united, concentrated effort will an impact be made on the Chancellor, the Prime Minister and the Government - who will ultimately make this decision. This will not be a short-term campaign. It will be a very difficult one. I hope that it is not a disruptive one, because by disruption we inflict wounds on ourselves that we cannot afford. This can be done without disruption, and without undue militancy, but it must be done on a consistent, cohesive and collective basis. My party supports the generality of the motion and we look forward to participating with other parties in the Assembly to form a joint presentation. I hope that it will be spearheaded by the appropriate departmental Ministers in the Assembly on a strong public and international basis. Given the experiences of the last 18 months, this is the only way to bring about change. The only effective change that we can make is to have an immediate reduction.

There has been talk of waiting for the autumn Budget. That may be possible if the autumn Budget is next month. However, if that does not make a substantial, meaningful contribution to our problem, then we will have to address it in a stronger and more virulent way.

The differential between fuel duties in both North and South has been exacerbated by the currency exchange. During the Finance Bill debate, in representations to the Chancellor and his Ministers of State I asked repeatedly for a special scheme for Northern Ireland to be implemented. A scheme has been implemented along the Dutch and German border, where differentials were considerable - though not nearly as considerable as the differentials we had. At that time there was a great reluctance among the Ministers at Westminster and the Ministers in Northern Ireland to alleviate the distress that had been caused - mostly in the border areas and affecting the smaller retailers, hauliers and transport companies.

The Dutch implemented a scheme. Part of the scheme was ruled out by the European Court, which is fair enough. However, part of that scheme is still in operation. There is no justification for the British Government not introducing that part, which was tolerated and allowed to continue by the European Commission, to the border areas of Northern Ireland. That is another practical avenue where a remedy can be achieved for the additional problem that we have. Even if the taxes are reduced, they will not be reduced sufficiently to address the problem of the differential between the two countries. We need a reduction in general taxation, combined with a scheme to alleviate the contrast in the border areas.

Dr Birnie:

I agree with the Member's comments regarding the international and the Northern Ireland/Republic of Ireland differential. Does he agree that there is scope to use the North/South Ministerial Council to put pressure on the Dublin Government to increase some of their duties towards the UK level?

Mr McGrady:

I am enthusiastic about the North/South Ministerial Council engaging on all problems affecting the whole of Ireland, North and South. I encourage it to take on as many of our problems as it can and to address them. However, to ask the Republic of Ireland Government to increase their taxes would be rather silly.

12.45 pm

Why should we ask other Governments to impose a burden on people when we are trying to reduce the same burden for ourselves? That is the reality of the situation. You do not make a bad situation worse by creating another bad situation for your neighbour. Harmonisation on a European scale must come about, otherwise this problem will continue, not just between the North of Ireland and the Republic but also between many other countries. As has been said, difficulties already exist between Holland and Germany and several other nations.

Returning to the original point - which I must emphasise - the real problem is the 71% excise duty imposed by the Chancellor of the Exchequer. That is our first target. We must not be diverted into long-term projects concerning the differentials between North and South. The lack of an exchange mechanism is an obvious long-term project to pursue, but that is of such import that we know we will have little impact if we ask the British Government to enter into the European monetary union. In the meantime, our target, which must be focused and consistent, must be reduced taxes at Westminster. My party will support the motion in all its aspects and in the terms which I have suggested to the Assembly. I look forward to a joint exercise with all the other parties in this Chamber to further the cause of duty reduction.

Mr P Doherty:

A LeasCheann Comhairle, I welcome and support this motion. There is great concern about the escalating cost of fuel and even greater concern about the British exchequer's attitude - an attitude which reflects no consideration of the economic effects which partition and two tax regimes have created in our country. Indeed, the North of Ireland is only an afterthought when the British Government considers finances. I believe that both the proposers of this motion also recognise this in the second half of their motion, which I read as Unionist-speak for an all-Ireland fuel policy.

