Rates of Duty on Hydrocarbon Oil

Clause 1 – in the House of Commons at 3:45 pm on 24 April 2001.

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Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan 3:45, 24 April 2001

I beg to move amendment No. 27, in page 1, line 18, leave out "0.4582" and insert "£0.4392".

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

With this it will be convenient to discuss amendment No. 28, in page 1, line 20, leave out "£0.4582" and insert "£0.4392".

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

I take great pleasure in moving amendment No. 27 and in speaking to amendment No. 28, both of them proposals tabled by my hon. Friends and me. This matter, too, may be relevant on Friday 8 June, unless the Government choose to accept the amendments and to change course on a very important issue that affects large areas of the country, but especially Scotland—the fifth largest oil producer in the world—which suffers from the highest petrol prices in Europe.

During yesterday's debates on the Finance Bill, I was struck by the Treasury team's complacency in the face of a world economic environment that is moving into much stormier waters than the benign conditions enjoyed over the past four years. Given that the Treasury team, and the Chancellor in particular, were so quick to claim the credit for the past four years, they will, no doubt, also want to accept the responsibility for the economic difficulties that we are approaching.

Earlier today, I saw the Chancellor making a speech, and he said that he was not complacent. He sounded pretty complacent to me, and I should have thought that the Treasury team would do well to understand that, although they may still have boom conditions in the south-east of England, they now have bust conditions in Bathgate.

We also discuss the Finance Bill against the background of the Minister for the Environment yesterday making the point about the impact on the rural economy. Although these amendments would have an impact on every petrol consumer in the country, they are also designed to benefit the rural economy, which is hit first and foremost by high fuel prices. Yesterday, the Minister for the Environment told the House that the current estimate of losses caused to the rural economy by the foot and mouth outbreak amounts to some £140 million every single week, against which the Government's package of £200 million, as he claimed it to be, looks devastatingly inadequate to stem the economic impact on those important areas of the country. I make that point because the rural economy is hurt first and foremost by high and rising oil and petrol prices.

It is obvious that the Government's transport strategy—eventually unveiled only a few months ago by the Deputy Prime Minister—has still to make any serious impact on making alternative means of transport available to people in the rural economy. It is also obvious that, although oil and petrol prices are high across the country, in the rural economy, especially in the highlands of Scotland, we have the highest petrol prices of all. For a range of reasons, although the amendments would help every motorist and every petrol user, and hence every person who depends on goods purchased—fuel is a significant component of the costs—they are also designed to help the hard-pressed rural economy in particular.

Under amendments Nos. 27 and 28, the duty would be reduced on ultra-low sulphur petrol and diesel by 2p a litre—about 10p a gallon. That would be in addition to the small but welcome reductions announced by the Chancellor in the Budget.

It is time for the Treasury team to come clean about what they believed a couple of years ago petrol prices were likely to be in 2001. Two years ago, we in the Scottish Grand Committee debated a range of matters that affect petrol prices, and the late Donald Dewar made a clear statement about what the Government's expectation then was on the price of oil: The oil price is likely to stay at about $10 to $12 a barrel at least in the foreseeable future. Therefore we are worlds removed from the oil prices and production levels of the mid-1980s."—[Official Report, Scottish Grand Committee, 1 February 1999; c. 8.] We can take it from such an authoritative source that that was the Government's expectation just two years ago.

At that time, the Chancellor of the Exchequer assumed that oil revenues would be £1.2 billion in the current financial year. In fact, the latest forecast is for oil revenues to be £5.9 billion, rising to £6.2 billion next year, and £5.4 billion and £5.7 billion in the two years after that. Even that forecast was based on the assumption that oil prices would be much lower than those prevailing at present. Two years ago, the Government expected oil prices to be roughly $10 to $12 a barrel, but the price is now $27 a barrel. The Chancellor has benefited massively in terms of the exploitation of Scottish resources and filling the Treasury's coffers, so it is entirely reasonable for these modest but important amendments to seek a further concession for consumers at the pumps.

Photo of John Bercow John Bercow Shadow Spokesperson (Home Affairs)

I understand the hon. Gentleman's argument, but in the name of transparency, does he not agree that it would be helpful if the proportion of the purchase price of petrol that is represented by tax and excise duty were displayed at the pump or on the bills that customers receive?

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

I very much agree with that. As the hon. Gentleman knows, three quarters of the price of every gallon of petrol or diesel is made up of the various levies imposed. They include the specific fuel taxes and VAT. One important factor is that, as the price of fuel increases, the VAT obtained from every gallon of petrol also increases. Although I agree with the hon. Gentleman that such information should be displayed on every petrol pump—that would be excellent for the transparency of fiscal policy—I suspect that the Treasury team would be not too keen on the idea.

The Scottish National party produced a helpful pledge card and we distributed 500,000 of them last September during the fuel tax protests in Scotland. I would willingly send such a pledge card to the hon. Member for Buckingham (Mr. Bercow). If he would like to distribute SNP publicity in England, I would be very pleased—as long as he promises not to advertise the fact too much.

The hon. Gentleman made a fair point about transparency, but I suspect that the Treasury team are desperate, despite the rising price of oil, to prevent people from realising that 75 per cent. of the price of every gallon or litre of petrol is made up of Treasury charges of one kind or another. That fact clearly places responsibility where it belongs: on the Chancellor and his Treasury team.

Two years ago, the Government expected a very different oil price environment and they have benefited massively from Scotland's resources pouring into the London Treasury. The Government expected the current price of petrol to be considerably lower, and that fact gives the lie to the suggestion that we sometimes hear—including from the previous Govertment—that the fuel price escalator and the approach taken to the price of petrol are entirely due to international obligations and the Kyoto summit. If the expectation that the price of a barrel of oil would be $10 had been realised, the price of petrol would obviously be much lower than it is. But it is not, and the Government have reacted incredibly slowly. It was only the pressure of the massive fuel price protests last September that led them to make any significant concessions at all and to fine-tune their fiscal position to take account of reality and the price that people paid at every petrol station in the country.

The Treasury team would do well to recognise that, when the fuel price protests were under way, the country of England was so anxious that, if we believe the opinion polls, even the Conservatives, for a very brief period, looked like a tenable option for voters. Such was the public anxiety—and people would have to be extremely anxious to turn to the Conservatives—that pressure was brought to bear on the Government when the average price at the pumps was 80.9p a litre. The average price today is 78.9p a litre, with price rises expected in the next few weeks. It is not beyond the bounds of possibility that the Government will have to fight the election campaign with the price of petrol approaching £4 a gallon and a public who are extremely sensitive to the issue. Although it might be against my electoral interests to argue that the Government should accept the amendments, they would be wise not to take for granted the public's tolerance of current petrol prices and the increases in the pipeline.

We know that last September the Prime Minister telephoned the oil companies to persuade them not to increase prices at the pumps, and there was a small delay. We saw again today the limitations of the Prime Minister's telephone calls when it comes to affecting major policy decisions. I dare say that the Prime Minister and the Deputy Prime Minister—the man who has suggested, against the backdrop of a major industrial closure in Scotland, that it is appropriate to slash public expenditure there—are probably on the telephone to the oil companies pleading for the increases to be delayed until after 7 June. The public will not be fooled, because they do not find it acceptable that we have the highest petrol prices in Europe. They have seen through the Government's claim that prices reflect an environmental imperative rather than a fiscal accumulation, which is what actually lies behind the petrol price strategy, just as surely as they saw through the previous Government who made the same claim when they kicked off the vast petrol price increases.

The public's tolerance is now such that they will not accept the same cavalier attitude as was displayed until last September. The Treasury will be wise to have a damascene conversion in the next few hours and to accept our amendments, so that the price of petrol is reduced as it should be, given the vast accumulation of revenues in the Exchequer and the fact that oil costs $27 a barrel. I suspect that if the amendment were put to the population at large to determine, there would be vast support for it.

We are debating the issue as we enter an election period. When it comes to the Division, all hon. Members will be wise to vote for a more reasonable attitude to the price of petrol at the pumps. That will help every motorist, every consumer who relies on purchasing goods for which the price of transport is important, and our rural areas that are especially hard pressed.

Photo of Kenneth Clarke Kenneth Clarke Conservative, Rushcliffe

I have great respect for the hon. Member for Banff and Buchan (Mr. Salmond), but I cannot recall taking part before in a debate initiated by the Scottish National party. I have no objection to doing so now. I congratulate him on tabling an amendment on an important subject. However, I am not totally persuaded by its literal terms, so I am not sure that I will join him in the Division Lobby.

Nevertheless, the hon. Gentleman raises an important topic for most of our electorate, certainly those who live in rural areas. A short discussion about tax levels on petrol and diesel is justified. I decided to speak in the hope that the Minister would take the opportunity to explain the Government's policy on that. This subject, above all other aspects of their economic policy, is something on which they have no consistency. Their most recent primary motivation has plainly been panic in the face of public opinion. They have been buffeted by events and give no inkling of the direction of their policy should they be returned to power.

4 pm

The explanatory notes to the Bill give the last great pronouncement of our Chancellor on his considered policy on this subject. They say: In November 1999 the Chancellor announced that the appropriate level of fuel duties would be decided on a Budget by Budget basis, taking into account the Government's economic, social and environmental commitments. That seems to me largely to depend on the dates of an election, newspaper reaction to recent decisions and the public reaction to the levels of taxation which have been imposed, and that is not very satisfactory.

The hon. Member for Banff and Buchan said that we are having this debate against the background of an interesting change in the economic climate, which affects all our discussions on the Bill. The Chancellor has at last recognised that he has not abolished the economic cycle. A marked slowdown is taking place in the American economy; there is some slowdown in the eurozone economy and some economic slowdown will take place here.

