The price of road fuel is again becoming one of the hottest political topics in the land. Just having paid £88 to fill my car with diesel, I share in the sense of aggravation.
It is one thing to say “something must be done” and quite another to make any useful suggestion. Indeed, this is a subject that lends itself both to empty rhetoric and hypocrisy – neither of which does the slightest bit of good for the motorists at the sharp end of the issue.
The first, fundamental question is whether it is a good or bad thing to price people out of using their cars, or at least to discourage use to the extent that has become habitual. The political answer to this is not as obvious as it might appear since, until very recently, it was the stated policy of every political party to achieve exactly that.
That is why the Tories introduced a fuel duty escalator in the mid-1990s. It was intended, obviously, to make motoring more expensive on environmental grounds.
When Labour took office in 1997, they inherited and retained it – but were attacked for being too wimpish in their approach. “Double it,” cried the opposition parties – with the Liberals and Greens in the vanguard.
Then came the price hikes of 2001 and the lorry drivers’ protests. Suddenly, most of the “double it” brigade became the “abolish it” retreat army.
The Government’s response was to freeze the rate of increase at the level of inflation and it was only last year that they felt it safe to propose an above-inflation increase on environmental grounds, since reversed.
But the brutal truth is that the surge in oil prices of recent months has achieved exactly what the fuel duty escalator set out to do – which was to make motoring sufficiently expensive for people to think twice about it. The difference is that while measures introduced by governments can be reversed in response to political pressures, the rise in oil prices shows every sign of being with us to stay. And Opec doesn’t have to fight elections.
All of this suggests that we have been living in a fool’s paradise for the past decade. If politicians had stuck to their guns, told the voters that there was no such thing as cheap oil and they had better get used to that reality, instead of retreating at the first whiff of grapeshot, then I suspect that we would now be a lot further forward in terms of alternative fuels and engine efficiency. In particular, the pressures on the manufacturers to adapt to a new world order would have been a lot more intense.
So, though it is not an easy line to sell at present, the pain may be worth the gain. Nobody can now assume that fuel prices are going to revert even to the level they were at a few months ago. That is the reality that must inform our own behaviour and, therefore, the response of the market. And in the not so very long run, that will be no bad thing.
Meanwhile, demands for Government to cut the general level of taxation on road fuel are pointless. Rightly or wrongly, the UK taxation system has evolved with road fuel as a major contributor to the coffers. It is just about possible to freeze it, but not to cut it without major requirements being created for alternative sources of revenue.
Anyway, it is a bit of a myth that British motorists pay more tax. When I was energy minister, I commissioned research to get to the bottom of that one and it emerged that we are, in fact, around the middle of the European league table. This is because, while our system piles taxation on at the pump, other countries have much higher levels of road tax and other duties, particularly on less fuel-efficient vehicles. So simply crying for a cut in taxation is a pointless demand.
Indeed, making such a general demand for political effect detracts from the much stronger case for intervention where it both could, and should, be applied. Most urgently, in my view, this means the most peripheral areas of the country that pay up to 20p a litre more for their fuel than in the cities. And remember, in the context of this debate, Inverness and Aberdeen are every bit as much “the cities” as Glasgow or London. It would need a tiny piece of adjustment by the oil companies, with appropriate sticks and carrots from Government, to adjust their wholesale pricing structures in order to remove this massive burden from the ultra-peripheral and island areas.
The volumes involved are so minuscule in the overall scheme of things that there would be no measurable impact on the generality of pricing. This is an eminently deliverable option that should be pursued as a matter of urgency.
Air passenger discounts, introduced by the previous Holyrood administration, and the RET pilot proposed for the Western Isles have both recognised the disproportionate impact of transport costs. A deal with the oil companies to moderate fuel prices in the most peripheral postcode areas of the UK, which suffer huge disadvantage because of internal transport costs, would be in exactly the same spirit and, frankly, I don’t care whether it is Holyrood or Westminster who delivers it. But somebody should.