It is clear from meeting people in my constituency that the cost of living is a huge concern for families in Barnet, especially rising fuel prices.

Getting the answers right on fuel duty, and reconciling environmental and economic issues, is one of the most difficult challenges faced by any government. I believe we should take forward a green agenda in a way that strengthens family finances — so that we can go green and save money at the same time.

The old politics of fuel tax has become polarised between those who argue that we should cut the cost of living whatever the cost to the environment and those who press for escalating tax on fuel whatever the cost to the economy. We need a new approach that better meets the needs of both the economy and the environment. Under Conservative proposals for a fair fuel stabiliser, put out to consultation last week, when fuel prices go up, fuel duty would fall, and when fuel prices go down, fuel duty would rise.

This is a new way of setting fuel duty that will strengthen environmental signals when oil prices fall, and cushion the blow when fuel costs rise. Government will be sharing the pain when prices rise and sharing the gain when they fall.

If a fair fuel stabiliser had been introduced at the 2008 Budget, fuel would now be 5p per litre cheaper. This would save up to £3.50 on each tank of fuel for a Ford Mondeo, or £2.60 for a Vauxhall Astra. If, however, oil prices had fallen below the $84 forecast in the budget, fuel duty would have risen. In either case, forecast Government revenues would have been unchanged. If a fair fuel stabiliser had been in operation over the past year, the average household would have saved more than £90 in fuel costs.

Our new approach would bring three key benefits. Firstly, it would increase the stability of family finances. Government would be helping when the cost of living was rising sharply, by setting aside money in good times to help in difficult times.

Secondly, the stabiliser would enhance economic stability by reducing the sensitivity of public finances and inflation to unpredictable changes in oil prices. Government would be able to predict fuel duty revenues over the medium term with much greater certainty. And the stabiliser would reduce the volatility of inflation. If half of the increase in fuel prices over the past year had been offset by lower fuel duty, consumer price inflation would now be below three per cent.

Thirdly, our proposals would make our ability to meet climate change targets for reducing emissions less dependent on volatile international oil markets. They would mean greater certainty about the price of fuel (and hence carbon) which would help people and businesses factor environmental costs into future decisions and behaviour changes.