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Finance Bill

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 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 a case of 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—