A question should be asked of a Chancellor who has been very lucky in the past four years. I shall not talk about his inheritance, but I certainly think that he has been lucky in the state of the world economy. He has managed to produce reasonable results by following fairly aberrant policies. He taxed too much when he did not need to, putting taxes on business, savings and pensions. He savagely restrained public spending for his first two years, and he now promises for the next three years massive increases unrivalled in this country since the days of the Heath Government which he thinks can be sustained by continued growth. All that may be changing, and I agree with what the hon. Gentleman just said about the Chancellor's apparent complacency about that—it fits in with my theme on fuel taxes. The time has come for a clear policy and a clear statement of where we are going, and I am not sure that that is what we will have.

The Chancellor's approach to fuel prices when he came to office was very straightforward. It was very flattering of him to adopt what he said was my policy. Indeed, for some time I had been following the fuel tax escalator, having introduced it when we had the cheapest petrol and diesel in western Europe, a situation that, in my opinion, we had arrived at slightly by accident and without anybody really noticing or asking why. I made it clear when I stuck to the escalator during my time as Chancellor that I was doing so first because I needed to raise the revenue to deal with the state of the public finances. That is a matter for which the Chancellor should be grateful because he inherited very healthy public finances as a result of the tax and spend policies to which he had succeeded. Secondly, the escalator had environmental benefits, which I did not overstate, but I certainly thought that it was worth while to return to a higher rate of tax and a higher price for petrol and diesel to make people think twice about using their car and to make them look for efficiencies in their use of fuel, and that had environmental benefits.

The Chancellor was very flattering—he took all that over and decided that the fuel tax escalator was now an essential part of his tax strategy. However, he increased the rate above inflation at which he was going to escalate fuel tax. He also increased the frequency of the increases by having two Budgets in one year, in both of which he applied the same escalator. He took over the escalator and accelerated it. He also forgot one of the rules of escalators which those who travel by public transport will recall, which is that one gets on at the bottom and one gets off at the top. This escalator was now to go on for ever, and according to this Chancellor, before last September, fuel taxes were going who knows where. At that stage, we were already the most expensive country in western Europe for the motorist and the haulier, and the Chancellor was firmly committed to carrying on with the fuel escalator for the foreseeable future, come what may.

As a tax policy, that was catastrophic. It was one of the Chancellor's more elementary errors. People have often quoted Colbert saying that the art of raising taxation is to pluck the feathers of the goose but to get as many feathers as one can with the minimum of hissing. The Chancellor chose one target, fuel taxes, and drove them on remorselessly at such a rate until he had a consumer explosion—a revolt. He carried on with that policy to such an extent, showing no reservations about it, until we had the nearest that we have had to a citizens' revolt on the streets. For a week or two, it had mass support, as people realised that they had by far the most expensive petrol and diesel in western Europe and that the Chancellor intended to carry on raising prices. Those of us on the road at the time found ourselves surrounded by a public who genuinely sympathised with hauliers going in for direct action, causing conflict and so on. Fortunately—although this is a funny way of conducting Government policy—the Government showed signs of panic, as they do in every crisis, retreated rapidly and backed down. Now we have no policy and there is a freeze on duties for an unspecified period, which will certainly go on until after the election.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

I do not want to discourage the right hon. and learned Gentleman from speaking in Scottish National party debates in future but, if I have followed him correctly, he said that the Chancellor made two mistakes; first, public expenditure in the first two years was too low—which, of course, was inherited from the right hon. and learned Gentleman—and, secondly, the fuel price escalator, which was also inherited from him. Could he not have left a note in the Treasury telling the Chancellor to get off the escalator, or other helpful advice?

Photo of Kenneth Clarke Kenneth Clarke Conservative, Rushcliffe

The Chancellor is fond of taking my slogans and claiming that he is taking my policies. In previous Budget and Finance Bill debates, I have tried to make it clear that he is getting them slightly wrong. I have been highly critical and have often regretted the fact that he has used my slogans and taken my name in vain to characterise the rather peculiar policies that he has followed. I will not go through everything, but I invented the slogan, No return to boom and bust". I used that in my first Budget, and it was promptly stolen by the present Chancellor. When I used it, I did not mean that we going to abolish the economic cycle; the whole point of macro-economic policy was to stop the extremes that could arise from bad macro-economic policy when the economy went into a bubble, followed by a deep recession, which we experienced in the late 1980s and early 1990s and which the Americans may be experiencing now, as they seem to be going through a classic boom and bust scenario.

I left behind figures on spending and, with all my colleagues, expected an annual public spending round, which would adjust those figures between Departments in the light of circumstances affecting both them and the national economy. The Chancellor said that he was following Tory figures, but when he made that announcement he made only one decision—to cancel two years of public spending rounds. I have said previously that I am sure that none of my colleagues in the Conservative Cabinet, especially the Secretaries of State for Education and for Health, would ever have put up with that.

I find myself agreeing with Liberal Democrat Members that the Government's bizarre decision was motivated only by a desire to out public spending commitments in the first two or three years to enable them to be more generous at the end of the parliamentary period. The Government left it a bit late; the health service was in crisis and the Prime Minister was panicking when they finally changed gear and went into pre-election mode. Now there are spending commitments, not just on health and education—if wit were to take office now, I would support colleagues who have committed us to that—but across Whitehall. The Government are now postulating increases in public spending in the next three years far beyond any likely rate of growth in our economy. Those increases are bound to take us into deficit in the middle of the next Parliament unless fiscal prudence is pursued by the Chancellor's successor.

I have already dealt with fuel tax the Chancellor took over my escalator. If, when I was Chancellor, I was asked whether the idea of petrol and diesel escalator was that every year, whatever the circumstances, taxes on those commodities would be increased by a certain percentage beyond inflation for an indefinite and non-foreseeable period I would have said, "Of course not." I would have said that that would have caused a consumer revolt, because no sensible tax raiser puts such a large burden on a narrow piece of the tax base. When people look back on that feature of Government policy, they will think it quite bizarre; the Government just sat and waited until, eventually, the lorry drivers predictably took to the streets. Indeed, we got to the stage when major haulage firms filled large-capacity lorries with diesel before coming back to this country to make their journeys here.

In present circumstances, I do not expect the Chancellor to accept the SNP's inducements to take off another 3p a litre. However, could we have an indication of the Government's present and future policy? Is it just to go to the election saying, "We cut the duty and held it down, and after the election, we'll have to see what turns up, but so long as you keep quiet and the newspapers don't mind, and if we have some problems with the public spending commitments, we will no doubt be back to putting up the tax on petrol and diesel again"?

The Government got away with what they did before September last year because they were very lucky with the crude oil price, which fell extraordinarily for a long time, so the motorist and the haulier did not notice the impact of the taxation. Once the oil price began to go back to a more normal level, the full horror for the rural economy and much of the business economy was revealed, and the Government had to go back. Do they intend in future to take account of crude oil prices in deciding the appropriate level of petrol and diesel tax in any given year?

Will the Government in future pay more attention to the impact of the tax, on the rural economy in particular? This is an especially appropriate time to discuss that aspect, as the rural economy faces a tremendous crisis this summer, which will have a marked effect on the growth of the economy as a whole, when the knock-on effect of the foot and mouth epidemic on many associated rural and countryside industries is felt.

Will the Government have any concern for the environmental consequences of taxation? One minute they put the tax up because that is good environmental policy, then they put the tax down, which apparently, they say, has no environmental consequences at all. I know that the Government have no real commitment to using tax for environmental purposes. I personally introduced the landfill tax and gave a rebate on it—instead of the taxation being paid, when money was put by site operators into environmentally approved schemes. I cited environmental reasons for putting up road tax.

This Government cited such reasons when it suited them, but they had different arguments for lowering the tax on domestic fuel. They had different arguments for subsidising the coal industry and coal-burn in power stations. They have absolutely no consistent or genuine view on environmental issues, but will they be persuaded that there is an environmental case for keeping our fuel taxes among the highest in western industrial countries, but not vastly above the level that prevails in competitor economies across the rest of western Europe?

When the Minister says that she cannot take off 3p per litre, I invite her to take the opportunity to explain the Government's approach. They look back over folly, panic and U-turn. Can they explain what balance they intend to strike, bearing in mind the crude oil price and the particular effects on the rural economy and on other parts of the economy that are dependent on diesel fuel, such as haulage? What is their policy on the environmental consequences of a fuel tax?

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

It is a great pleasure to follow my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). I am sure that the House listened with interest to his analysis. If anything, he was unduly modest when he dealt with the history of the matter, and particularly the inheritance that the Government took over from his stewardship of the economy.

My right hon. and learned Friend left the Government a benign economic inheritance and, as he made clear, the Government's principal activity since then has been to tax too much when they did not need to do so. The taxes that are the subject of the amendments are a good example of the Government's inclination towards tax by stealth and to tax as much and as long as possible while they can get away with it. Now, as my right hon. and learned Friend rightly said, after all the Government's boasts about boom and bust, they face a humiliating change of spin but not of policy, with the Chancellor today having to climb down over his claims about the economy and admit what is apparent to many other people—that we are facing a period of uncertainty in the world economy.

I listened with interest also to the opening speech by the hon. Member for Banff and Buchan (Mr. Salmond). I hope that he will forgive me if I say that I feel able to resist the temptation that he presented to us to distribute Scottish nationalist literature throughout England. That is one activity that I can happily do without. However, I acknowledge reluctantly that some of the points that the hon. Gentleman made with respect to Scotland apply to motorists the length and breadth of the United Kingdom. I shall make some particular points about the effect of the Government's policies on Northern Ireland in due course.

