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Finance Bill

We have, not least because the Scottish National party tried to table similar amendments to other Finance Bills. When such amendments are proposed, we consider the policy proposals and make our analysis of those. The hon. Member for Eastleigh (Chris Huhne) mentioned sustainable economic growth. He said that, from an intellectual perspective, he was sympathetic to the approach in the new clause and was interested in the proposal, in the interests of greater economic stability, if it helped to smooth oil prices. We both got the clear answer to that when the hon. Member for Banff and Buchan (Mr. Salmond) said that it is a ““one-way clause.”” My assessment of it is the same as that of the hon. Member for Eastleigh, in that it would not have that smoothing and stabilising effect. If the new clause were accepted, it would introduce mechanisms that could lead to duty reductions when pump prices rose significantly in a six-month period and it would freeze duty increases when international oil markets were high. The effect of the pump price-related proposed new subsection (1C) on the price that the average motorist pays for a litre of fuel would be small. If the price of petrol rose at the pumps from 85p a litre to 88p a litre—a rise of 3p—the new clause would reduce the duty rate for petrol by just 0.525p a litre, not, as the hon. Member for Dundee, East argued, by a value roughly equivalent to the freeze that I announced of 1.22p a litre. Yesterday’s announcement to postpone further the planned inflation increase in the fuel duty rate would do more now, which the hon. Member for Angus (Mr. Weir) advocated, than the new clause. The mechanism is unnecessarily complex. It would do nothing to bring stability to the market in the UK. Indeed, it is unlikely that consumers would see all the benefit—modest though it is—of its operation. Despite being the Minister, and not an Opposition spokesman, I shall not dwell on the technical deficiencies of the drafting of the provision. A second mechanism, whereby higher international oil market prices would trigger a freeze in duty increases, would result in expensive changes to road fuel duty and VAT systems both for people who have to account for the tax that they are due to pay and for the Government trying to collect it. The burden is likely to be heaviest for people who are minor oil users and dealers. Finally, the new clause is based on the misconception that high fuel prices lead to higher overall VAT receipts. That is not necessarily the case. If people have to spend more on one commodity they tend to spend less on others, and the overall level of VAT receipts usually remains relatively unchanged. The hon. Member for Dundee, East may be interested in the latest assessment by our analysts, who estimate that a 5p a litre increase in pump prices will result in higher VAT receipts of about £290 million in the current year. The resulting reduction in demand, however, will lead to lower duty revenue of about £500 million. High oil prices—I have debated this point with the hon. Member for Banff and Buchan a number of times—have a complex impact on public finances, economic activity and Government expenditure commitments. Windfall gains do not, as he claims, necessarily come to the Treasury as a result of rising oil prices.