Downing Street Says » Fuel Prices

Asked for a sense of what was being discussed at the meeting with oil industry representatives, the Prime Minister’s Spokesman (PMS) replied that the meeting was with the board of Oil & Gas UK which was the main representative body for the oil and gas sector in the UK, so it would cover most of the major North Sea oil producers. The main issues that they would be discussing would be the implications of what was happening in global oil markets for the UK oil industry, and what more the Government and the industry working together could do to make the most of remaining UK oil reserves under the North Sea.

Asked if there was a full cast list, the PMS replied that it was a private meeting so he did not want to get into naming individuals, but the organisations on the board was a matter of public record.

Asked if we were expecting any initiatives to come out of the meeting, tax incentives for example, the PMS replied that we should wait and see. The Department for Business were due to respond later today to the latest licensing round on North Sea oil exploration, and some further announcements from them could also be anticipated in relation to the licensing regime in terms of what could be done in order to better incentivise and make the most of remaining reserves, particularly in the mature fields.

Asked if the Prime Minister was retreating from the green agenda that he had set himself, the PMS replied that the Prime Minister was not retreating from the green agenda. On Vehicle Excise Duty (VED) and fuel prices, of course we understood the difficulties that consumers and businesses faced as a result of high global oil prices. We had already given a tax rebate of £120 this year for basic rate taxpayers, deferred the increase in fuel duties, and increased the Winter Fuel Allowance. Clearly future decisions were a matter for the Chancellor in future Budgets, and future Pre-Budget Reports (PBRs), but the he was clear that he needed to take into account the need for economic stability, the need to fund public services, and the need to promote energy efficiency. That was why the most effective action that the Government could take now to address the concerns of motorists was to work with international partners to bring greater stability in the oil market.

Asked if there would be discussions about how much money had been raised from extra North Sea tax revenues, the PMS replied that as the Treasury had always made clear, the impact of higher oil prices on public finances tended to be neutral over a period of time.

Asked about the fuel poverty event on Friday, and asked if this would be on heating, and would this be the first wave of dealing with the 10p problem, the PMS replied that issues relating to 10p were addressed by the Chancellor in his statement a couple of weeks ago. The Chancellor made clear at the time that the announcements that he made for this year on 10p were pretty comprehensive. This was a separate event – clearly we had an ongoing agenda to do what we could to help vulnerable groups deal with the high cost of heating. This was not in the context of the action that we took on 10p, which was something quite separate.

Asked if it should then be seen in the context of VED and fuel prices, in that it was another cost sparked by higher oil prices, the PMS replied that it should be seen in the context of the Government’s ongoing commitment to help vulnerable groups and the elderly in particular, deal with heating costs.

Asked if there was anything under discussion today that people might be able to feel at the pump in the next couple of months, the PMS replied that this was part of the process. The key point in the Prime Minister’s article in the Guardian this morning was that he made clear that there was no easy answer to this, we were not suggesting that action we could take in the UK was going to provide the solution. We needed an international solution and an international response, and that would be the key to dealing with the instability in the oil markets that was affecting so many people in this country and elsewhere. But clearly we had a part to play in that and that was what we would be addressing today.

Asked if the Prime Minister had any talks planned with the Heads of any of the OPEC countries, the PMS replied that we stayed in close contact with our key partners in the Middle East. As and when we had anything specific to say about that we would let people know.

Asked if the Prime Minister had considered a windfall tax on oil companies, the PMS replied that the position on that was really a matter for the Treasury, who had said things previously in relation to commitments they were making for this parliament, but it was best to check the precise form of language with them.

Asked if there were any discussions going on with European partners following President Sarkozy’s idea for fuel tax harmonisation across the EU, the PMS replied that we had a long standing position that tax policy matters were really a matter for the British Chancellor of the Exchequer to deal with the in the Budget and PBR, and that remained the position. We would of course discuss with our international partners and our partners in the EU ahead of the EU summit in a couple of weeks time and the G8 meeting in July, what more we could do internationally to keep up the pressure on oil producers in order to reduce supply. But tax really was an issue for the British Chancellor.

Put that President Sarkozy then should "forget it", the PMS replied that as he had said, we had a long standing position on tax harmonisation and tax matters in Europe.

Asked that if the Prime Minister was not retreating from his green agenda, could people understand that he would not be retreating from his position on VED and fuel duty, the PMS replied that as he had said on VED of course we understood the difficulties that consumers and businesses faced. But the key thing about this was that the full effect of these changes to VED would not come into effect in full until 2010, and the issue was what could we do now in order to help consumers and business who were facing higher fuel costs. The most effective action we could take now was to work with our international partners to see what more we could do in order to stabilise and reduce the global oil price.

Asked for the Government’s response on the retrospectiveness and fairness of VED, the PMS replied that the Government’s position was that this would not come into effect until 2009 and would not come into full effect until 2010. So in that sense it was not retrospective and clearly this was about encouraging the more energy efficient use of cars and affecting future choices about the cars they buy – people were not simply choosing between new car A and new car B, they were also choosing whether or not to buy a new car or a second-hand car. So second-hand cars were part of the mix, and that was why the changes were made in the way they were done, but they were introduced in a staggered way over a period of time, and they only started to come into effect in 2009 and did not come fully into effect until 2010.

Asked if the Government accepted that given most people were feeling the pinch, those who had a second-hand car were unlikely to be in a position to buy a new car, the PMS replied that this would not come fully into effect until 2010, and the key issue that consumers faced now was the high global price of oil. That was why the Government’s efforts were focussed on action that we could take with our international partners to deal with higher oil prices.

Put that there were no plans at all to look at the retrospective nature of VED, the PMS replied that the position was set out by the Chancellor in the Budget, these were all matters for the Chancellor and the Treasury, and as he had said the Government’s focus at a this point was on taking action with our international partners to stabilise and reduce the global price of oil.