4.15 pm

I want to make our position clear at the outset. As my right hon. Friend the shadow Chancellor said, we are committed to cutting duty on fuel by at least 3p a litre. We want to cut petrol tax and to offer some relief to the hard-working families who have to pay too much to the Government every time they fill their tanks. I assure Labour Members that those families will remember that in future.

Photo of John Bercow John Bercow Shadow Spokesperson (Home Affairs)

Of course, my hon. Friend is absolutely right to speak about the impact of petrol tax on hard-working families. However, will he also bear in mind the interests of an appreciable number of people, not least in rural areas, among whom I number Mrs. Elizabeth Zettl, an 83-year-old woman in Buckingham High street in my constituency? Mrs. Zettl travels around by car to undertake charitable work on behalf of deserving causes. She has been consistently punished by this Administration and she is very angry about it.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

My hon. Friend rightly illustrates some of the personal circumstances that lie behind the problems associated with motoring in rural areas. His example concerned somebody who undertakes very commendable activities. The problems that are faced by poorer members of rural communities, who may rely on their cars to make their way from village to village, or from village to supermarket, often seem to be overlooked by the Government, under whom motorists in town and country alike—I shall deal with the special problems of the countryside in a moment—have taken a clobbering.

My right hon. and learned Friend the Member for Rushcliffe was right in his analysis of the history of those problems. Perhaps his words deserve underlining with this fact: in May 1997, the motorist paid an average of 59p a litre to fill up at the pump, but today, he pays almost 76p a litre. For the benefit of Labour Members, we should make it clear where the responsibility lies, as no less than 13p out of that 17p increase arises from additional tax piled on by the Chancellor. As my right hon. and learned Friend said, it was piled on time and time again for as long as the Chancellor thought that he could get away with it. The amount of tax on a litre of petrol in May 1997 was 45.7p; it is now 59p. Let me give one particular motoring example. We have heard something about Mondeo man in the past. A Mondeo man who fills up his tank now pays £10 more than he did before this Government came to power.

I have obtained from the Library figures that are based on the European Union weekly oil bulletin. According to those figures, even after making allowance for when the change in duty on ultra-low sulphur petrol and the temporary change in respect of ordinary unleaded petrol take effect, the United Kingdom still has the most expensive petrol in the European Union. That is the case because United Kingdom motorists pay so much tax and duty. The hon. Member for Banff and Buchan adverted to the fact that tax and duty amount to 75 per cent. of the total price of unleaded petrol at the pump. As was pointed out by one of our tabloid newspapers last week, the United Kingdom has one of the cheapest rates in the European Union for pre-tax petrol, but the most expensive rate for post-tax petrol.

Not least among the implications is that which affects the part of the United Kingdom that shares a land border with another EU member. In the Republic of Ireland, petrol is about 15p to 17p a litre cheaper than in Northern Ireland. The gulf between petrol prices in Northern Ireland and the Republic has been reflected in the growing problem of cross-border fuel smuggling, to whose existence even the Government are beginning to admit, and in the disappearance of petrol retail stations in the vicinity of the border. A significant number of those stations have been lost in the past four years.

The background to our debate is the unprecedented public dissatisfaction with fuel prices that was expressed last autumn. As my right hon. and learned Friend the Member for Rushcliffe rightly said, the Chancellor was prepared to continue to increase petrol prices, apparently without any rationale or firm policy other than to raise as much revenue as possible from the motorist. He was happy to pursue that course, thus causing more and more pain to motorists, until the general public said that they could take no more.

It was clear last autumn that those who expressed their dissatisfaction and said that they could take no more included pensioners and families on low incomes. High fuel taxation bears down heavily on pensioners and other groups who cannot afford it. However, it is part of the Government's unenviable record of increasing the tax burden on the least well-off in our society. The Institute for Fiscal Studies pointed that out today.

The least well-off include people who want to own and use a motor car. In some rural areas, that is a necessity, as my hon. Friend the Member for Buckingham (Mr. Bercow) made clear. They want to use their cars, but the Government are punishing them with high levels of tax and duty, which contribute to their record of regressive taxation that hits the least well-off the hardest.

My right hon. and learned Friend was right to paint a wider picture to encompass the world economy and the possibility of future increases in the price of petrol. Whatever happens to the price of crude oil, there should be no doubt about where responsibility rests for the relatively high price of petrol in the United Kingdom. Ministers cannot spin away the fact that the Government have significantly increased fuel duty and that 75 per cent. of that high price—the highest in Europe—arises from taxation. The Government must accept responsibility for the high price that motorists pay every time they visit the pumps. They must not be allowed to spin their way out of it.

We shall endeavour to make it clear where the responsibility lies: it lies with the Government, who have lost their grip on policy. They try to increase taxation whenever they can get away with it—when they are not being pressed and buffeted by public opinion. They created those forces by setting such high taxes. Ministers are responsible for the agony that high prices at the pumps cause so many motorists. Responsibility rests with the Government, and they should not be allowed to escape it.

Photo of Michael Moore Michael Moore Shadow Spokesperson (Transport)

This has been an interesting discussion, not least for the cameo it has provided of the continuing debate about boom and bust and a possible return to the cycle over the coming months.

Sadly, the debate has lacked any reference to sustainability, or to the role of the environment in the determination of fuel policy and associated matters. I note that no Labour Back Benchers are rushing to participate; I hope that Ministers will address such matters when they respond.

We cannot ignore the difficulties that can arise in balancing the needs of the environment, economic competitiveness and social inclusion, which are the three components of sustainability. The hon. Member for Banff and Buchan (Mr. Salmond) made some important points about the economy and the way in which he sees it developing. I associate myself with his comments and those of other hon. Members concerning the sad news about Motorola jobs in central Scotland. Our rural communities are suffering greatly from foot and mouth, and it is therefore right to place emphasis on the way in which we tackle the economic problems that affect the whole country.

In the past two or three years—and especially in the past 12 months—the fuel price issue has been buffeted around. When things came to a head last autumn, we acknowledged that there had to be an accommodation and that we had to keep all parts of the sustainability argument in kilter. In the past, it was important to support the fuel duty escalator for environmental reasons, but changing circumstances meant that it had to alter.

We have been advocating for a long time that there should be a freeze on fuel duty in real terms for the lifetime of this Parliament, and, indeed, the next one. After the events of last year, we would like to have seen a return to the travelling public of the windfall VAT receipts that the Treasury obtained and pocketed for other purposes. It is important to switch car tax aggressively towards encouraging smaller, more environmentally friendly cars and to shift the whole emphasis of our environmental taxation towards congestion charging, recognising, as we do, the need for upfront investment in public transport that will enable us to produce appropriate public transport alternatives.

The pain that many of our communities are suffering has focused everyone's mind. We recognise the difficulties of escalating fuel prices, but we also recognise the opportunities that congestion charging and other technologies will afford us for using a more sophisticated approach to targeting environmental taxation.

New circumstances involving huge increases in world oil prices, followed by massive fluctuations, have been experienced over the past six months. All the parties have had to adjust to that new reality—and some have done so more dishonourably than others. In adapting to the new situation, we cannot let the central idea of sustainability get lost. But alas, that is exactly what is happening, with a Dutch auction under way between the different parties to see which one can promise the most meaningless tax policy changes. We did not hear much about the environment from the hon. Member for Banff and Buchan—nor did we hear much from the right hon. and learned Member for Rushcliffe (Mr. Clarke) about his party's policy on fuel taxation. Sadly, even his Front-Bench spokesman did not provide an answer to that particular mystery.

There is an argument for a cut in fuel duty if it can stimulate changes that lead the market to adopt more environmentally friendly fuels. We support the plans on ultra-low sulphur fuel for that reason, and, if the debate should move on, I hope that my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) will have the opportunity to raise the issue of taxation changes on biodiesel.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

I agree with the tenor of most of the hon. Gentleman's comments. However, a problem remains in rural areas, where a double jeopardy, or double whammy, is imposed on rural dwellers. The figures quoted for the price of petrol per litre by the Conservative Front-Bench spokesman would not be recognisable to the people in my constituency, who have to buy petrol at 2p, 3p or 4p a litre more than that. Does the hon. Gentleman have any suggestions as to how, on the social justice side of sustainability, we can ensure that people in rural areas who need some form of private transport for access to jobs and services are not penalised by the differential between urban and rural petrol costs?

Photo of Michael Moore Michael Moore Shadow Spokesperson (Transport)

I am grateful to the hon. Gentleman for that intervention and I acknowledge his credentials in these matters. He raises the issue of the environment with great regularity. This is a difficult issue for all of us. Our view is that the funds that will be made available through congestion charging must allow us to create alternative public transport systems. That will apply not only in urban areas but in rural areas, where people will be able to use those facilities to get into the towns and cities where many of them have to work. I suspect that the answer to the hon. Gentleman's question is in nobody's mind just yet. However, we must ensure that, when we put forward these arguments, we do not lose sight of the environmental aspects as we rightly and properly focus attention on the problems in rural areas.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

My hon. Friend referred to urban congestion charging. Is it not the case that, in urban areas where public transport could be made available, if properly funded through urban congestion charging, there would not only be a renaissance of public transport, but higher costs for those who chose to use their cars needlessly? That would mean that those in rural areas would pay far less, because there would not be the same availability of public transport or the same need to get people out of their cars.

