Schedule 5
Finance Bill
9:30 am
Jeremy Browne (Shadow Chief Secretary To the Treasury, Treasury; Taunton, Liberal Democrat)
I beg to move amendment No. 65, in schedule 5, page 143, line 45, at end insert—
‘27 In Article 21 of the Renewable Transport Fuel Obligations Order 2007 (S.I. 2007/3072), after paragraph (11) insert—
“(12) The Administrator shall undertake an annual review of the effectiveness of the buy-out price level under sub-paragraph (7), including in particular its impact on the level of incentive provided to suppliers to invest in biofuels.
(13) Within two months of completing any review under paragraph (12), the Administrator shall submit a report of its findings to the Secretary of State.
(14) As soon as reasonably practicable after the Secretary of State has received a report on a review under paragraph (12) the Secretary of State shall lay a copy of the report before the House of Commons.”’.
The amendment deals with an issue related to that raised by amendment No. 66. It, too, refers to schedule 5, but it deals with the on-road use of biofuels. Because the wording of the amendment is fairly complicated, it may be helpful to take the Committee through its intention. Article 21 of the Renewable Transport Fuel Obligations Order 2007 allows fuel suppliers to pay a buy-out price to discharge their obligation to replace a certain percentage of their annual fossil fuel sales with biofuel. The so-called renewable transport fuel obligation, which has been in force since April, will be run by the newly formed Renewable Fuels Agency. At present, biofuels receive two forms of support: a 20p per litre rebate and a 15p per litre buy-out price. If a supplier has a litre of biofuel, he will get 20p off the duty rate, and avoid paying a another 15p for not hitting the biofuel target. That creates a total saving of 35p for the supplier.
The Government, however, announced in the Budget that from 2010-11, the rebate would be scrapped and replaced with a buy-out price of 30p a litre. Consequently, my amendment would insert three new paragraphs into the order. Proposed new paragraph (12) would require the administrator of the buy-out mechanism to undertake an annual review of the buy-out level, and its effect on incentivising biofuel investment. New paragraphs (13) and (14) would require the review to be presented to and approved by the House.
This is a probing amendment. Its purpose is to ascertain the Government’s motivation in respect of biofuels. How were the figures arrived at, and how will they be kept under review? Has the Treasury taken account of present and future rises in oil prices and agricultural commodities? Is 30p enough to incentivise a sustainable UK biofuel production industry? That area was touched on in the previous debate. How viable is biofuel production in terms of our total energy requirements? How sustainable is biofuel production, and how is its environmental value measured? Given the EU’s renewable energy directive, which means that 10 per cent. of transport-related energy must be renewable by 2020, I want to establish whether or not biofuel production is likely to make a significant contribution to that target.
Finally, scrapping the 20p per litre rebate and replacing it with a higher buy-out price is estimated, as I understand it, to net the Treasury a saving of £500 million a year. I suspect that this particular schedule and these amendments do not feature prominently on a list of the highlights of the Finance Bill Committee for most Members. However, by my estimate, the proposals in this schedule are the third-highest revenue raiser from the Budget after the changes to vehicle excuse duty and the revenue raised from increased alcohol duties. It is therefore worth the Committee examining these proposals in detail, first to see whether they will achieve the environmental objectives to which the Government aspire and claim that they will achieve, but also because, as I understand it, they are a significant method for raising additional revenue for the Treasury.