Owing to the underdevelopment of the rail network and the consequent over-dependence on roads, the price of fuel is crucial in Ireland. Fuel tax, unfortunately, is a reserved matter for the British Government, but as the Assembly evolves and develops, one option which could be examined is a mileage-based or gallon-based fuel rebate system. The administration of this could be minimised by allowing rebates to be deducted from VAT or other tax liabilities. However, as long as we have two tax systems on this island, we will always experience difficulties. The uncertainty created by fuel pricing underlines again the Sinn Féin argument that what we need is an all-Ireland economy. Only then will the days of being held to ransom at the petrol pumps by the British exchequer be over.

To address these problems in the long term, the British Minister and his counterpart in Dublin should explore ways and means of harmonising tax and duty rates. While there has understandably been a focus on fuel prices at petrol pumps, we also need to recognise - and this point was brought up earlier - that high tax and duty rates also adversely affect the price of home heating oil, and perhaps that pain is felt more intensely than that felt by motorists and road hauliers.

We support and welcome this motion, and we would like to see a speedy resolution of the problem.

Mr Close:

I applaud the initiative of Mr Beggs and Mr Dodds in bringing this very serious issue to the Floor of the House, where the elected representatives in Northern Ireland can add their voice to those demanding change. I also take the opportunity to publicly applaud the mature attitude that has been adopted by the Road Haulage Association, the Petrol Retailers Association, the Federation of Small Businesses, the Confederation of British Industry and the Ulster Farmers' Union, which have all been involved in the fuel crisis group, the many other trade and voluntary organisations throughout Northern Ireland and the great Northern Ireland public.

In spite of the fact that we in Northern Ireland suffer more because of escalating fuel prices than those in the South of Ireland, Scotland, Wales or England, there have not been any organised road blockades in Northern Ireland. That has got to be applauded. Northern Ireland has not been brought to a standstill.

Our people, particularly the various organisations to which I have referred, have used the democratic process in a determined fashion and with great dignity in an effort to get their message across. For that reason above all, we, as their elected representatives, must support them and demonstrate that somebody is listening to their plight. We must ensure that their message is transmitted with the maximum democratic clout to the Prime Minister, the Chancellor, the Treasury and all those who hold and control the purse strings.

In some respects it could be said that the democratic process itself is on trial over this issue. If it is not seen to deliver, to listen and to deal with such causes as are currently facing it, then there are serious questions to be answered.

The Prime Minister and the Chancellor are on record as saying that they cannot and will not give in to blackmail, threats or blockades. As a democrat, I have sympathy with that view, but equally I firmly believe that the Government have a duty to listen to the people and to respond positively to a just cause that has the backing of the overwhelming majority of the people. This is such a cause. I challenge the Prime Minister to put our money where his mouth is and to recognise in a tangible fashion the mature attitude adopted by the people in Northern Ireland in the current crisis.

We live, as has already been said, in a peripheral society. Our fuel costs are higher than elsewhere in the United Kingdom. We share a land border with another EU country where fuel tax is considerably less; thus we suffer from unfair competition. Prime Minister, if you will not give in to blackmail, you will surely reward the long-suffering people of Northern Ireland whose voice and reason have been their only weapons. Cut our fuel taxes now, or give us in Northern Ireland some form of rebate.

I also urge the First Minister, the Deputy First Minister and the other Ministers to take this message to Downing Street as soon as possible. The people do not want just sympathy; they want action from their democratically elected leaders.

It must also be made clear that the oil companies are not to blame for the current crisis. Nor do I accept the line that is currently being peddled that a reduction in fuel taxes would inevitably have an adverse effect upon the Health Service, education, and so on.

Britain is unique among the other European countries in that it is a net exporter of oil. I have recently seen figures to suggest that in the first half of this year alone there was a surplus of £2·5 billion on the oil account.

Every time the price of crude oil rises there is a revenue bonus for the Chancellor. If he were a member of a caring Government he would have given some of this windfall back to the people and reduced the price of fuel. Why has this windfall been buried in a cloud of half-truths and presumably tucked away in some election war chest?

We have the highest petrol and diesel costs in Europe, if not the world, because we suffer from obscene taxation on fuel. As Mr Dodds pointed out, it is actually worse than that. We suffer from obscene double taxation on fuel. We are taxed on the tax that the Government levy on fuel. I was amazed to learn that the price of petrol in the United Kingdom is lower than in the USA. It is less than 18p per litre in the United Kingdom compared to over 19p in the USA, yet we pay almost £4 per gallon, whereas the price is less than £1 in the United States.

