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

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Owen Smith interview: “I’m pretty red”

The Labour leadership challenger is struggling to win over a left suspicious of his past. 

The south Wales valleys embody the history of the labour movement: its victories, its defeats, its heroes, its villains. It was this resonant location that Owen Smith chose for his speech on the morning of 22 August. Labour Party members had that day begun voting on whether the 46-year-old Pontypridd MP should replace Jeremy Corbyn as their leader.

“Our history, our party was literally hewed from the hillsides around where we sit today,” Smith told a small audience at the Ely Valley Miners Welfare Club in Tonyrefail, a short distance from his home. The Welshman cited the Taff Vale judgment of 1901, which ruled that trade unions could be sued for losses caused by industrial action. It was this decision that spurred on the establishment of a Labour Party in parliament to repeal the law (as it would do in 1906 in alliance with the Liberal government).

Smith spoke later of marching with miners from the Maerdy Colliery as a 14-year-old, on the day they returned to work at the end of the 1984-85 strike. “I saw that they were utterly unbowed,” he recalled. “But they were ultimately defeated.”

Such moments, he concluded, proved the need for Labour to win power and to maintain “a powerful voice in parliament” – something he believes Jeremy Corbyn is incapable of providing. On 28 June, less than a year after Corbyn’s landslide victory, 172 MPs (81 per cent of the Parliamentary Labour Party) endorsed a no-confidence motion in him. Sixty-five shadow ministers, including Smith (who was then the shadow work and pensions secretary), resigned from the front bench.

Yet though Smith enjoys the overwhelming backing of the PLP, few believe he will prevail among members. He achieved only 53 constituency nominations, against the leader’s 285. On social media, where internal party contests are increasingly decided, Smith’s reach is minuscule compared to that of Corbyn (who has 795,000 Facebook fans to his 14,000).

The day before Smith spoke in south Wales, he won the endorsement of Sadiq Khan, the Mayor of London and Labour’s most senior elected politician. He was subsequently also backed by the Scottish Labour leader, Kezia Dugdale. Neil Kinnock and Ed Miliband have trumpeted his cause. Yet Smith-supporting MPs fear that such declarations count for little. “It’s like the Remain campaign and the Archbishop of Canterbury,” one told me, suggesting that Labour members, like Leave voters, ”weren’t listening” to such grandees.

Corbyn’s allies and foes alike are already preparing for the aftermath of the leader’s anticipated victory. The former warn that rebel MPs put themselves at risk of deselection by members. In response, some have threatened privately to form a parliamentary breakaway group and bid for the status of the official opposition.

Smith, unsurprisingly, insists that he can win. “I think the CLP [Constituency Labour Party] nominations don’t truly reflect the views in CLPs,” he told me when we spoke after his 20-minute address. The challenger, dressed in his favoured combination of dark suit and open-necked white shirt, welcomed the black coffee proffered by his aide. “They reflect the fact that some of the people who are new members and are supportive of Jeremy were very organised . . .

“Anybody who knows the Labour Party knows that selections are very often won by the sleepers: the people who don’t go to CLP meetings and don’t necessarily shout from the rooftops.” Smith’s hopes rest on those who share Oscar Wilde’s view: “The problem with socialism is that it takes up too many spare evenings.”

Cartoon: George Leigh

Smith first publicly revealed his leadership ambitions in an interview with me back in January. “It would be an incredible honour and privilege,” he said. I wrote then of a widespread view among Labour MPs that the next leader “will at least need to be from the party’s soft left to be acceptable to the party membership”. When the rebellion against Corbyn came, it was this consideration that proved decisive. Smith was embraced as a Miliband-esque socialist and a parliamentary “clean skin”, untainted by the New Labour years, having been elected in 2010. By contrast, his initial rival, Angela Eagle, had been an MP since 1992 and voted for the Iraq War.

However, Smith proved to have a more ambiguous past than some of his backers anticipated. Corbyn’s supporters swiftly unearthed a series of interviews from 2006 in which their opponent made a notably centrist pitch. Smith, then a by-election candidate in Blaenau Gwent, south Wales, defended Tony Blair (suggesting that they differed only over the Iraq War), supported private-sector involvement in the National Health Service and praised city academies. “I’m not someone, frankly, who gets terribly wound up about some of the ideological nuances,” he told Wales Online.

Since then, he has struggled to reconcile these positions with his increasingly left-wing programme: opposing private provision in the NHS, returning academy schools to local authority control, banning zero-hours contracts and imposing a wealth tax of 1 per cent.

“To be honest, my opponents have extrapolated rather a lot in an attempt to brand me as a ‘Blairite wolf in sheep’s clothing’,” Smith told me. “Well, I’m nothing of the sort, I’ve always been a democratic socialist and I always will be. My views haven’t really changed at all, I’m someone who has been on the left of the party.

“My dad [the Welsh historian Dai Smith] is someone who’s been on the left of the Labour movement all his life. I’m someone who’s been surrounded by people who’ve been on the left of the Labour movement all their lives. It should come as no surprise that I’ve come out of that background and I’m pretty red. Because I am.”

Yet a former shadow cabinet colleague told me that Smith did not stand out as “a radical” in meetings: “The only time that I remember him becoming really animated was over further tax-raising powers for Scotland and the implications for Wales.”

What Smith believes in most, some say, is himself. The shadow chancellor, John McDonnell, described him as “one of the most ambitious career politicians I’ve met”. Others have dismissed him as a “Big Pharma lobbyist” because of his past as head of policy and government relations for Pfizer.