Photo of Michael Moore Michael Moore Shadow Spokesperson (Transport) 4:30, 24 April 2001

I agree with my hon. Friend.

We should ask what lies behind the amendment—what the intention is. The Scottish National party's petrol price policies have a sorry history: few survive, and this one is likely to fare no better. We have been told that what is proposed is an initial cut of 10p a gallon, which is tantalising stuff. Nowadays we tend to buy our fuel in litres rather than gallons, although we measure our cars' fuel economy in miles per gallon. My point is, however, that there may be just a hint of politics in this, rather than any real concern about the issues that are at the heart of the debate.

What is behind the policy? Is it the environment? Clearly not: we have heard virtually no mention of that, except in the form of attacks on others' views. Is it a desire to help small petrol stations, in the teeth of competition from the major oil companies and the supermarkets? That is unlikely; there was certainly no evidence of it in the speech of the hon. Member for Banff and Buchan. Is it the fluctuating oil price? Well, we have heard a little more about that.

Andrew Wilson, the SNP's finance spokesman, relaunched his policy a few days ago, trumpeting it as a response to a price increase announced by Shell. The problem is that the policy had been announced earlier, before the price increase. The "auction" approach that many other parties now seem to espouse does not take account of the fact that the oil price is fluctuating wildly. What we have not been given today is any sense that the objective is to tie us to a particular petrol price at a particular time. We have seen massive shifts in the oil price over the past year; to keep up with that would require a weekly policy change, which, even by the SNP's standards, would be fairly breathtaking. The party's position has no credible basis.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

What is breathtaking is the position taken by the Liberal Democrats over a number of years. It is based on the politics of the Kincardine and Deeside by-election: the Liberal candidate was busy attacking the price of petrol under the Conservative party, only for it to be revealed that Liberal policy would make it even higher. Indeed, Liberal policy over most of the last few years would make it even higher than it is under the present Government.

If the hon. Gentleman consults the record, he will note that every fuel tax debate that has taken place while I have been a Member of Parliament has featured an extremely consistent position, to which some Members of his own party have been extremely sympathetic. What a pity that a Liberal Democrat Front-Bench spokesman will have to reveal to the people of Scotland that he is not prepared to vote for lower petrol prices in existing circumstances.

Photo of Michael Moore Michael Moore Shadow Spokesperson (Transport)

As usual, what the hon. Gentleman says half-answers the point that we have been debating.

Over the past two or three years, my Liberal Democrat colleagues and I have consistently opposed increases in fuel taxation that have not been accompanied by the requisite investment in public transport. Such investment has been completely lacking under the current Government, and it is still lacking. We hear lots about the £180 billion in the 10-year transport plan—I shall be very surprised if we escape another reference to that this afternoon—but that vague and notional amount is not, in fact, committed. The private sector amounts are not known; and, as we noted earlier during questions to the Secretary of State for the Environment, Transport and the Regions, we are still stuck in multimodal studies halfway around the country, which means that no serious investment is going on.

The hon. Gentleman need not lecture the Liberal Democrats on fuel policy. We believe that there is a link between any fuel tax, the revenues that are raised, and the public transport that is created as a result. The hon. Gentleman has not demonstrated this afternoon that he cares much about that.

As I have said, there is no credible basis for the SNP's position. This is a pre-election stunt, and we will have nothing to do with it.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party, Galloway and Upper Nithsdale

I want to talk briefly about the effect that the amendment would have on rural areas such as the one that I represent. As the hon. Member for Ceredigion (Mr. Thomas) said, in rural areas, we are talking about a cut in the retail price, which is already much higher than in many urban areas.

Galloway and Upper Nithsdale is one of the six constituencies with the lowest average income in Scotland. Household incomes in Dumfries and Galloway, in which the constituency is situated, are the second lowest of all the local authorities in the UK, yet Galloway and Upper Nithsdale is in the top six constituencies in Scotland for car ownership.

That is not because my constituents are particularly perverse. It is not because, although they have much lower incomes than the average, they want many more cars than the average. It is because it is essential for them to have those cars to get to work. Another consequence of the lower incomes is that people's cars are often much older; more difficult and more expensive to maintain; and less fuel efficient.

People in areas such as mine—as in many other areas in Scotland and the UK—have to travel considerable distances to work. That is largely due to the decline in agriculture, which is on-going even as we speak. In many cases, two members of the family have to travel to work separately: because wages are so low, both parents have to work but they cannot work at the same time because of child care and other commitments, so they need two cars—a fact which to some extent accounts for the increase in car ownership.

In many such areas, public transport is not an option. Dumfries and Galloway offers a very generous subsidy to public transport in the area, yet services will never be frequent enough or at the right times to allow the majority of my constituents to get to work when they want to. I was recently at a meeting in Dalbeattie, where a factory was shutting down, with about 50 redundancies. One young chap said that he had been able to get a job in Dumfries, the nearest major town some 10 miles away, but that the job started at 7.30 am and the first bus in the morning could not get him to work in time. The only alternative for him was to buy a car. It is all very well to talk about alternative transport systems and investment in alternative transport systems, but the harsh fact is that, in many rural areas, no matter how much we invest in those systems, they will never be good enough to enable the vast number of people to get to the jobs that are on offer.

There exists an alternative for those people: to get on their proverbial bike and move out of rural areas. Interestingly, the latest population statistics for Scotland, which were published this week, show that in all areas except Edinburgh, and particularly in rural areas, the population has declined over the past 10 years. At the same time, the number of older people in those areas has increased. The younger people—those who need work—are moving out of the countryside because they cannot afford to travel to work and cannot get jobs in rural areas. As that happens, a vicious circle develops. Local incomes drop even further because fewer people are in employment in rural areas, and the cost of services increases in those areas because more elderly people are putting a burden on social services. There is a cycle of decline in our rural economy.

Many of the imperatives to use private transport are created by changes in our public services. For example, the centralisation of hospital services is going on throughout the country. From Stranraer, the biggest town in my constituency, it is a journey of 150 miles to the nearest general hospital. From the Mull of Galloway, it is a return trip of 210 miles to the nearest general hospital.

People cannot do that sensibly in a day by public transport. They have to have a car to visit a relative in hospital or to go to an out-patient appointment. And that is only for those specialties that can still be dealt with in Dumfries infirmary. For many others, people have to go either to Edinburgh or to Glasgow. So the nature of public services in rural areas is driving people to use their cars.

Although modern technology can enable the economy in rural areas to expand, the Government's policy is to leave telecommunications development, particularly in relation to broadband, to the market. We know what the market is doing in rural areas—it is not investing in them, so in those areas of the modern economy that include some opportunity for rural areas to prosper, nothing is happening.

I remember Government Back Benchers in previous Budget debates saying that the tax was being imposed for the sake of the environment, but we have not heard that story so much lately. That argument cut little ice with my constituents, who are relatively few in number and who did not see that they were individually causing much of a problem to the environment in Dumfries and Galloway, although they could see that the far more highly paid drivers who clog the M25 every day were contributing to the detriment of the environment. The tax did not stop those drivers, who simply absorbed the cost in the higher wages paid in their areas.

It is a pattern that so-called environmental taxes hit rural areas harder. Yesterday, we debated the aggregates tax, which affects quarries, some 99.9 per cent. of which are situated in rural environments. That tax will be redistributed, allegedly, through cuts in employers' national insurance contributions, but—surprise, surprise—most of those with jobs work in urban areas, so the subsidy flows to those areas from a tax raised in rural areas.

Another effect of the fuel duty is the significant impact on commercial hauliers, including those in my constituency. The hon. Member for Hertsmere (Mr. Clappison) mentioned competition from Northern Ireland, and that is significant for my constituency because it is the closest mainland constituency to that area. Many hauliers come across to Galloway from Northern Ireland, having filled up with cheap DERV in the south of Ireland, and can undercut local hauliers in my constituency—many of whom have gone out of business as a result.

I suspect that the Government will not accept the amendment, even though they could earn some brownie points for the coming election if they did so. However, the Government must seriously consider mechanisms designed to help rural areas, and I have a suggestion for them. We know that the tourism industry is in deep crisis and we also know that rural bus services receive an essential rebate on DERV duty. Why not extend that duty rebate to operators of touring coaches? That would encourage them to come into country areas. Many hotels in my constituency, and other constituencies throughout rural Britain, have been affected by cancellations from tour operators because they have not had the bookings.Fuel duty is a significant cost for tour operators, and a reduction in it would enable them to reduce their prices and bring more tourists into the countryside. As we heard from the Minister for the Environment in his statement yesterday, we need to encourage more people to come to the countryside, and the Government could play their part today.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

The amendment is an irresponsible attempt to reduce fuel duty below the levels proposed by the Government. Clause 1 already cuts the duty rates on the main road fuels used in the UK. The duty on ultra-low sulphur petrol will be cut by 2p a litre and that on ultra-low sulphur diesel by 3p, to equalise the duty on the two products. Those reductions form part of a package of measures that will protect and enhance the environment, and are also equivalent to an overall cut of 4p a litre for motorists and 7p a litre for hauliers.