The difference is not in the profits of the oil companies or petrol retailers - they get about 1p per litre. The difference is in the tax taken by the Government - 70p to 75p. At least Dick Turpin had the decency to wear a mask. Gordon Brown and Tony Blair have the barefaced audacity to blame everybody but themselves, and to date they have even refused to listen to those who have pointed out the error of their ways.

However, I must be fair. The attempts by William Hague and his political cronies to capitalise on Labour's difficulties is political opportunism at its worst. We all remember that it was the Tory Chancellor, Norman Lamont, who introduced the fuel duty escalator in 1993. This highway robbery was continued by Kenneth Clarke, resulting in fuel duty increasing by 5% more than inflation during the years 1993 to 1996. It was dressed up as a green tax, but I would prefer to call it a con tax.

However, the Labour Party, not to be outdone in exorbitant taxation, increased the escalator to 6% when it came to power, and the result was fuel duty going up by 10% in 1997, 10% in 1998 and another 10% in March 1999. While the Labour Government have dropped the fuel escalator, the damage has been done. I appeal for this highway robbery to stop. It is totally counter-productive, particularly in Northern Ireland, where it is killing businesses. It is killing the road haulage industry, and it is making all of us suffer unduly.

As duty is much less in the South of Ireland, there is a daily flow of vehicles travelling across the border to fill up with fuel, and, as has been mentioned, smuggling is rife. I understand that smugglers can gross as much as £35,000 per week through their illegal practices. How else can we explain that between 1994 and 1999 there was an increase of 124,694 in the number of vehicles registered in Northern Ireland, yet during the same period the amount of fuel delivered to Northern Ireland fell by 41·6%? The Treasury is losing money hand over fist through its blindness.

Mr J Kelly:

Does the Member agree that the Assembly initially should have sought the ability to raise taxes at a local level?

Mr Close:

As one who advocated throughout the entire talks process that we should have tax-varying powers I agree with the Member, but that is somewhat removed from the issue we are discussing. We are discussing the huge taxes being imposed on motorists and the fuel industry. Rather than seeking powers to further increase prices, we should be looking for a reduction in prices.

The Treasury is losing approximately £200 million because of the amount of fuel that could be sold here.

1.00 pm

It is economic madness caused by a blind and arrogant Government. I direct my final comments to the Prime Minister: open your eyes and see the damage that your exorbitant taxes on fuel are causing; open your ears and listen to the hard-pressed people who are pleading for your help; open your mouth and tell us that you will act without further delay to deal with the crisis.

Mr Roche:

The events of the past week have been the most momentous in the life of the Labour Administration. The characteristic response of the Prime Minister has been to misrepresent the nature of the protests and blame high fuel prices on OPEC and the oil companies. Government by spin and mendacity may have reached the end of the road. The electorate simply does not believe the Prime Minister. The Sunday Times/NOP poll of 17 September showed that 71% of the electorate blames the Government for high fuel prices and 77% does not accept the Government's claim that there is no scope for cutting tax on fuel.

The electorate is correct on both counts. First, there is scope for a reduction in fuel tax. The Institute of Directors and the Confederation of British Industry (CBI) have calculated that the Chancellor has scope to cut duty and VAT on unleaded petrol by up to 6p per litre because of the tax windfall from higher North Sea oil prices. That windfall is worth about £8 billion to the Treasury. Fuel taxes must be cut immediately. That would have the added advantage of constraining the Government in their waste of millions of pounds on stupid projects, such as Mr Mandelson's brainchild, the Millennium Dome. Secondly, the Government have been literally ripping off the vast majority of people in the United Kingdom for whom the purchase of fuel is an entirely unavoidable necessity. At least two thirds of the rise in the price of petrol since May 1997 has been due to higher tax.

The mechanism employed by the Chancellor has been a form of stealth taxation based on a fuel duty escalator introduced by Norman Lamont in March 1993. The ostensible reason for this tax was to contribute to the prevention of ozone depletion, but the real reason had nothing to do with the environment. The real reason for the introduction of the fuel duty escalator was to reduce a £46 billion budget deficit that had resulted from the boom-and-bust policies of Nigel Lawson in the late 1980s. Chancellor Brown has used this stealth tax to its very limit. The CBI calculates that only 15% of revenue raised through fuel taxes is reinvested in transport infrastructure and public transport.