“I’m not ashamed that I had a life outside politics before I became an MP,” Smith told me. “Yes, I worked for Pfizer and I also worked as a BBC journalist and as an adviser to the last Labour government on the peace process in Northern Ireland.

“People don’t want career politicians – they want men and women who have had experience of working in business and in the different sectors that make up our economy. Critics may use it against me, but my time in business has helped me understand what’s wrong with it and how we can make it work better.”

Corbyn’s supporters, however, allege that Smith’s left-wing pledges would not withstand contact with centrist colleagues. The degree to which the challenger has rebutted this charge shows that he recognises its potency.

He has offered to make Corbyn party president or chair if he wins, to allow Corbyn to act as “a guardian of Labour’s values”. In his speech, Smith vowed to increase member influence by making conference votes binding on the leadership.

Throughout the 1980s, another soft-left Welshman, Neil Kinnock, struggled to assert authority as the hard left retained control of vital bodies. Smith’s proposals risk replicating this conflict. But he told me that he would respect Labour’s conference even if it endorsed stances such as Trident abolition (Smith joined CND as a teenager but later renounced unilateralism). “I do think in order to reassure members that, under my leadership, we would listen hard to them and act in accordance with their views, conference does need to become sovereign once more,” he said.

Tony Benn’s dream of internal democracy appeared to be within reach. I asked Smith whether he would support other reforms such as a reduced MP nomination threshold for leadership candidates (Corbyn allies have proposed a cut from 15 per cent to 5 per cent). “All of these things can be debated,” he told me. “I’m not sure it should be 5 per cent: I need to look at it when we get closer to it. But I am convinced that the left needs to be able to put up candidates in this contest, I’ve always felt that.”

Smith’s assertion is contradicted by a colleague who described him as having been “furious”, “apoplectic” when Corbyn made the ballot last year (he supported Andy Burnham’s campaign).

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Smith is less equiovcal over the mandatory reselection of MPs. “That would be a really retrograde step for the party,” he told me. “It would be an uncomradely way for us to do business.” He is critical of the Corbyn-aligned group Momentum, some of whose members are spearheading deselection efforts. “I fear an attitude within Momentum that they are a separate organisation and they shouldn’t be,” he told me. “It’s hard to argue that they’re loyal and supportive if they’re organising a bloomin’ great really in the same town at the same time in competition to the Labour Party” (the group will hold its own four-day conference alongside Labour’s in Liverpool).

Some of those close to Corbyn, such as John McDonnell, have unhesitatingly described themselves as Marxists (in 2006, the shadow chancellor named Marx, Lenin and Trotsky as his “most significant” intellectual influences). I asked Smith whether he believed Labour could encompass such views. “Yes, I think we’ve always been a broad church and there have always been people who’ve come from that tradition,” he replied. “There are two broad traditions: the extra-parliamentary tradition, that has always seen parliament as a compromise and parliamentary socialism as a compromise, from [the trade unionist and theorist] Noah Ablett here in south Wales with The Miners’ Next Step through to Ed Miliband’s dad [Ralph, a Marxist historian] ... and the mainstream social democratic tradition that I came from.”

He added: “We’ve had this battle in the Labour Party over the ages, haven’t we? Except now I think it’s more serious because there is a very real danger, with Labour at such a low ebb and politics fragmented more broadly, and so many more parties and so many options for people and such a lesser tribal attachment to the Labour Party, that we can’t afford those fractures.

"If we splinter, there’s lot of other places for people to put their vote.”

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Though they will not say so publicly, some of Smith’s supporters believe Labour would remain unelectable under his leadership. A former shadow cabinet minister told me that he was offering a “warmed-up Ed Milibandism, which was rejected by the voters”. Smith naturally contests this analysis. “I don’t think that we lost the last election because we were too left-wing,” he said. “The proof is that the Tories have engaged in all sorts of these policies ... Theresa May’s opening speech upon becoming leader was to talk about social injustice, economic insecurity, lack of security in the workplace. Labour values, Labour words in a Tory mouth, evidence that the broad story we’re telling about Britain is right.”

Smith said that, unlike Corbyn, he would resign if he became leader and lost a confidence vote by MPs. “Yes - I would [resign]. We are a party that believes in parliamentary democracy and, as such, it is only right that the leader commands the support of his or her colleagues in the Commons.”

Should Corbyn win the contest, as expected, Smith will not return to the shadow cabinet but act as “a loyal backbencher”.  He pledges to resist any breakaway: “I'm Labour, I've always been Labour and I will never stop being Labour," he said. 

Speaking of his fear that Corbyn would seek to remain leader even if the party lost the next general election, he said: “I’m deeply worried about it. I think he’s determined to hang on come hell or high water. And what does that say about him? ... I think he is more concerned with his version of the Labour Party being sustained and being victorious than he is with the Labour Party being victorious in elections. I think he is actually prepared to sacrifice unity and victory - two great words that have traditionally been emblazoned on Labour banners through the ages - in order to secure control of the party.”

The trouble for Owen Smith is that, for all his combative talk and appeal to the left, he is trapped between his past pragmatism and his present radicalism. 

Tony Benn, Corbyn’s late mentor, divided politicians into “signposts” and “weathercocks”: those who shape opinion and those who are shaped by it. He would have branded Smith a “weathercock”. Even if he wins, Smith risks being remembered not as a politician who resolved his party’s contradictions, but as one who embodied them.

George Eaton is political editor of the New Statesman.

This article first appeared in the 25 August 2016 issue of the New Statesman, Cameron: the legacy of a loser