The Government have a prudent and responsible strategy that balances the interests of motorists with legitimate concerns about the environment—about which we have heard remarkably little in this afternoon's debate—while ensuring that we continue to raise valuable revenue from fuel duties for spending on vital public services including health, education and transport, which is another issue that the Opposition seem keen to disregard.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan 4:45, 24 April 2001

I spoke at some length about the increase of £5 billion in Government revenues that has resulted from the fact that the price of oil is much higher than the Government expected two years ago. Will the Minister say what, in 1999, the Treasury expected the price of petrol to be now? If we are to believe the Treasury forecast, the expectation must have been that the price would be below current levels. If that level was considered sustainable for the environment in 1999, why is it not so in 2001?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

The hon. Gentleman made that point earlier, and I shall respond to it in detail later. However, there has been no reference in the debate so far to the Red Book. It was noted earlier that there have been considerable fluctuations in the spot price of Brent crude oil. The graph at box 6.3 in chapter 6 shows that that price rose from a low of $10 a barrel in January 1999 to a high of between $33 and $34. I am sure that I do not have to remind the hon. Gentleman that that threefold increase makes a considerable difference to the price of petrol at the pump.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

The Minister makes my point for me. I have demonstrated already that in 1999 the Government expected oil to cost between $10 and $12 a barrel for the foreseeable future. What was the Government's expectation in 1999 of what the price of petrol at the pumps would be in 2001? It must have been lower than the current price, so why is that forecast level not sustainable in environmental terms now? It is a reasonably simple question, and I hope that the Minister will address it now.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

As I said, I shall come to that point in the course of my response. I want to be as logical as possible, to prevent the debate from jumping around from point to point.

The hon. Gentleman did not mention the fact that the amendment would cost the Exchequer more than £800 million a year. That is a substantial amount of revenue, and he must explain how he would recoup the money and so be able to match the Government's spending plans. He must also explain how he would meet the environmental targets. The Scottish National party is keen to be seen as a tax-and-spend party. It needs to offer more of an explanation of how its economic policies hang together, and of how it would be able to deliver—fiscally and in terms of public finances—policies based on the tax-and-spend premise.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

I give the Minister the credit of assuming that she has read my party's taxation document, which explains that we propose to increase the rate of taxation for people earning more than £100,000 a year by 5p. Whether the Government think that that is right or wrong, the Minister's statement that we have not explained how we would raise the revenue to finance the proposal in the amendment is totally invalid. In passing, may I point out that our proposal would still leave the highest marginal rate of tax considerably below what the Chancellor considered to be the appropriate rate just a few years ago?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I am well aware of what the Scottish National party's manifesto contains, but when he moved the amendment, the hon. Gentleman did not explain to the House how his party's proposals on spending and taxation would be squared. It is good to hear him confirm the party's commitment.

However, the hon. Gentleman's policy contains an inconsistency. His party's taxation document talks about fulfilling Britain's international commitments, especially in reducing levels of carbon dioxide and sulphur dioxide, and related environmental obligations. It is unclear how the amendment would contribute to achieving such objectives.

The package of measures in the Bill represents a balance between economic, environmental and social concerns. As I have argued, a single cut in fuel duty—which is one of the amendment's proposals—could have adverse effects on the environment. Instead, the Government have announced a package of measures that will protect and enhance the environment. The package is equivalent to a cut of 4p per litre for motorists, and 7p per litre for hauliers. Those who wish to cut fuel duty must explain how they would do that. The Government's first priority is a stable economy.

Let me turn to the points made about the global economic climate by the right hon. and learned Member for Rushcliffe (Mr. Clarke) and to the remarks made by other right hon. and hon. Members. The Chancellor said today that all countries should take the necessary action to sustain growth. He made the point powerfully, supported by all that we have done, that our policy is much better placed than before in the face of global instability. As he said, we are on course to deliver stability and sustain growth. One reason for that is our tough and decisive action in introducing tough fiscal rules, reducing the national debt and making the Bank of England independent, which has succeeded in delivering the lowest rate of inflation for 30 years.

The right hon. and learned Member for Rushcliffe spoke proudly of the previous Government's legacy. We come back from time to time to the idea of the Tories' golden inheritance. I can never manage to square that with the fact that under the previous Government there was £28 billion net borrowing, and that between 1979 and 1997 more was spent on debt and unemployment than on the national health service. What sort of golden legacy was that? In contrast, in 2001–2 alone we will be spending £30 billion more on the national health service than on unemployment and debt. We also inherited an unemployment figure that had reached 3 million, and a 15 per cent. interest rate.

The right hon. and learned Gentleman says how lucky we have been—supposedly—but neglects to mention the Asian crisis and what we have done in international environments to stabilise the global economy and to work for continuing stability through the institution of such organisations as the financial stability forum.

Photo of Kenneth Clarke Kenneth Clarke Conservative, Rushcliffe

The hon. Lady has become slightly confused in giving the usual Labour account of the Government's awful inheritance. She will recall that the Government came into power after three years of growth, low inflation and consistently falling unemployment. The public finances were on course for balance. At the last election we debated the black hole in Labour's finances, but when the Government came to power it did not appear. Does the hon. Lady agree that that is because they failed to mention that they would increase the tax burden so heavily, as they did over the next three years, and freeze public spending so severely for their first two or three years in office? They are only just beginning to emerge from the consequences of that, so under this Government the increased spending on health and education for example, is still below the levels achieved under the Major Government.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

The right hon. and learned Gentleman is again rewriting history. We inherited a 44 per cent. debt-to-GDP ratio, and have reduced it to 31 or 32 per cent.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

The hon. Gentleman says that that is too low. He wants to borrow more and enter the cycle of boom and bust that characterised all previous Conservative Governments.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. This macro-economic debate is going wide of the amendment, and I do not want it to spread.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

Does the Minister believe that the long-term gilt yields underlying annuity costs, and the poor deal that pensioners buying annuities get, is a desirable part of Government policy, or would she like pensioners buying annuities to get better value?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

Our position on annuities has been made clear many times to the hon. Gentleman, and was set out in the Red Book and the Budget statement. I shall not be drawn further on that, Sir Alan, as I realise that I am testing your patience.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

In the time-honoured phrase, may I refer all hon. Members to the comments that I made a few moments ago?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

We shall abide by them most faithfully, Sir Alan.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

No I should like to move on.

Complaints have been made about UK tax levels. The overall context, however, is that our tax burden is much lower than the European Union average. Indeed, 10 EU countries have higher tax burdens. Business tax rates are low, and our corporation tax rate is among the lowest in the EU and well below average. In addition, for small companies the rate is only 10 per cent. We can be proud of our record on reducing taxation on business. Our taxation rates are competitive when compared with those of comparable EU and other countries.

Let me talk about the Government's strategy on fuel duty. The appropriate duty rate will in future be decided Budget by Budget. Opposition Members have criticised that, and the right hon. and learned Member for Rushcliffe seemed to complain both that we had ended the escalator that he created, and that we had been on it at all. I am not clear what his argument amounted to. He may have been suggesting that we should have come off the escalator sooner—I see him nodding—but that policy would merely have added to the £16 billion cuts guarantee that his party must already explain to the people of the United Kingdom.

Photo of Kenneth Clarke Kenneth Clarke Conservative, Rushcliffe

The Minister cannot continue the debate using the totally bogus £16 billion figure that the Government keep contributing to an election campaign that is totally brain-free on many subjects, particularly economic policy. Would it not have been logical, having started the escalator when we had the cheapest fuel in western Europe, at least to stop its automatic increase once our fuel had become the most expensive in Europe? Did the Government pursue any logical policy, rather than staying on an escalator towards the stratosphere until civil disobedience on our streets sent them into a U-turn?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

We had already announced the end of the escalator before then. The right hon. and learned Gentleman is obviously uncomfortable about the fact that he introduced the escalator and we ended it, but that is the fact of the matter.

We have used duty differentials to encourage the manufacture and use of cleaner fuels. We have encouraged the use of ultra-low sulphur diesel, which now accounts for 100 per cent. of the road diesel market. The incentives that we recently announced for ultra-low sulphur petrol mean that we expect that to account for 100 per cent. of the petrol market by the middle of June. The Budget introduced a comprehensive strategy to encourage cleaner alternative fuels. Our clear policy on fuel duty has several different dimensions, and it is important that we should maintain that.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

Will the Minister address the recent report on fuel duty by the Select Committee on Environmental Audit? That report made it clear that the Government's thinking has been muddled and that not enough environmental modelling has been done on the effect of fuel duty and its relationships with traffic congestion and reductions in greenhouse gases. Does she accept that the Government need to make a far clearer environmental case if they intend to pursue the current rates of fuel tax in future? If they do not, the problems that arose in September will come back.

5 pm

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I do not accept that our position is in any way muddled. However, the Committee is fully entitled to its view. We have looked at the triangle of difficult issues and achieved the right balance between them—between the environment and environmental needs, the costs of motoring, and the revenues from fuel duty. We need to balance those issues and we have made those difficult decisions, leading to the 4p equivalent cut for motorists and the 7p equivalent cut for hauliers.

I point out to those Members whose memories seem remarkably short that the percentage of tax on a litre of petrol has not really changed. Indeed, in May 1997, tax was 77.5 per cent. of the cost of a litre of petrol, whereas it is now 74.7 per cent. on lead replacement petrol and 75.3 per cent. on ultra-low sulphur petrol. Several statistics were falsely bandied about by Members during the debate, and I need to put the record right.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

When one is talking about a proportion, the figure of which it is a proportion is important. Will the hon. Lady remind us of the price of petrol in May 1997?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I do not have that figure to hand. The point being made by the hon. Gentleman and by other Opposition Members is that the proportion is dramatically different. It is not dramatically different; it is almost the same—if anything, it is slightly lower—so the point is not relevant.

I remind hon. Members that the wider choice of cheaper motoring that we want to see has also been initiated through policies on car use. There is a reduced rate of vehicle excise duty on cars with smaller engines registered before 1 March 2001. It is being extended on 1 July 2001 to all cars with an engine threshold of up to 1.5 litres, and will eventually be backdated to November 2000. As hon. Members know, that will reduce the cost of VED by £55 a year for an extra 5 million car owners. In addition, all car and motor bike VED rates were frozen this year. Those are relevant considerations when considering the cost of motoring.