The result of Labour policy is that while the United Kingdom is a net exporter of oil, it pays higher fuel prices than any other western European country. The result is a massive distortion of competitiveness affecting major sectors of United Kingdom industry. The situation is exacerbated in Northern Ireland due to the weakness of the euro against sterling. Fuel costs for farmers and fishermen in Northern Ireland have increased by 110% in the past 12 months. Derv prices are 83% higher in Northern Ireland than in the Republic.

The combined result of tax differentials and exchange rate movements has put severe pressure on local business and caused a massive growth in criminality on the part of terrorist organisations left intact by the Belfast Agreement. CBI Northern Ireland calculates that individual fuel smugglers can gross up to £35,000 per week, thus undermining honest business.

High underlying fuel prices will continue. The western economies are currently facing historic oil shortages. At the same time, many OPEC members have little scope to pump out extra oil as they are already operating close to capacity. The crisis of unacceptably high fuel prices will not be resolved in the long term by a short-term manipulation of tax rates. The crisis is due to something deeper than an entirely legitimate concern about oil prices.

The crisis reflects a United Kingdom economy - indeed, an EU economy - that has reached the limit of taxable capacity. This is shown by the fact that 78% of the UK electorate supports the protests and blockages and 85% demands a cut in fuel taxation. This is very relevant to the dominant tax-raising mentality - which we have just heard about - in the Assembly. This mentality is out of touch with the requirement of economic success in a capitalist, competitive global economy. The current fuel tax crisis is indicative of the imperative to move towards a low-tax economy in the United Kingdom by a radical rolling-back of the frontiers of the state in the areas of social welfare, education and health and to substitute for state provision the development of private market-orientated provision in these areas. State provision in these areas is marked by inefficiencies that squander literally uncountable billions of taxpayers' money.

This political crisis provides politicians and business leaders in Northern Ireland with the opportunity to put themselves in the vanguard of a new progressive thinking aimed at the creation in the United Kingdom of a minimalist state which is required to lay the basis of a low tax economy. That is what is required for economic prosperity in the context of permanent global capitalism. The Government could then concentrate on its primary function of effectively protecting the lives and property of law-abiding citizens. The NIUP supports the motion and demands an immediate cut in fuel taxation before further irreparable damage is done to major sectors of business in Northern Ireland.

Mr Douglas:

I support the motion. There are a number of issues in this debate. Foremost must be the rise in fuel costs attributable to the rise in the price of crude oil, and hence the rise imposed at the pumps by the oil companies. Second is the tax take of the Government through fuel duties and VAT. Thirdly, there is a disparity in fuel prices throughout Europe and the civilised world.

First, and most importantly, we must consider the impact of the exorbitant price of fuel on our economy and on the public, given the poor public transport links available in the Province. The oil companies are making disproportionate profits at the expense of the travelling public and British industry. Over the past week the oil companies have tried to raise prices by 2p per litre, only to back down due to public, and perhaps Government, pressure. Industry sources say that the rise was not wholly needed to cover crude oil prices but was an exercise in profiteering on the companies' part. In fact, 1p would have covered the rise in the price of crude oil.

Secondly, we have the Government's double whammy in taking both duty and VAT on the same product. It is well known that 75% of the price of a litre of fuel is made up of tax. That is totally unacceptable and must be addressed immediately. The Government is wrong to say that all this tax is needed for public services. It is a fact that for every $1 rise in oil prices, the Government gain £330 million per year.

Recent rises since the Government's comprehensive spending review in July totalled $11 a barrel, so the Chancellor would bring in an extra £3·7 billion in tax revenue. Translating this into petrol duty would cut 7·5p a litre off the cost of fuel. I call on Gordon Brown to make these legitimate cuts immediately to allow our hard-pressed industrial base and the motoring public some breathing space.

