Transparency: The True Cost of Petrol and Diesel

Today I spoke in parliament about my plans to make the price of fuel more transparent to the motorists of Britain.

You can read my full speech below or watch it with the video above.

Robert Halfon (Harlow): 
I only want to make one point today, about the transparency of petrol and diesel prices. Let me start by saying that this Government has stepped up to the plate when it comes to cutting fuel duty. Ministers have done more to cut fuel duty in two years, than the many Governments in the past. But fuel duty is still a “stealth” tax. They're right. As the FairFuelUK campaign have pointed out, we are not straight with the public about how much tax they are paying. I should pay tribute to FairFuelUK for one of the most effective campaigning groups in our country.

At the moment, when I fill up my car, my receipt says:“FUEL £50... VAT £10”. This is wrong. If my receipt was accurate, it would say something more like:“FUEL £25... DUTY £25 … VAT £10”. And there should be some mention of how much of that tax is actually spent on our roads.

So I want to make three brief points, this afternoon:

1. It was never meant to be like this.

2. What I am proposing.

3. Why transparency works.

The history of car taxation is a textbook case of how a tax becomes entrenched. First it is temporary; hypothecated for a specific purpose; then it is expanded; finally it is folded into general taxation. This is exactly what happened to fuel duty between 1909, and 1937. In the early years of the 20th Century, funding for roads was drawn mainly from local ratepayers. The so-called “People’s Budget” in 1909 - from the Liberal Party - put a new duty on "motor spirit" (i.e. petrol), in the days before E.C.C. membership forced us to introduce VAT. This was ring-fenced for a “Road Improvement Fund”. The explicit promise of Lloyd-George, in his Budget speech on 29 April 1909, was - and I quote - “The funds so raised will not merely be devoted exclusively to the improvement of the roads, but they will be well and wisely spent for that end...”

By the 1920s the Road Fund was repeatedly raided to prop up the Treasury. At the same time, fuel duty was compounded with licence-fees, vehicle taxes, and so forth. Eventually from 1937 motoring duty was treated as a general tax. The result, by 1966, just 33 per cent of the revenue was actually spent on roads. By 2008, this has fallen to just 20 per cent. Of course over the years a series of “temporary” increases were brought in.

 The Fuel duty escalator in some senses in 1956 with the Hydrocarbon Oil Duties (Temporary Increase) Act in 1956 - back when duty was fluctuating between 5p and 6p a litre, and VAT did not exist. The temporary increase was a mirage. Fuel duty is now 58p, with 20% VAT on top - an increase of more than 1,000 per cent.

 My argument is that on every receipt, of every fuel bill, the tax burden should be clear and transparent, and there should be some indication of how much is being spent on our roads.

So my receipt would say: "FUEL £25... Duty £25... VAT £10... Amount spent on roads £7".

My Hon. Friend the Member for Ipswich proposed this for income tax - welcomed by the Chancellor. Let us do the same for petrol and diesel.

Why is this necessary?

First we should be honest with motorists. The average family in Harlow spends a tenth of their income on fuel - more than they spend on the weekly shop. In essence, that is petrol poverty. Morally, they have a right to know why their bills are so high. Tax-transparency will act as a deterrent and stop any Government hiking Fuel duty without good reason. Because people will see the increase on their receipts.

Now it will also be easier to hold the big oil companies to account. The Government say their actions have a low impact, compared with the huge swings in the oil-price. My proposal would give people the hard evidence, on a weekly basis, to know if falls in oil-prices are being passed onto consumers. As recommended by the website I'm involved in PetrolPromise.com.

In conclusion, my proposal does what it says on the tin.

We need basic transparency on Fuel duty about what people pay, and where the money goes. It's more honest; it is a deterrent against tax rises; and it adds pressure on the oil companies to be fair.

Therefore I hope - if the House is willing - to introduce a Private Members Bill on the subject later this year. But in the meantime I would urge Ministers to consider this proposal for the Autumn Statement.

by Robert Halfon MP - Working Hard for Harlow.