I accept, however, the comments made by several Members that for people living in, and travelling to work from, rural areas, motoring costs are more significant than they are for people in urban environments. However, we have introduced a 7p equivalent cut in the rate, and that is an especially big help to motorists in rural areas.

Arguments were made about smuggling in Northern Ireland, and the differentials in duty rates between Northern Ireland and the Republic of Ireland. Those arguments always strike me as curious. UK rates are set for good reasons. The Government are well aware of the smuggling problem in Northern Ireland, but we shall not allow our policies—or the livelihoods of legitimate traders—to be undermined by the activities of criminals.

I am puzzled by those arguments, because they sometimes seem like arguments for tax harmonisation, which the Government completely reject. Instead, Customs and Excise has developed a strategy to tackle oil fraud. In Northern Ireland, that strategy includes significantly increased resources, which have been in operation since 25 September last year and have resulted in greatly enhanced enforcement activity. The aim of Customs and Excise is not only to seize more smuggled petrol and diesel but to ensure that its activity has an impact on the illicit market.

A question was put about the hypothecation of fuel tax for investment in public transport. For the pleasure of the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore), I reiterate that we do indeed have a £180 billion, 10-year public investment strategy plan—we are extremely proud of it. The plan represents an increase of current expenditure by about three quarters. In the pre-Budget report in 1999, we agreed that any money derived from any future real-terms increase in fuel duty should be hypothecated for transport spending. That point has already been taken on board by the Government.

I conclude by reminding hon. Members that, as I have said before, if they support the amendment, which is irresponsible, they should say where the money would come from and what would be cut. We have ensured that our monetary and fiscal policy adds up, that we are making the key investments in public services, and that we are tackling the disadvantage that some hon. Members have highlighted.

In talking about some of that disadvantage, especially that in rural areas, Opposition Members forget the importance of the work being done for those on low and average incomes through the introduction of the working families tax credit, the national minimum wage, the children's tax credit and the cuts that we have made in direct taxation. In all those ways, Opposition Members have neglected to view the Government's policy in its wider context, so I recommend that the House oppose the amendment.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

I assure the Economic Secretary that 75 per cent. of almost £4 a gallon amounts to more in monetary terms than 77 per cent. of less than £3 a gallon. She must take my word for that, but it is absolutely true. She may want to ask the mighty expertise at her disposal in the Treasury to work out that sum, but I can give her an absolute assurance that the sum that the Government are taking in petrol duty has vastly increased during the new Labour party's term in office.

What does the Economic Secretary's speech amount to? She suggests that the Government's proposed 2p cut in the price of ultra-low sulphur is a wise act of policy, but that the 4p cut proposed by the Scottish National party is wildly irresponsible. However, the reality is that the cut proposed by the Government—and, indeed, the decision to step off the fuel price escalator—were brought about by force majeure, because of the impact of a massive fuel tax protest. That was not an act of policy; it was an act of panic, and everyone knows it.

If the Economic Secretary cares to check the record, she will see that the SNP has consistently opposed that approach to petrol taxation, which was, I agree, started by the Conservative party—but it was continued by the new Labour party. The reason why we oppose the policy is simple: it is a blunt instrument. In pursuing the policy that the Government inherited from the previous Government, they tax most the people who do least environmental damage to the overall economy.

Not only is the price of petrol higher in rural areas, but the taxation on every gallon of petrol is higher, because the element of taxation depends on the overall price. The policy is perverse. There are much better and more sophisticated ways to approach environmental taxation. The Economic Secretary talks about the great infrastructure plan, but after four years in government, it is still definitely just a plan.

Matthew Parris wrote an interesting article today, in which he speculated that if the new Labour party won the election, every Minister and Labour Back Bencher would have to get used to the fact that they would no longer have the luxury of blaming the previous Government for their mistakes, because, of course, they themselves would be the previous Government. I hope that when the Economic Secretary has had time to think about some of the arguments that she has used today, she will realise their fragility. Despite being totally unable to tell us what the Government's expectation was in 1999 of what the price of a gallon of petrol would be now, she argued that the policy was based on environmental grounds.

That idea was always a phantom. The policy was always about cash for the Treasury, not about concern for the world environment. It was never green; it was always Brown. That is the reality of the policy, and it does huge damage to the rural economy, in particular, and to every consumer and everyone who depends on the price of transport when purchasing goods in the shops. The Government have not gone far enough to draw the sting from this as an election issue.

If proof positive of that final statement were necessary, the fact that five Labour Members from Scotland have attended the debate without one of them indicating a wish to speak shows that they understand that when people—

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

The hon. Gentleman wandered into the Committee a few minutes ago, and I will not give him the opportunity to do what he should have done earlier—make his own speech. Neither he nor his colleagues wanted to speak in the debate because when people go to the polls, they will know that the new Labour party means high petrol prices in Scotland.

Question put, That the amendment be made:—

The Committee divided: Ayes 129, Noes 287.