It has also been suggested that we should have a VAT-lowering mechanism to be triggered when world oil prices rise above a certain level. I would welcome such a measure, as would the public, but I believe it should be set up so that the red tape would not outweigh the benefits, and that the cost would not be passed on to the public.

We must consider the disparity in fuel prices between here and the rest of Europe, our main trading partners. These disparities are belittled by the Government, and the public is fed untruths to keep the blame away from the national Government's door. I will list four lies that were highlighted in the press over the last week.

First, "Motorists are no worse off than their European counterparts as, in Europe, motorists must pay tolls, even though taxes are much less in Europe."

The fact is we pay higher fuel duties than anywhere in Europe. We pay more to buy our cars. Motor tax is greater here than almost anywhere in Europe and, although some Europeans have road tolls, the income from them is spent almost wholly on transport issues.

Mr McCartney:

Is the Member aware that throughout France, which spends 80% of its tax revenue from motor fuel on roads, one can travel on the route nationale, which is better than most of our motorways, and whether one travels on a toll road is entirely optional?

Mr Douglas:

I was not aware of that.

The second point I would like to highlight, which was a mistruth on the part of the Government, is "Cuts in fuel tax will hit spending on health and education."

Since spending plans were revised in July, increased Government income would allow cuts in fuel duty of 8p a litre, with no resultant cuts in public services.

A third misleading statement was "Tax cannot be changed except during the March Budget".

The fact is that under the 1979 Excise Duties (Surcharges or Rebates) Act the Chancellor can raise and lower fuel duties by up to 10% at any time, without requiring legislation. This would allow petrol prices to be cut by 20p a gallon.

The fourth misleading point is "High fuel tax protects the environment by cutting pollution."

There is little evidence to support the assertion that raising fuel taxes cuts pollution. Even though the fuel tax has risen exorbitantly since 1993, the miles driven has also risen - by 12%. If the environment is so important to the Government, would it not make more sense for them to invest in clean technology and energy-efficient measures?

My final point, which is more important and nearer to home, is that more than any other part of the United Kingdom, Northern Ireland depends on oil for its energy. We have an agriculture industry, already crippled by bad prices, finding its fuel costs increased drastically throughout the last year. This adds to the costs of both farmers and agriculture contractors and, indirectly, as hauliers are affected, we find that input costs also rise. Our haulage businesses suffer, as they cannot pass on price rises to their customers and risk being replaced by hauliers from the South. Our rural areas depend on oil to carry out almost any function throughout the day, especially in the farming community. We are on the periphery of Europe, and, apart from oil, there is no type of fuel we can use.

1.15 pm

Much of the Province also depends on oil for home heating. Therefore any price rise impacts on the most needy in society - namely, the young, the unemployed and the elderly. We also have a land border with another EU state. That gives rise to smuggling on a grand scale, creating great losses to our public funds.

In supporting this motion, I call on the Chancellor to cut fuel duties immediately and to cut or abolish VAT above a specified world oil price threshold. I also call on the Chancellor to cut the remaining VAT on home heating oil as this is not a luxury but a necessity. I support the motion.

Mr McCartney:

At this stage of the debate it might be said that the field has not just been played upon but has been ploughed. Therefore I will endeavour to confine my remarks to some salient, and perhaps greener, parts of the pitch. There is no doubt that the situation threatening our agricultural and haulage base with extinction is caused by two main considerations: first, the absolutely punitive rates of excise duty and VAT on motor fuel; and secondly, but directly related to the first consideration, the softly, softly policy of the Government in relation to the commercial activities of paramilitaries.

Some of these figures lead to interesting conclusions. The number of vehicles in Northern Ireland has risen by 21% since 1995. There have been 125,000 additional vehicles registered in Northern Ireland in that period. The amount of legally imported fuel has dropped by over 50%, according to the figures of the Petrol Retailers Association. Even the Government say that it has dropped by 41%. If you have an increase in the number of users of motor fuel, and you have a fantastic reduction in the amount of fuel that is legally imported, then the only conclusion must be that a vast quantity of fuel is being illegally imported into Northern Ireland.

Of course, that is not the only reason. An increasing and significant number of owners of vehicles registered in Northern Ireland are going into the Republic to top up their tanks.

A Member:

Will the Member give way?


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