Kennedy demands freeze on fuel taxes

The Liberal Democrats moved to exploit the Government's troubles over the petrol crisis yesterday with a call for a windfall tax on oil companies and a five-year freeze on fuel duty.

The Liberal Democrats moved to exploit the Government's troubles over the petrol crisis yesterday with a call for a windfall tax on oil companies and a five-year freeze on fuel duty.

Charles Kennedy, the party's leader, said that such radical policies were the only way to assure the public that politicians had learnt from the national protests this month.

In an emergency statement to the Liberal Democrat conference in Bournemouth, Mr Kennedy said the estimated £1bn VAT windfall from the sharp rise in crude oil prices should be spent on transport improvements.

Unveiling a four-point plan for a "fair deal on fuel", he called on Gordon Brown to prove he was listening to the electorate by placing a cap on fuel duty in real terms for five years. The increase in VAT taken by the Treasury in recent months should be spent on improving public transport to "ease the burden on the travelling public".

Mr Kennedy also singled out the oil giants for criticism, warning that they should be taxed on excess profits if they failed to restrict price rises or protect regular supplies.

"We call on the Government to ensure that oil companies recognise their social responsibilities, both in respect of pricing and security of supply. If they fail to do so, we will take measures to tax their excess profits," he said. "We also believe oil companies should not be allowed to exploit those reliant on personal transport in rural areas. We therefore call on the Government to offer rate relief on rural fuel stations."

Mr Kennedy said his party was the only one committed to open and transparent taxation, although he stressed that greener taxes need not mean more taxes.

"Liberal Democrats believe that the Government must be more open about the money it receives from fuel and how it is spent," he said. "Taxes on fuel should not be a backdoor way of raising revenue, they should be used to reform the tax system to protect the environment."

The Liberal Democrat leader said the events of recent weeks showed that "politicians have got to listen as well as lead".

Labour immediately hit back at Mr Kennedy's new fuel policies, claiming they were "confused and contradictory".

Andrew Smith, the Chief Secretary to the Treasury, said the Liberal Democrats' previous manifesto committed them to increasing the fuel duty escalator by 8 per cent every year.

"Charles Kennedy accuses William Hague of opportunism, but today he seems to be copying what he yesterday condemned," he said.