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PETROL PRICES MAY KILL THE ECONOMY AND THE COALITION



The price of petrol yesterday at one garage in West London.

Friday January 14,2011
By Ross Clark

NICK Clegg earlier this week made a pitch for the hearts of “alarm clock Britain”: those who “come rain or shine are busy making Britain tick”. He was right to identify working people as being in need of support, having been taken for granted during the Labour years.

But what is the point in supporting people when they are emerging bleary-eyed from under their duvets if you are then going to kick them in the teeth when they go outside and get into the car?

Fuel prices yesterday were nudging their record highs of July 2008. Unleaded petrol was averaging £1.28 a litre and
diesel £1.32 a litre. And what is the Government doing to help those who rely on their cars to get to work every day? It plans to raise duty by a penny over inflation in April this year and every year until 2014.

While the Government’s “preferred” inflation index is the consumer price index (CPI), which stands at 3.3 per cent, when it comes to jacking up petrol prices the Treasury prefers the higher retail prices index (RPI), which stands at
4.7 per cent. With fuel duty already at just under 59p per litre it means that motorists in April face prices surging by another 4p a litre.


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This of course is on top of the three rises in fuel duty that have already happened over the past year – a penny in April, a penny in October and 0.76p in January – and on top of the 2.5 per cent VAT rise imposed on January 4. All in all it means that by April motorists will be paying 10p more to the Government for every litre of fuel they buy than a year ago.

We all know there is a budget deficit that needs to be closed but higher fuel taxes strike right at the heart of the economic recovery. Last October Work and Pensions Secretary Iain Duncan Smith implored the unemployed of Merthyr Tydfil to “get on the bus” and look for work 25 miles away in Cardiff. The underlying point he was making was sound: that in a dynamic economy people need to be prepared to travel long distances to look for work.

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But that doesn’t exactly fit in with Government policy on fuel taxes. As it happens Merthyr Tydfil to Cardiff city centre is a journey that can easily be made by bus or train – in the daytime at least. But for huge numbers of working Britons the reality is that their car is the only option of getting to their workplace.

What about a nurse working shifts from 10pm-6am? In common with many towns and villages in Britain the last bus passes my house at 6pm. What about plumbers and electricians who need their vans to travel from one job to another?

You couldn’t get better examples of “alarm clock Britain” but in each case they face real pain from rising fuel
costs. A worker making a 25-mile daily journey to and from work in a modest car which does 40 miles to the gallon will at current prices be paying more than £37 per week in fuel alone, that is before servicing costs and parking are taken into account.

Mr Duncan Smith is rightly committed to eliminating the trap that makes some people better off staying on benefits than taking a job but high fuel costs are worsening it: there is no point in going out to work if your travel costs exceed your increase in income.

Anyone who read the Conservative manifesto for last year’s election would have come to the conclusion that the party appreciated the effect of soaring fuel prices on working people. In case MPs have forgotten the passage on fuel prices I will quote it in full: “We will consult on the introduction of a fair fuel stabiliser. This would cut fuel duty when oil prices rise and vice versa. It would ensure families, businesses and the whole of the British economy are less exposed to volatile oil markets.”

In the event the price of crude oil has surged to nearly $100 a barrel and instead of cutting fuel duties the Government is raising them. The fair fuel stabiliser seems to have been kicked into touch with David Cameron warning recently that fuel tax “is a complex area”.

On several occasions the Government has also promised a fuel duty rebate for rural areas where bus services are few and people must travel long distances to work and to shop.

But this too is no closer to happening. The Government has proposed a pilot scheme for the Scottish Islands and the Isles of Scilly but it turns out that it breaks EU law.

Under the rules of the single market any state wanting to introduce a fuel duty rate varying from one part of the country to another must make a proposal to the European Commission, which must then be agreed unanimously by finance ministers.

I think we can take that as a “no” then. Did we really join the EU in order to prevent our Government from offering some of the most vulnerable people in Britain protection from high fuel prices?

David Cameron once promised to renegotiate Britain’s relationship with the EU but it seems that this is yet another promise that has been kicked into the long grass.

Fuel duties are in danger of becoming to Cameron and the Conservatives what tuition fees have become to Clegg: an issue on which they end up taking a completely opposite position to that which they pledged to take while in opposition. If I were a Tory strategist I would look at Clegg’s ratings – and get that fair fuel stabiliser in place pretty quickly.

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