Clause 9 - Mixing of rebated oil
Finance Bill
11:00 am
Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)
The clause underlines our continuing commitment to promoting the use of cleaner, environmentally friendly fuels. It is designed to aid the smooth introduction of sulphur-free fuels. Those cleaner fuels will come on-stream in the UK well ahead of the EU imperative to do so, as we discussed under clause 7.
At first glance, the clause may appear to be more substantial than it is. It replaces and updates an entire section of the Hydrocarbon Oil Duties Act 1979. In doing this, the sections covering road fuels are omitted, thereby allowing the mixing of fuels and aiding the introduction of sulphur-free fuel. The problem we faced and the problem raised by the industry, to which the clause is a response, is that under the current duty system for hydrocarbon oils duty is charged when two road fuels of differing duty rates are mixed together. The rules were originally introduced as an incentive to make new fuels available to the consumer and ensure that environmental benefits were not lost by mixing cleaner fuels with
lower-grade alternatives. However, in reality, the mixing provisions have hindered the introduction of new fuels. Some mixing will inevitably and always occur at filling stations, and the additional duty has discouraged oil companies from making a rapid changeover.
In September, with the introduction of sulphur-free fuels, the UK faces its biggest changeover of fuel since the introduction of ultra-low sulphur petrol and diesel. We have therefore reviewed the measures that may be required to ensure a smooth transition.
I have discussed the matter at least twice with the Association of UK Oil Independents and received representations from it in the in the run-up to the Budget, as it felt that the change in clause 9 was needed to enable its members to make the switch. The clause removes the hindrance of the mixing provisions and it will ensure a smooth changeover to sulphur-free petrol and diesel.
The clause also rationalises the existing rules on mixing non-road fuels, which remains prohibited. The clause is permanent. It is introduced to aid the changeover and it will smooth and accelerate the transition to sulphur-free fuels from September. Its main use will be in the transition period, but it will remain on the statute book if the Committee agrees to it. The Government believe that the clause will assist the oil industry and help to meet consumer demand for sulphur-free fuels, which we all want, more quickly. On that basis, I commend it to the Committee.
Question put and agreed to.
Clause 9 ordered to stand part of the Bill.