The case against a “fair fuel stabiliser”

This costly measure would mean major tax rises or spending cuts elsewhere.

The only time that William Hague led Tony Blair in the polls was during the fuel protests of 2000. Mindful of the damage that high petrol prices can inflict on a government and of Labour's increasingly sharp attack on the "cost of living", the coalition is assembling what has been described as a "rescue package" for motorists.

Today's Times (£) reports that a "fair fuel stabiliser", a measure first promised in 2008 but since quietly dropped, is being "actively looked at" ahead of the Budget on 23 March. With this in mind, it's worth restating the practical case against the policy. Many supporters of a fuel stabiliser make the false assumption that the state receives a windfall in tax revenues when oil prices rise.

George Osborne, for instance, once claimed: "Currently, when oil prices rise, the government receives a windfall increase in tax revenues, mainly due to taxes on North Sea oil production. And when oil prices fall, the government suffers an unexpected shortfall in revenues for the same reason."

In fact, as I've noted before, higher prices rarely increase revenue because of the overall effect on economic performance. A summer analysis by the Office for Budget Responsibility 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 shows, higher oil prices generally lead to a fall in tax revenues.


In other words, the government would need to raise taxes or cut spending elsewhere if it lowered duty on petrol. Even those who should be natural supporters of the measure, such as the chairman of the Retail Motor Industry Federation, Brian Madderson, aren't convinced. In a recent letter to George Osborne, Madderson wrote: "Whilst the idea undoubtedly has popular appeal, the reality is that any such mechanism would require detailed investigation, involvement of industry and be both complex and costly to manage."

The Chancellor should hold his nerve and face down the motorists' lobby.

George Eaton is political editor of the New Statesman.

Show Hide image

How a dark night for Paris was made easier by British messages of support

The French Ambassador to the UK reflects on the Paris attacks, and how Britain's response helped make the aftermath more bearable.

I was at a dinner with members of London’s French community when news of the 13 November attacks in Paris first reached me. Our initial reaction – one that I think was shared the world over – was of shock. Young people, out on a Friday night, doing normal things that young people do: chatting, laughing, drinking, dancing. Enjoying the pleasures that are their right, in a city that lives and breathes music, conversation and, above all, liberty.

I felt a tragic sense of déjà vu as I followed the events unfolding on television. Less than a year ago, our country was attacked by murderers and fanatics who wanted to destroy the values that we hold dear. And again on 13 November, I watched as France fell victim to another cowardly and barbaric attack on its way of life.


Fraternité, solidarité

The grief that was shared by the French community here in London was made easier to bear by the messages of support that flooded in from around the country – if anything, even more than after the Charlie Hebdo attacks. I received countless phone calls, emails and letters from British friends, dignitaries, members of the public and faith groups, all conveying sympathy and friendship. I was particularly touched by a statement presented to me by representatives of 140 leaders of the Muslim community.

None was more powerful than the football match between England and France at Wembley, just four days after three suicide bombers blew themselves up outside the Stade de France in Paris. Never has the word “friendly” taken on such a literal meaning. It wasn’t about the football that night; it was about coming together and showing that we won’t live in terror. There have been so many stirring renditions of the French national anthem these past weeks – not least that of the French bass Nicolas Courjal following my appearance on The Andrew Marr Show – but the singing of La Marseillaise by the whole stadium, including the Prime Minister and Prince William, really did move me. I think the front cover of the Metro the next morning summed it up best: “England. France. United.”


Fitting tributes

The embassy in London was a focal point for many who wanted to show their support in the wake of the attacks. A sea of flowers and candles quickly formed outside, with a constant stream of people coming to sign the book of condolence that has now been sent to Paris. Once again, the British people showed that we can count on them in difficult times. I led a minute’s silence alongside the Home Secretary, Theresa May, which was observed all around the country in memory of the victims of the attacks.

Her presence was fitting, given the close relationship that our respective home secretaries have built. There are constant exchanges between the French and British security services, for the threat of terrorism is not faced by France alone. The whole of Europe must ensure that stronger security measures are put in place. We wish to preserve Schengen and the border checks are only temporary measures. But the external border needs to be much more secure and European border guards need to be present.


Beyond Calais

I’m glad that, after a tough summer, our message that Calais is only one part of a Europe-wide migrant crisis seems to have got through. The kind of criticism I heard in July, when I was asked time and again by the press why France wasn’t doing more to prevent migrants crossing the tunnel, is now much rarer. Indeed, Franco-British co-operation has been effective in Calais. But the “Jungle” is still there, inhabited partly by people who would qualify for refugee status and who will need to be taken care of. France is already doing a lot in that regard.


Current climate

Migration was on the agenda last week at the London School of Economics, where I opened a conference on its link with climate change, the last in a series of Franco-British events that the embassy has held in the run-up to the UN climate summit in Paris, which starts on 30 November. Life has to go on as normally as possible after the atrocities. Any­thing else would be a victory for the terrorists. The sense of momentum ahead of the summit is strong and hasn’t been diminished by the attacks. If anything, the sense of urgency is greater than ever. This summit is about securing the future of humanity – what could be more important than that?

Nuclear energy is one of the ways we can reduce CO2 emissions. President Xi Jinping of China’s recent visit to the UK resulted in decisive steps being taken towards the building of a new nuclear plant at Hinkley Point by the French company EDF. This project will provide secure, low-carbon energy to UK homes and reinforce the alliance between France and Britain for decades to come.


Old alliances

On Monday I attended a breakfast in Paris between David Cameron and François Hollande. Witnessing this new testimony to the strength of the century-old Entente Cordiale, I could not help but think, bemused, of those commentators who claim that to ensure the success of the British renegotiation, there will have to be a highly visible Franco-
British spat at a forthcoming European council . . . Speaking of friendship in times of crisis, two days before the Paris attacks, I presented 19 British veterans with the Légion d’honneur, France’s highest honour, in recognition of their role in securing France’s liberation during the Second World War. Over 1,000 have received their medals so far and many more will get them in the months to come. I’ve received a number of poignant letters from them as a result. In the midst of the grief and despair, it will be all the more moving to honour these veterans. They are a reminder that courage, determination and, above all, solidarity will triumph.

Sylvie Bermann is the French ambassador to the UK 

This article first appeared in the 26 November 2015 issue of the New Statesman, Terror vs the State