Writing exclusively for PoliticsHome, Ed Balls calls on the Government to postpone the 3p increase in fuel duty - currently planned for January - until "at least" April.
Britain is finally out of the longest double-dip recession since the Second World War. But this is no time for complacency. A strong economic recovery is far from secured. And families, pensioners and businesses are still feeling the squeeze. Prices are rising faster than wages and families are being hit hard by the government’s VAT hike, cuts to tax credits and child benefit.
At a time when the cost of living is rising, our recovery is fragile and this out of touch government is giving 8,000 millionaires a tax cut, it cannot be right to hit middle and low income families and small businesses with another tax increase.
That is why Labour is calling on the Chancellor to cancel January’s planned 3p rise in fuel duty – at least until next April. We will put this to a vote in Parliament on Monday and I hope MPs from all parties will stand up for their constituents and back our call.
Where should the government get the money to pay for this tax cut? I suggest they pay for this move by clamping down on tax avoidance. For example, there is a growing problem with some employment agencies forcing workers to become employees of an umbrella company. They then falsely inflate the worker’s travel and food expense claims, reducing tax and national insurance, and pocket the avoided tax as profits.
HM Revenue and Customs has forecast that these schemes cost the exchequer £650m a year. Recent estimates have now put it as high as £1 billion a year. But Ministers have failed to take tough action to stop it happening. Even if only a proportion of that money was recouped it could pay for the fuel duty rise to be put off until next Spring.
Acting now would give some relief to millions of motorists. Petrol now costs an average of £1.36 per litre. That’s 5p higher than in the summer when George Osborne u-turned and agreed to Labour’s call to postpone August’s fuel duty rise. And it’s 15p higher than it was at the general election.
It’s good news that some of the big supermarkets have this week cut their pump prices to attract shoppers in the run up to Christmas. But rather than give the retailers a reason to put prices back up in the New Year, Ministers should keep the pressure on them to keep it down by postponing the duty rise in January.
Of course difficult decisions are needed to get the deficit down. That’s why Labour put up fuel duty in the past. But we often delayed or cancelled planned duty rises based on the circumstances at the time – including at the height of the global financial crisis. And I am clear that now is not the right time to hit the economy with another tax rise on small firms and people on low and middle incomes.
The government needs to act and clamp down on those avoiding paying their fair share of tax so that millions don’t have to pay more. And I hope MPs from other parties will join us next week in pushing them to do so.
Response: The Confederation of Paper Industries
“The Confederation of Paper Industries (CPI) represents Members who produce pulp and paper, convert it into products such as corrugated boxes and collect waste paper which is then processed and returned to the mills to make new paper products. It is a fully circular operation and at every stage there is one constant factor – the need to transport it to the next. A total of 5m tonnes of paper is produced in the UK every year.
Transport costs are a significant element in the total costs associated with these operations and any rise in tax on fuels is particularly unwelcome, especially at a time when the economic situation is putting extreme pressure on margins. The UK Paper Industry is also facing significant increases in costs associated with energy and climate change policy, as well as an array of other environmental legislation. Government cannot keep passing additional costs on to industry and expect it to remain competitive.
CPI would therefore support any move to delay – or even abandon – attempts to raise fuel duties above their current very high level”.
The proposed increase in fuel duty of 3p per litre, due to come into force in January, will place yet another burden on a struggling economy.
This move will tighten the already narrow margins of contractors and tradesmen across the country, with additional burdens arising where employees claim fuel expenses as part of their work.
At a time when the Government should be helping small businesses grow, Mr Osborn’s fuel duty hike will make life increasingly difficult for SME’s across the country.
Though the Treasury have indicated this move could bring in £1.5 billion, the tax increase could also cost as many as 35,000 jobs, according to the campaign group FairFuelUK. These predictions bring the net efficiency of this attempt to balance the budget into question.
NAPIT are therefore calling for Mr Osborne to postpone this increase in order to reduce an already heavy burden on a fragile industry.
Response: Mineral Products Association
We strongly support the postponement or cancellation of the planned rises in fuel duties. The planned increases would cost the minerals products industry over £11 million per annum and we cannot just continue loading production and manufacturing businesses with increasing costs and at the same time expect these industries to contribute to economic recovery. We have included our concern about rising fuel duties in representations we have made to the Government which highlight the significant cost and burden of regulatory costs on our industry. There comes a time when Government really has to review the cumulative impact of these costs on business - we cannot simply assume that industry can keep absorbing such costs. Our industry markets will decline by 10% this year and we have seen no recovery since the depths of the 2009 recession - this is the time to be reducing the burden on business and not increasing it.