Division No. 190][5.10 pm
Ainsworth, Peter (E Surrey)Curry, Rt Hon David
Amess, DavidDavies, Quentin (Grantham)
Ancram, Rt Hon MichaelDavis, Rt Hon David (Haltemprice)
Arbuthnot, Rt Hon JamesDay, Stephen
Atkinson, Peter (Hexham)Dorrell, Rt Hon Stephen
Baldry, TonyDuncan, Alan
Bell, Martin (Tatton)Evans, Nigel
Bercow, JohnEwing, Mrs Margaret
Blunt, CrispinFabricant, Michael
Boswell, TimFallon, Michael
Bottomley, Peter (Worthing W)Flight, Howard
Brady, GrahamForth, Rt Hon Eric
Brazier, JulianFox, Dr Liam
Brooke, Rt Hon PeterFraser, Christopher
Browning, Mrs AngelaGale, Roger
Bruce, Ian (S Dorset)Garnier, Edward
Burns, SimonGibb, Nick
Clappison, JamesGill, Christopher
Clarke, Rt Hon Kenneth (Rushcliffe)Gillan, Mrs Cheryl
Gray, James
Clifton-Brown, GeoffreyGreen, Damian
Cormack, Sir PatrickGreenway, John
Cran, JamesGrieve, Dominic
Gummer, Rt Hon JohnPaisley, Rev Ian
Hague, Rt Hon WilliamPaterson, Owen
Hamilton, Rt Hon Sir ArchiePortillo, Rt Hon Michael
Hammond, PhilipPrior, David
Hawkins, NickRandall, John
Hayes, JohnRedwood, Rt Hon John
Heald, OliverRobatha[...], Andrew
Heathcoat-Amory, Rt Hon DavidRobertson, Laurence (Tewk'b'ry)
Horam, JohnRobinson, Peter (Belfast E)
Howard, Rt Hon MichaelRoe, Mrs Marion (Broxbourne)
Howarth, Gerald (Aldershot)Ross, William (E Lond'y)
Jack, Rt Hon MichaelRuffley, David
Jenkin, BernardSt Aubyn, Nick
Johnson Smith, Rt Hon Sir GeoffreySalmond, Alex
Shephard, Rt Hon Mrs Gillian
Key, RobertShepherd, Richard
Kirkbride, Miss JulieSimpson, Keith (Mid-Norfolk)
Laing, Mrs EleanorSoames, Nicholas
Lait, Mrs JacquiSpelman, Mrs Caroline
Leigh, EdwardSpicer, Sir Michael
Letwin, OliverSpring, Richard
Lewis, Dr Julian (New Forest E)Stanley, Rt Hon Sir John
Lidington, DavidSteen, Anthony
Lidington, DavidStreeter, Gary
Lilley, Rt Hon PeterSwayne, Desmond
Lloyd, Rt Hon Sir Peter (Fareham)Syms Robert
Llwyd, ElfynTapsell, Sir Peter
Loughton, TimTaylor, Ian (Esher & Walton)
Luff, PeterTaylor, John M (Solihull)
MacGregor, Rt Hon JohnTrend Michael
McIntosh, Miss AnneTyrie, Andrew
MacKay, Rt Hon AndrewViggers, Peter
Maclean, Rt Hon DavidWalter, Robert
McLoughlin, PatrickWaterson, Nigel
Madel, Sir DavidWhittingdale, John
Malins, HumfreyWiddecombe, Rt Hon Miss Ann
Maples, JohnWilletts, David
Mates, MichaelWinterton, Mrs Ann (Congleton)
Mawhinney, Rt Hon Sir BrianWinterton, Nicholas (Macclesfield)
Morgan, Alasdair (Galloway)Yeo, Tim
Nicholls, Patrick
O'Brien, Stephen (Eddisbury)Tellers for the Ayes:
Ottaway, RichardMr. Dafydd Wigley and
Paice, JamesMr. Simon Thomas.
Adams, Mrs Irene (Paisley N)Bradshaw, Ben
Ainger, NickBrinton, Mrs Helen
Ainsworth, Robert (Cov'try NE)Browne, Desmond
Allen, GrahamBuck, Ms Karen
Anderson, Rt Hon Donald (Swansea E)Burden, Richard
Burgon, Colin
Armstrong, Rt Hon Ms HilaryButler, Mrs Christine
Ashton, JoeCampbell, Alan (Tynemouth)
Atherton, Ms CandyCampbell, Mrs Anne (C'bridge)
Atkins, CharlotteCampbell, Ronnie (Blyth V)
Austin, JohnCampbell-Savours, Dale
Bailey, AdrianCann, Jamie
Banks, TonyCaplin, Ivor
Barnes, HarryCasale, Roger
Battle, JohnChapman, Ben (Wirral S)
Bayley, HughClapham, Michael
Begg, Miss AnneClark, Rt Hon Dr David (S Shields)
Benn, Hilary (Leeds C)Clark, Dr Lynda (Edinburgh Pentlands)
Benn, Rt Hon Tony (Chesterfield)
Bennett, Andrew FClarke, Charles (Norwich S)
Benton, JoeClarke, Eric (Midlothian)
Best, HaroldClarke, Rt Hon Tom (Coatbridge)
Betts, CliveClelland, David
Blears, Ms HazelClwyd, Ann
Blizzard, BobCoffey, Ms Ann
Blunkett, Rt Hon DavidCohen, Harry
Boateng, Rt Hon PaulColeman, Iain
Borrow, DavidColman Tony
Bradley, Rt Hon Keith (Withington)Connarty, Michael
Cook, Frank (Stockton N)Iddon, Dr Brian
Cooper, YvetteIllsley, Eric
Corbett, RobinJackson, Ms Glenda (Hampstead)
Corston, JeanJackson, Helen (Hillsborough)
Cousins, JimJohnson, Alan (Hull W & Hessle)
Cranston, RossJohnson, Miss Melanie (Welwyn Hatfield)
Crausby, David
Cryer, John (Hornchurch)Jones, Rt Hon Barry (Alyn)
Cummings, JohnJones, Helen (Warrington N)
Dalyell, TamJones, Jon Owen (Cardiff C)
Darvill, KeithJones, Dr Lynne (Selly Oak)
Davey, Valerie (Bristol W)Jones, Martyn (Clwyd S)
Davidson, IanJowell, Rt Hon Ms Tessa
Davies, Rt Hon Denzil (Llanelli)Joyce, Eric
Davies, Geraint (Croydon C)Kaufman, Rt Hon Gerald
Dean, Mrs JanetKeeble, Ms Sally
Denham, Rt Hon JohnKelly, Ms Ruth
Dobbin, JimKemp, Fraser
Donohoe, Brian HKennedy, Jane (Wavertree)
Doran, FrankKhabra, Piara S
Dowd, JimKidney, David
Drew, DavidKilfoyle, Peter
Drown, Ms JuliaKing, Andy (Rugby & Kenilworth)
Dunwoody, Mrs GwynethKing, Ms Oona (Bethnal Green)
Eagle, Angela (Wallasey)Kingham, Ms Tess
Eagle, Maria (L'pool Garston)Ladyman, Dr Stephen
Efford, CliveLammy, David
Ellman, Mrs LouiseLawrence, Mrs Jackie
Field, Rt Hon FrankLeslie, Christopher
Fisher, MarkLevitt, Tom
Fitzpatrick, JimLewis, Ivan (Bury S)
Flint, CarolineLewis, Terry (Worsley)
Follett, BarbaraLiddell, Rt Hon Mrs Helen
Foster, Rt Hon DerekLinton, Martin
Foster, Michael Jabez (Hastings)Lloyd, Tony (Manchester C)
Foster, Michael J (Worcester)Lock, David
Gapes, MikeMcAvoy, Thomas
Gardiner, BarryMcCabe, Steve
George, Rt Hon Bruce (Walsall S)McDonagh, Siobhain
Gerrard, NeilMcDonnell, John
Gibson, Dr IanMcFall, John
Gilroy, Mrs LindaMcGuire, Mrs Anne
Godsiff, RogerMcIsaac, Shona
Goggins, PaulMcKenna, Mrs Rosemary
Golding, Mrs LlinMcNulty, Tony
Gordon, Mrs EileenMacShane, Denis
Griffiths, Jane (Reading E)Mactaggart, Fiona
Griffiths, Nigel (Edinburgh S)McWilliam, John
Griffiths, Win (Bridgend)Mallaber, Judy
Grocott, BruceMandelson, Rt Hon Peter
Grogan, JohnMarshall, David (Shettleston)
Hain, PeterMarshall, Jim (Leicester S)
Hall, Mike (Weaver Vale)Martlew, Eric
Hall, Patrick (Bedford)Maxton, John
Hanson, DavidMeacher, Rt Hon Michael
Henderson, Doug (Newcastle N)Merron, Gillian
Hendrick, MarkMichael, Rt Hon Alun
Hepburn, StephenMichie, Bill (Shef'ld Heeley)
Heppell, JohnMiller, Andrew
Hesford, StephenMoffatt, Laura
Hewitt, Ms PatriciaMoran, Ms Margaret
Hill, KeithMorgan, Ms Julie (Cardiff N)
Hinchliffe, DavidMorris, Rt Hon Sir John (Aberavon)
Hodge, Ms Margaret
Hoey, KateMountford, Kali
Hood, JimmyMudie, George
Hoon, Rt Hon GeoffreyMullin, Chris
Hope, PhilMurphy, Denis (Wansbeck)
Hopkins, KelvinMurphy, Jim (Eastwood)
Howarth, George (Knowsley N)Naysmith, Dr Doug
Howells, Dr KimO'Brien, Bill (Normanton)
Hoyle, LindsayO'Brien, Mike (N Warks)
Hughes, Kevin (Doncaster N)Olner, Bill
Humble, Mrs JoanOrgan, Mrs Diana
Hurst, AlanOsborne, Ms Sandra
Hutton, JohnPearson, Ian
Pendry, Rt Hon TomSouthworth, Ms Helen
Pickthall, ColinSquire, Ms Rachel
Pike, Peter LStarkey, Dr Phyllis
Plaskitt, JamesSteinberg, Gerry
Pollard, KerryStevenson, George
Pond, ChrisStewart, David (Inverness E)
Pound, StephenStewart, Ian (Eccles)
Prentice, Ms Bridget (Lewisham E)Strang, Rt Hon Dr Gavin
Prentice, Gordon (Pendle)Stuart, Ms Gisela
Primarolo, DawnSutcliffe, Gerry
Prosser, GwynTaylor, Rt Hon Mrs Ann (Dewsbury)
Quinn, Lawrie
Radice, Rt Hon GilesTaylor, Ms Dari (Stockton S)
Rammell, BillTaylor, David (NW Leics)
Raynsford, Rt Hon NickTemple-Morris, Peter
Reed, Andrew (Loughborough)Thomas, Gareth R (Harrow W)
Robertson, John (Glasgow Anniesland)Timms, Stephen
Tipping Paddy
Roche, Mrs BarbaraTodd, Mark
Rogers, AllanTouhig, Don
Rooney, TerryTickett, Jon
Ross, Ernie (Dundee W)Turner, Dennis (Wolverh'ton SE)
Rowlands, TedTurner, Dr Desmond (Kemptown)
Roy, FrankTurner, Neil (Wigan)
Ruane, ChrisTwigg, Derek (Halton)
Ruane, ChrisTynan, Bill
Ruddock JoanWard, Ms Claire
Russell, Ms Christine (Chester)Wareing, Robert N
Ryan, Ms JoanWhite, Brian
Salter, MartinWhitehead, Dr Alan
Savidge, MalcolmWicks, Malcolm
Sedgemore, BrianWilliams, Rt Hon Alan (Swansea W)
Shaw, Jonathan
Sheerman, BarryWilliams, Alan W (E Carmarthen)
Sheldon, Rt Hon RobertWinnick, David
Simpson, Alan (Nottingham S)Winterton, Ms Rosie (Doncaster C)
Skinner, DennisWoodward, Shaun
Smith, Rt Hon Andrew (Oxford E)Woolas, Phil
Smith, Angela (Basildon)Worthington, Tony
Smith, Miss Geraldine (Morecambe & Lunesdale)Wright, Anthony D (Gt Yarmouth)
Wright, Tony (Cannock)
Smith, Jacqui (Redditch)
Smith, John (Glamorgan)Tellers for the Noes:
Smith, Llew (Blaenau Gwent)Mr. Greg Pope and
Soley, CliveMr. David Jamieson.

Question accordingly negatived.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

I beg to move amendment No. 6, in page 1, line 21, leave out "14th June 2001" and insert "5th April 2002".

We have been debating the changes in duty on ultra-low sulphur petrol and the temporary reduction in duty on unleaded petrol. We now come to amendment No. 6, which deals with the period for which the reduction in duty on ordinary unleaded petrol is to apply. In his Budget statement, the Chancellor announced that the Government intended to match the reduction in duty on ultra-low sulphur petrol with a reduction in duty on unleaded petrol for a temporary period. The amendment would extend the period during which that reduction applies from 14 June this year—the date fixed by the Chancellor—to the end of the current financial year, 5 April 2002.

Given the Government's plans, hon. Members may find 14 June an interesting choice of date. We are tempted to ask about the magic of 14 June. Where does that date come from and what is the rationale behind it? Why has 14 June been plucked from all other dates as the day on which the concession on ordinary unleaded petrol will end? Why is it necessary to end it then? It is clear that, on 14 June, any ordinary unleaded petrol on sale to the public will bear an increase of 2p a litre in duty. In other words, on 14 June, the 2p that the Chancellor took off on 7 March will be put back on.

I shall resist the temptation to talk about stealth, but we need more of an explanation of where 14 June comes from. Given that the price of petrol in this country is relatively high because of high fuel tax, which we have just debated, and given the ominous pressures in the world oil market, which were adverted to by Members on both sides of the Committee in the previous debate, the last thing any motorist using that type of petrol wants is a further increase in its price on 14 June. I suspect that any motorist who pays that extra duty on 14 June will get an unpleasant shock; on top of the already high price that he is paying, he will find himself paying an extra 2p a litre in duty.

