Clause 7 - Sulphur-free fuel
Finance Bill
10:45 am
Mr Andrew Tyrie (Chichester, Conservative)
The clause separates sulphur-free fuel from other ultra-low sulphur fuels, creating a new class of product that from September will attract duty at half a penny less than ultra-low sulphur fuels. I understand that initially only a few motorists will have access to it, but since it will be mandatory under EU law to use the fuel from January 2005, with a four-year transition period, there will be a major change in respect of sulphur-free fuel.
I have few queries about the proposal, mainly because the policy is already cast in stone; the Government have signed up to it and it would be difficult for them to shift away from it, even if they wanted to do so. However, I was struck by some of the comments made in our previous debate, which are relevant to the clause. I accept that the Government face the problem that the technology of what constitutes environmentally friendly fuels is constantly changing, which makes it difficult for them to develop long-term policies on the issue. On one hand, the industry wants stability, on the other the rates that need setting may have to be varied to encourage use of the right sort of fuel.
For almost 20 years I have been worried that the environmental impact assessments, and the assessment of the costs and benefits of many of the changes, have not been fully examined. There is a cost-benefit analysis of the switch from ultra-low sulphur to sulphur-free fuel, but I am not convinced by it, as it was not a particularly robust analysis. The hon. Member for Wolverhampton, South-West, who is listening carefully to the debate, made a similar point about LPG, which may or may not be correct; neither of us knows for sure. Has the proper analysis been carried out?
I make one general plea to the Minister. It is that he should require much greater attention and resources to be given to such issues by the Treasury. It is vital for better studies to be undertaken than at present.
To bring that point home, it is a fact that sulphur-free fuel is more aromatic, and the more aromatic a fuel is, the more carcinogenic it is likely to be. Probably for that reason, the clause contains a limit on the aromatic content of ultra-low sulphur fuel, whereas it proposes no limit on the aromatic content of sulphur-free petrol. By implication, therefore, that could lead to much higher levels of carcinogens becoming part of sulphur-free fuel. I am not convinced by the documentation that I have seen that a full cost-benefit analysis of those health effects was carried out when assessing whether it was worth moving from very low sulphur fuel to sulphur-free fuel. The Government need to devote more resources to that area. Is the Minister clear that the change will have an overall economic benefit and, if so, what is that benefit?
We will have to implement such a policy sooner rather than later, because we have to obey an EU directive. In that context, will the 0.5p differential introduced by the clause be enough to secure a switch? I believe that, in consultation, most of the industry believed that something nearer 1p would be required. How long do the Government intend that the incentive should last? Do they intend to alter it, if they do not
see immediate effects? Is it intended that the incentive should cover the whole cost of the conversion from ultra-low sulphur fuels to sulphur-free fuels?