Finance Bill

I shall concentrate on new clauses 8 and 9, which Scottish National party and Plaid Cymru Members tabled. As ever, the hon. Member for Wolverhampton, South-West (Rob Marris) made an interesting contribution. There is a danger that some Government policies that we have discussed today will give green taxes a bad name and could undermine the necessary shift towards environmental taxation, which must be supported because of the ““polluter pays”” principle that the hon. Gentleman mentioned. The hon. Member for South Thanet (Dr. Ladyman) has an interesting article in Progress. He is a Labour Member who, as a former Transport Minister, should know about such things. He makes powerful points and supports our proposal for a fuel duty regulator. There are three general reasons for needing a moderating mechanism for fuel duty. First, the unprecedented volatility in the price of oil has far-reaching social and economic consequences, and we need a mechanism to dampen the peaks and troughs. Secondly, environmental taxes must be linked to clear environmental criteria; otherwise the public will believe that they are simply a revenue-raising mechanism, and that undermines the broader importance of environmental taxation. Thirdly, surges in fuel prices disproportionately hit some sectors of the economy, some sections of the community and some parts of the country disproportionately that need and deserve Government protection. I shall consider each item briefly. Volatility is the catalyst for the debate, as it was at the beginning of the decade, when there were also fuel protests. The oil price is historically high. It is the second oil price shock and I think that it is qualitatively different from the first because, if we have not yet reached peak oil—the moment when conventional oil production goes into irreversible decline—we are near the summit. After 1973, non-OPEC countries could expand exploration and production in response to the oil price surge. That eventually broke the power of OPEC and led to a collapse in the oil price in the mid-1980s. We are in a different position now. The growth of the emerging economies, especially that of China, has driven the oil price up in terms of demand, while the supply side is totally different from what it was. Non-OPEC conventional oil production is already in irreversible decline. The North sea may be a special case—perhaps Government policies and tax hold back production there. We will be in a position whereby OPEC has a far stronger grip on the oil market than before. From what we know of demand, OPEC will be able to hold up oil prices in the long term. There are some counter-arguments about the lack of investment in refining. Some refining capacity will come on stream in India, Sri Lanka and the middle east. That will have some effect. There are discussions about the long-term prospects of tar sands, oil shale and even coal oil, but most people accept that we are in a period of high oil prices and that we will remain there, certainly until alternative fuels and technologies reach maturity—at least 20 years away. The fundamental driver is geological. Supplies are finite and they are running out, which is inevitable. That is the position that we are in. There may be a fall in the oil price if the Chinese economy goes into recession or if the US economy gets into further difficulties, and it could be a dramatic fall, but that is the point. Even against the underlying trend, which has to be upward, there may be dramatic surges and falls along the way. That is why we need a moderating regulator to provide people with the stability to plan for this new era. We have moved from an era of cheap oil and are now in an era of premium oil, and that will continue. We need to give people the ability to plan for a post-oil economy, as the Swedes are doing. However, we cannot do that if we are exposed to the vagaries of the international market. We need a planned transition to a post-carbon economy. A fuel regulator would be an important contribution towards enabling companies, families and individuals to do that. Large companies can do that through hedging, but we need to afford smaller companies and families some protection from massive fluctuations in the price of oil.