Why a “fair fuel stabiliser” would be bad policy

The government does not receive a “windfall” from higher petrol prices.

There's a notable interview with Robert Chote, the head of the Office for Budget Responsibility, in today's Financial Times in which he repudiates the notion of a "fair fuel stabiliser".

Philip Hammond, the Transport Secretary, has promised to "look at the practicality" of this measure in time for the next Budget and the government is under significant pressure from the tabloids to limit petrol prices. But Chote warns that the fuel stabiliser is premised on the false assumption that the state receives a windfall in tax revenues when oil prices rise. In fact, higher prices rarely increase revenue because of the overall effect on economic performance.

Chote refers to a summer analysis by the OBR which concluded that the "overall effect of a temporary oil-price rise would be 'close to zero' " and that "a permanent rise would create a loss to the public finances". This is because higher pump prices "reduce the demand for fuel, lowering fuel duty receipts" and push up the indexation of tax thresholds, benefits, public-service pensions and index-linked gilts.

As the data below confirms, higher oil prices would generally lead to a fall in tax revenues.

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This doesn't mean that a fuel stabiliser is unworkable, but it does mean that the government would need to raise taxes elsewhere if it lowered duty on petrol.

Chote's conclusion is that "a fair fuel stabiliser would be likely to make the public finances less stable rather than more stable". But will ministers put short-term political considerations first? We'll soon find out.

George Eaton is political editor of the New Statesman.

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Labour MP Sarah Champion resigns over grooming gang piece in The Sun

The shadow equalities minister is standing down after her controversial article sparked accusations of racism.

Sarah Champion has resigned as shadow equalities minister over her incendiary article about grooming gangs in The Sun.

The Labour MP for Rotherham caused controversy by writing a piece about the Newcastle paedophile ring, which the tabloid headlined: "British Pakistanis ARE raping white girls... and we need to face up to it".

This sparked accusations of racism, including from figures in her own party. Naz Shah, the Labour MP for Bradford West, wrote in the Independent“Such an incendiary headline and article is not only irresponsible but is also setting a very dangerous precedent and must be challenged.”

Champion initially tried to distance herself from how the article was framed, claiming that the opening paragraphs were edited and "stripped of nuance". The paper, however, said her team approved the piece and were "thrilled" with it.

In her resignation statement, Champion apologised for causing offence: “I apologise for the offence caused by the extremely poor choice of words in the Sun article on Friday. I am concerned that my continued position in the shadow cabinet would distract from the crucial issues around child protection which I have campaigned on my entire political career.”

“It is therefore with regret that I tender my resignation as shadow secretary of state for women and equalities.”

In a comment decrying The Sun's general Islamophobia-inciting coverage, the Labour leader Jeremy Corbyn warned against "attempts to brand communities or ethnic or religious groups, wittingly or unwittingly".

Anoosh Chakelian is senior writer at the New Statesman.