Budget 2013: George Osborne must scrap the fuel duty rise

Families urgently need help with the cost of living. The Chancellor should take action on fuel duty and then examine a 10p tax rate.

I am a moderniser. But I believe that the one area of modernisation that the Conservative Party should focus on is helping those on lower incomes, who are struggling to make a living. We need a Ronseal politics, which is easy to define. This is not about getting hung up about backgrounds, or what school you went to. In fact, most families would love to send their children to posh schools. But it's about being on the side of the poorest, even if we don't believe in the big state redistributionist welfarism of the Labour Party. David Cameron’s declaration that "Conservatives are not the party of the better off, but the party for the want-to-be-better-off" should run through everything that we do - every speech, every Budget line, every policy decision. It must be our narrative, our metaphorical "washing line", holding all the clothes pegs together.

This means picking some battles. Policies only get attention if there is a scrap to get them through. I will come on to the cost of living in a moment, but other suggestions might include support for the family around housing and the right to buy; the cost of childcare; and Michael Gove’s education reforms. These need to be pursued relentlessly, both through intellectual firepower and personal stories. A mirror image of what Labour have done on the 50p rate.
Modernisation also means being counter-intuitive. Conservatives should not be afraid to appropriate the language of the left, or build alliances with trade unions, pressure groups and the Big Society. We must show that our policies are compassionate. Language and manner are incredibly important.
So when it comes to the Budget, this means a focus on lower earners and the cost of living. There is no more toxic tax than fuel duty. In my constituency of Harlow, the question is not whether you can afford to have a car, but whether you can afford not to. Like it or not, Britain is a great car economy. Seventy one per cent of us still drive to work. Rocketing fuel prices are also draining investment away from the more productive parts of the economy. The AA estimates that a 3p rise at the pumps switches an extra £1.8m into fuel sales, out of peoples’ pockets, every day. In 2011, Sir Terry Leahy of Tesco blamed fuel prices for the GDP slowdown, saying: "Filling up the family car has gone up 70 per cent in two years, causing what was a steady recovery to go sideways."
Petrol prices are also an issue of social justice. In reality, fuel duty is a tax on everything as it pushes up the cost of public transport and road haulage. In November 2011, the ONS stated that fuel taxes are shockingly regressive. Two years ago, an ordinary car-owner in Harlow was spending £1,700 a year on filling up the family car. Sadly, this trend has got worse, not better. According to the RAC Foundation, 800,000 British families now spend a quarter of their income on running a car. The poorest decile of households in the UK are shelling out at least 27 per cent of their disposable income on buying and running a vehicle. This is a national scandal. Given that two-thirds of the pump-price of petrol and diesel is tax, this is largely a crisis of our own making. All sensible people agree that taxes should be broadly progressive. That is why fuel duty needs reform.
George Osborne gets this. He has cancelled or delayed every single fuel duty rise that Labour left behind in their 2009 and 2010 Budgets - and he has done this at a time of immense strain on the public finances.
Fuel is now 10p cheaper per litre as a result. According to the AA, that has meant £6m more for families to spend in Britain’s real economy, every single day; £2.2bn more annually left in Britain’s collective pocket. Given his record, I am urging the Chancellor to go further in this Budget and to scrap September’s planned rise in fuel duty.
The second campaign that I am pressing for - in the longer term - is a major tax reform: something that is easily understood; is totemic; and helps those on lowest incomes. Namely: the restoration of the 10p income tax-rate. I believe that progressive reductions of income tax must be a moral mission for Conservatives. For example, a 10p band introduced above the current personal allowance (say between £9,440 and £12,000) would hand back more than £250 a year to a worker on minimum wage, and would help them to earn much closer to a living wage in cash-terms. Conservatives could also look to widen out a 10p band over time. This could help more middle earners as well.
Restoring a proper, generous 10p rate would be totemic. People would notice it. In my view, Ed Miliband's half-hearted conversion to the idea was a missed opportunity, as Labour’s proposals would only mean an extra £34 a year for a family (according to Policy Exchange) and even their new "mansion tax" doesn't fund it all. Such a tax will set a dangerous precedent, and no doubt will rapidly become a "homes tax" as the band gets lower and lower. That's not what Britain needs. Besides, the coalition have already brought in a de facto "mansion tax" by hiking stamp duty on more expensive homes. What we need instead is a substantive income tax reform - as set out on Great Gordon Brown Repeal Bill
Some people say, "just keep raising the personal allowance". I think this would be unwise. Everyone should pay something towards public services, even if only a little. Nigel Lawson started off as a Chancellor prioritising tax allowances. But later he changed course. He said: "I wished to create a large constituency in favour of income-tax reductions. The last thing I wanted to do was to reduce the size of that constituency by taking people out of tax altogether."
Consider a second analogy. Suppose that you and your friends have have gone out to an expensive restaurant for a large meal, and finally it comes to splitting the bill. Under my proposals, most people would still contribute something, albeit the poorest would pay the least as a share of their income. But is it really sensible that more and more of the table have a totally free ride, on the grounds that this "avoids complexity"? As a Conservative, this makes me uneasy. What lavish choices will your friends order next time, if they know that you are paying the cheque?
For the Budget next week, money is tight. So how might we pay for a freeze in fuel duty? There are many places to start: restricting elderly benefits to poorer pensioners, for example, or ringfencing the extra revenues that are expected from the new 45p rate of income tax. But it is striking, how one-sided this debate is. Whenever one argues for tax cuts, there is a clamour of voices saying, "how are you going to pay for it?" And yet, when large unfunded rises in government spending are announced - Vince Cable’s £1bn "British business bank" for example, or several of DECC’s carbon schemes - nobody really asks where the money is coming from. Fiscal discipline must be about controlling spending, as much as a broad tax base.
But, however it is paid for, families urgently need help with the cost of living. If Conservatives are to win the next general election, it will be because we have helped fundamentally with things like the cost of filling up the family car. Fuel duty has become a toxic tax. Keeping petrol and diesel costs down will reduce poverty, help to boost jobs, and secure the GDP growth that we so desperately need. When the economy recovers, then we can look at other reforms - such as the 10p rate - but what we need right now is a cost of living Budget
Robert Halfon is Conservative MP for Harlow. He tweets at @halfon4harlowMP


