Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)

As the hon. Gentleman mentioned, the clause introduces definitions of sulphur-free petrol and diesel and enables us to introduce the differential for those fuels, as announced by the Chancellor in last year's Budget. The differential will mean that the duty on sulphur-free petrol and diesel will be 0.5p per litre less than that for ultra-low sulphur petrol and diesel.

The movement of the market towards replacing ultra-low sulphur fuels with sulphur-free ones is, in anyone's book, a major undertaking for the oil industry. Since the introduction of the differential was announced in the 2003 Budget, the industry has worked hard to install hundreds of millions of pounds worth of sulphur-removal plants at UK refineries, and to ensure that those more environmentally-friendly fuels will be available to the motorist.

As a result of the efforts made by the industry and the Government, the UK will be leading the way in Europe in this area. The hon. Gentleman said that he understood that very few people would have access to sulphur-free fuel in September, but we expect sulphur-free fuels to be widely available from 1 September. We estimate that sulphur-free diesel should be available everywhere from September and that sulphur-free petrol will fully replace ultra-low sulphur petrol by the end of the year. That estimate has been confirmed by the UK Petroleum Industry Association.

The hon. Gentleman mentioned the European directive. By introducing these measures with regard to the fuel supply in the UK, we will be well ahead of what is required of us by the directive, which requires us to make the switch by 2009.

When we announced the differential for sulphur-free fuels, there was some scepticism about whether that would lead to the kind of market switch that we wanted. However, I am confident, from what the industry is now telling the Government, that those fuels will be available throughout the UK. That was certainly the case when we made the switch—driven similarly by duty differentials—to the ultra-low-sulphur fuels a couple of years ago. We have listened to the industry on implementation and, in particular, on how the definition should be formed in law so that there are no barriers to the fuel coming on to the market. We will pick that up when we consider clause 9.

Motorists will benefit from sulphur-free fuels because they will bring significant improvements in air quality, as well as major savings in carbon dioxide emissions. Above those environmental benefits, sulphur-free fuels will also assist the development of petrol-injection engines in cars. When used in engines such as direct-injection engines, sulphur-free fuels can produce fuel savings of between 2 and 4 per cent., compared with ultra-low sulphur fuels. In the long term, sulphur-free fuels offer not only environmental benefits, but genuine savings to motorists by giving more miles to the gallon through more efficient

engines. The new rates come into effect on 1 September this year, when duty rates will be revalorised and ultra-low-sulphur fuels increased by 0.5p a litre above that level.

Question put and agreed to.

Clause 7 ordered to stand part of the Bill.

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