Asked then why John Hutton said yesterday "wait and see" on VED, the PMS replied that all that John Hutton and Jack Straw were saying yesterday was nothing more than of course the Government understood the concerns that consumers faced, but the key thing about these changes in VED was that they did not come fully into effect until 2010, and the issue was what could we do now. The most effective action we could take now was to work with our international partners to stabilise and reduce the price of oil.

Asked what this international action was, the PMS replied that clearly there was more that could happen on supply, but it was also about demand as well, and the argument that the Prime Minister was making in his Guardian article today was that clearly there was a belief in the market that demand would continue to outstrip supply maybe indefinitely. So there was an onus on the developed countries to act and to demonstrate that we were taking action to deal with ever increasing demand for oil as well.

Asked if there would be a short-term policy announcement or agreement coming out of the meeting, the PMS replied that people should wait and see what happened at the meetings. But the expectation of what was going to happen over the long term was having an effect in the short term on the price.

Asked for an explanation of the relevance of the licenses being signed this afternoon, the PMS replied that people should wait for DBERR to say what they had to say later following the meeting that the Prime Minister was having with the Chancellor. What was being looked at was what more we could do to encourage production from the more mature and less economically viable sites in the North Sea.

Asked if basically we were looking at ways to release oil that we currently have not dug out, the PMS replied that this was a fair summary of the position.

Asked if the level of the oil price in October played a role in deciding what to do about the fuel duty, and did the Prime Minister actually believe that in the next few months OPEC could increase supply significantly enough to make a significant difference to the oil price, the PMS replied that he was not going to start to answer questions on hypothetical circumstances about decisions that may or may not be taken later in the autumn. On OPEC, this was an important part of the solution, but it was only part of the solution as the Prime Minister was saying today. Part of it was about seeing what could be done to increase supply to help stabilise the oil price, part of it was about increasing greater transparency in the oil market so that we could develop more stability in the oil market and more stability around oil prices. But part of it was also about addressing issues around demand, and that was also what the Prime Minister was talking about. So OPEC was part of the story, but as the Prime Minister said there was no easy answer to this, and we needed a comprehensive and international strategy for dealing with this.

Asked if there had been some sort of push-back where people had said that there was nothing much we could do about supply in the next few months, the PMS replied that clearly action taken by OPEC was part of the solution, but as we had always made clear and as the Prime Minister had made clear in his article today, there was no single easy answer to this, and what we needed was a comprehensive approach that looked at both supply and demand, and there had not been any change in that position.

Asked if the Prime Minister was expecting some action or effort on the oil producers about the amount of oil they were producing, the PMS replied that these were commercial decisions being made by commercial organisations, so it was up to them to make those decisions. What the Government could do was work with the oil industry, and that would part of the discussion today, to look at whether or not there were any existing barriers to further investment or exploration in the North sea that we could overcome.

Put that these were things for the long term, the PMS replied that obviously we were talking about investment decisions in the North Sea, and the issue about the oil market was that this distinction between the short term and long term was a rather false one – because those trading in the oil market were looking at what the long term trends were and were trading off that.

Put that yesterday the hauliers said they wanted a 25p cut in the price of a litre of diesel within seven days and threatened blockades, and asked for the Government’s response, the PMS replied that this was putting words in to the mouths of the hauliers. Of course the Government understood the difficulties the haulage industry was facing at the moment as a result of the global increase of prices. We did freeze the fuel duty increase earlier this year, but tax matters were really matters for the Chancellor in the Budget and the PBR, and he also needed to take into account the need for economic the stability, the need to fund public services, and the need to promote energy efficiency.

Put that there was not instrumentality whereby in the short term the meeting today would lead to lower prices at the pump, the PMS replied that we were not suggesting that UK action alone would be sufficient. We were saying that there was no easy answer to this, we needed comprehensive international action to deal with this, and the UK was prepared to play its part in that.

Put that the Prime Minister had said that the 10p tax was a matter for the PBR and the Budget, and then that all changed, and was there any prospect of an announcement about fuel duty or VED before the PBR in November, the PMS replied that this was misrepresenting the Government’s position on 10p, the Chancellor did say in the letter he wrote to the treasury Select Committee on the 23rd April that we would bring forward some announcements on 10p, particularly to deal with issues relating to this year, in advance of the Pre-Budget Report. And as he had said before, tax decisions were a matter for the Chancellor to take in the PBR and the Budget.

Asked if John Hutton had clarified what he meant then by "wait and see", the PMS replied that again these were really matters for the Chancellor and the Treasury. The key thing was what the Chancellor says, and the Chancellor and the Treasury had been making clear that these sorts of tax matters that were issues for them to be considered in the normal way in the PBR and the Budget.

Put that the Business Secretary then was not involved in all this, the PMS replied that obviously there was discussions within Government, but tax was traditionally a matter for the Chancellor.

Asked about the obstacles for higher production in the North Sea, and were these tax obstacles or licensing issues, the PMS replied that it was best to wait for the BERR announcements.

Asked if he was being coy because the announcements were market sensitive, the PMS replied that had was being coy because it was important that announcements of this kind were done in the proper way by the relevant department.

Asked what locus the Justice Secretary had to talk about this, the PMS replied that he was a senior member of the Cabinet, he was up and about dealing with other issues yesterday and was asked the question.

Asked if what he said was authorised, the PMS replied that all the Justice Secretary was saying was what the Chancellor and the Prime Minister would happily agree with, which was that of course we understood the concerns consumers faced, but we also needed to take into account the need to ensure economic stability to fund public services and promote energy efficiency.

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» Wednesday, May 28, 2008

Fuel Prices

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