Fuel duty protestors stand outside Parliament on March 7, 2012 in London. Photograph: Getty Images.

Robert Halfon is Conservative MP for Harlow. He tweets at @halfon4harlowMP

Photo: Getty Images
Show Hide image

I'm far from convinced by Cameron's plans for Syria

The Prime Minister has a plan for when the bombs drop. But what about after?

In the House of Commons today, the Prime Minister set out a powerful case for Britain to join air strikes against Isil in Syria.  Isil, he argued, poses a direct threat to Britain and its people, and Britain should not be in the business of “outsourcing our security to our allies”. And while he conceded that further airstrikes alone would not be sufficient to beat Isil, he made the case for an “Isil first” strategy – attacking Isil now, while continuing to do what we can diplomatically to help secure a lasting settlement for Syria in which Assad (eventually) plays no part.

I agreed with much of David Cameron’s analysis. And no-one should doubt either the murderous barbarism of Isil in the region, or the barbarism they foment and inspire in others across the world.  But at the end of his lengthy Q&A session with MPs, I remained unconvinced that UK involvement in airstrikes in Syria was the right option. Because the case for action has to be a case for action that has a chance of succeeding.  And David Cameron’s case contained neither a plan for winning the war, nor a plan for winning the peace.

The Prime Minister, along with military experts and analysts across the world, concedes that air strikes alone will not defeat Isil, and that (as in Iraq) ground forces are essential if we want to rid Syria of Isil. But what is the plan to assemble these ground forces so necessary for a successful mission?  David Cameron’s answer today was more a hope than a plan. He referred to “70,000 Syrian opposition fighters - principally the Free Syrian Army (FSA) – with whom we can co-ordinate attacks on Isil”.

But it is an illusion to think that these fighters can provide the ground forces needed to complement aerial bombardment of Isil.  Many commentators have begun to doubt whether the FSA continues to exist as a coherent operational entity over the past few months. Coralling the myriad rebel groups into a disciplined force capable of fighting and occupying Isil territory is a heroic ambition, not a plan. And previous efforts to mobilize the rebels against Isil have been utter failures. Last month the Americans abandoned a $500m programme to train and turn 5,400 rebel fighters into a disciplined force to fight Isil. They succeeded in training just 60 fighters. And there have been incidents of American-trained fighters giving some of their US-provided equipment to the Nusra Front, an affiliate of Al Qaeda.

Why has it proven so hard to co-opt rebel forces in the fight against Isil? Because most of the various rebel groups are fighting a war against Assad, not against Isil.  Syria’s civil war is gruesome and complex, but it is fundamentally a Civil War between Assad’s forces and a variety of opponents of Assad’s regime. It would be a mistake for Britain to base a case for military action against Isil on the hope that thousands of disparate rebel forces can be persuaded to change their enemy – especially when the evidence so far is that they won’t.

This is a plan for military action that, at present, looks highly unlikely to succeed.  But what of the plan for peace? David Cameron today argued for the separation of the immediate task at hand - to strike against Isil in Syria – from the longer-term ambition of achieving a settlement in Syria and removing Assad.  But for Isil to be beaten, the two cannot be separated. Because it is only by making progress in developing a credible and internationally-backed plan for a post-Assad Syria that we will persuade Syrian Sunnis that fighting Isil will not end up helping Assad win the Civil War.  If we want not only to rely on rebel Sunnis to provide ground troops against Isil, but also provide stable governance in Isil-occupied areas when the bombing stops, progress on a settlement to Syria’s Civil War is more not less urgent.  Without it, the reluctance of Syrian Sunnis to think that our fight is their fight will undermine the chances of military efforts to beat Isil and bring basic order to the regions they control. 

This points us towards doubling down on the progress that has already been made in Vienna: working with the USA, France, Syria’s neighbours and the Gulf states, as well as Russia and Iran. We need not just a combined approach to ending the conflict, but the prospect of a post-war Syria that offers a place for those whose cooperation we seek to defeat Isil. No doubt this will strike some as insufficient in the face of the horrors perpetrated by Isil. But I fear that if we want not just to take action against Isil but to defeat them and prevent their return, it offers a better chance of succeeding than David Cameron’s proposal today. 

Stewart Wood is a former Shadow Cabinet minister and adviser to Ed Miliband. He tweets as @StewartWood.