I do not want to anticipate the Minister's reply, but in answering the debate, she may well echo what we are told in the explanatory notes to the Bill: To ensure no market distortion in the final transition to 100 per cent. ULSP"— that is, ultra-low sulphur petrol— a temporary cut in duty for ordinary unleaded has also been introduced. This will ensure all distributors and retailers will be able to pass on a 2 pence per litre duty cut to their customers. When this temporary concession ends on June 14 it is expected that ULSP will form virtually 100 per cent. of the petrol supplied to the UK". 5.30 pm We are told in the concluding words of that statement that Ministers expect that ultra-low sulphur petrol will form virtually 100 per cent. of the petrol supplied to the United Kingdom, but we know all too well that, in this field as in so many others, what Ministers expect to happen does not always come to pass. Indeed, in the previous debate we had some interesting questions about what Ministers expected in the past which did not receive an answer.

In any case, whether or not ultra-low sulphur petrol is supplied to the motorist is not in the hands of Ministers, as Ministers admit. A Minister in the Department of Trade and Industry told my hon. Friend the Member for Altrincham and Sale, West (Mr. Brady) in a written answer on 16 November last year: Future levels of supply for ULSP will be a matter for individual companies to determine, "—[Official Report, 16 November 2000; Vol. 356, c. 718W.] In a further written reply on 26 February, the Financial Secretary stated that he believed that the oil companies are on track to meet their target to supply ULSP nationwide at their retail sites by the end of March"—[Official Report, 26 February 2001; Vol. 363, c. 511W]. However, there is no guarantee of that. Can the Economic Secretary say whether ultra-low sulphur petrol is available at all the retail sites of the major oil companies? In addition, we should like to know how many of the retail sites of the independent petrol retailers are supplying ULSP. Can the Minister tell us what proportion of the petrol supplied in the UK is ULSP?

If it is the Government's case that the concession on unleaded petrol should end when ultra-low sulphur petrol constitutes 100 per cent. of the petrol supplied in the UK, why should not the date for the ending of the concession be moved from 14 June to 5 April next year? Why should there be any question of whether or not the deadline of 14 June is approaching, if it is the Government's intention and expectation that ultra-low sulphur petrol should be universally available before the concession ends?

If that is the Government's position, why do they not extend the deadline to April next year? If the deadline is not extended, is there not the risk that some motorists who fill their tanks on 14 June will get the unpleasant shock of an extra 2p per litre on top of the already high price that they are paying, and on top of whatever else they may face at that time by way of petrol price increases? We need an explanation from the Minister.

As matters stand, there is the risk of an extremely unpleasant shock for many motorists on 14 June. Just when they have been told by the Chancellor that there was a reduction of 2p in the price of unleaded petrol on 7 March, hey presto—the 2p goes beck again on 14 June. What is going on?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

When the proposal to which the amendment relates was made, Conservative Front Benchers argued that it was likely that the petrol companies would not succeed in getting ultra-low sulphur fuels on to the forecourt in all parts of the country in time to meet the deadline. It was argued that the deadline was therefore arbitrary and unfair to those who might not otherwise be supplied with the correct form of fuel.

I listened intently to the comments of the hon. Member for Hertsmere (Mr. Clappison), as I assumed that he would give the House some evidence to show that that problem was now materialising, but I noticed that he was unable to cite one example or to quote any association or organisation in support of his argument. A little earlier, my colleagues spoke to the RAC Foundation to ask whether it believed there was a problem. It said that it believed that there would be no problem in obtaining ultra-low sulphur fuels. The problem on the basis of which the amendment was tabled therefore appears to be non-existent. Opposition Front Benchers cannot give any examples, and people who are in the know argue the contrary of what they are saying.

The principle of the provision seems to make sense. It is about getting the big petrol companies to supply a fuel that not only causes less pollution in its own right, but will allow the supply of higher-efficiency engines that use less fuel. Such engines are already being used in Japan. As they use less fuel, they will emit less carbon dioxide, so the fuel will also help in meeting the Kyoto targets.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

The hon. Gentleman is endeavouring to defend the Government—we are used to seeing Liberal Democrats do that—but in doing so, he has not answered the very point that I put to them. Why is 14 June specified, rather than 5 April next year, if it is intended that the ultra-low sulphur petrol reduction should be matched by a temporary reduction in respect of unleaded petrol until there is 100 per cent. coverage?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

There is a simple answer to that question, but I must respond first to the hon. Gentleman's initial argument: I am defending not the Government but the environment. If there is a way in which we can help to protect the environment and to move towards the Kyoto targets, I believe that we should use it. On the particular element of policy in question, that is what the Government are doing. I say again to the hon. Gentleman that if he can give examples that show that there is a problem, he should by all means make his case. The Liberal Democrats want to ensure that nobody is disadvantaged by the proposal. The hon. Gentleman has failed to make his case, however, and when we asked the RAC Foundation whether there was a problem, it said no. We can therefore see no basis for the amendment.

Why should there be an early deadline, whether it happens to be in June or July? I am sure that it fitted in with the Government's election programme. They were rather lucky, in terms of foot and mouth, that it remained within that programme, but the principle of a tight deadline is correct anyway. We know from experience that the oil companies refused to introduce ultra-low sulphur fuel, on the grounds that it was too costly to do so. As a result of the price differential, we now see that they could have done so very quickly all along. Indeed, that is exactly what we are seeing now.

A big question mark must be placed over the oil companies' willingness to make the investment that they needed to make without the price differential. Provided that the time scale is achievable, the earlier the deadline, the earlier the companies will supply all petrol stations with ultra-low sulphur fuel. As soon as that happens, manufacturers can introduce the engines that rely on such fuel. The environmental benefits that they bring can then be achieved, so a tight deadline makes sense. If the hon. Member for Hertsmere could provide evidence to show that an extra month or two months, or, indeed, the period until April next year, would make all the difference and allow something to happen that would not otherwise be possible, he would be advancing a perfectly coherent argument. The truth is, however, that he can sustain no basis whatever for arguing for postponement until next April.

The only difference on the matter between the Conservative and Labour parties—dare I say it?—seems to be the date when they would like the election to occur. The Conservative party would like it to take place as late as possible, and no doubt the Government would like it to happen as early as possible. It seems peculiar, in terms of the general election, that the Government picked the specified date; and if we can assume Conservative Front Benchers are still in favour a an indefinite delay in the general election because of foot and mouth, their amendment precisely matches their election timetable.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

I support the amendment. If there is an agreement to move to the new fuel and there is to be a transition period, it makes sense for it to be longer rather than shorter. Nothing that the hon. Member for Truro and St. Austell (Mr. Taylor) said contradicts that. An incentive exists for oil companies to invest in the new fuel if they know that at some point in the near future—next April is near enough—the regime will change. The way the Government are proceeding will lead people to feel that they have been conned. They will believe that they were given a fuel tax reduction that suddenly disappeared.

Logistics dictate that there are bound to be places where the new fuel will not be introduced by the beginning of June. Consequently, people will feel put out. However, if the Government are confident that the new fuel will be introduced across the board by the beginning of June, there is no harm in extending the deadline for the offer on the old fuel. A longer deadline is therefore a sensible and prudent step.

Photo of Chris Leslie Chris Leslie Labour, Shipley

Clearly, the amendment would have an effect in terms of lost revenue. What would the proposal cost the Exchequer? Where would the money come from?

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

If I follow the logic of the views expressed by the hon. Gentleman's colleagues on the Liberal Democrat Benches, there are two arguments: either all the petrol stations will have the new fuel by June, thus entailing no cost to the Exchequer, or some stations will not have the new fuel, which underlines the purpose of the amendment. We await the Minister's response, but we may surmise that the oil companies have taken to the new measure with a will and that the cost to the Exchequer will be small. However, it will be significant for those who have to bear it.

My constituents already enjoy the benefits of the more environmentally friendly fuel. I am speaking not on their behalf but on behalf of the sort of community that the hon. Member for Truro and St. Austell represents. The additional cost of the fuel after June will bear far more heavily on the pockets of those in rural, more outlying parts of Britain, which are suffering so many burdens, than on the Chancellor's. We expect a Conservative Chancellor to be in office in June, and we will easily afford the item that we are considering out of the savings that we intend to make in running the Government.

I want to comment on the presumption behind the Liberal Democrat argument, and others that Labour Members have expressed, that there would be no demand by consumers for, or movement by oil companies towards, the new fuel without the tuppence reduction. First, the British people's political sensibilities have been insulted this evening. They understand exactly what lies behind the short-term dip in the enormous price of fuel. Secondly, their environmental sensibilities have been insulted. Consumers are environmentally conscious, and companies are responding to that. The idea that the tuppence reduction triggered the introduction of the new fuel is naive on the part of Liberal Democrat Members and calculating on the part of the Government, who try to claim credit for something that would have occurred anyway through consumer demand and the companies' development of new technology.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

The hon. Gentleman may know that I used to be the Liberal Democrat environment spokesman. In that role, I was approached by Japanese manufacturers who make high-efficiency engines. They argued for low-sulphur fuel in this country so that those engines could be used. I was also approached by petrol companies which argued against it because it would cost them too much to introduce. The reduction seems to have had the desired effect, and our argument cannot be characterised as naive, since the petrol companies made a case that was shown to be wrong.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

In his long and varied career, the hon. Gentleman was even spokesman for England. I am therefore not surprised to hear that he was once the Liberal Democrat environment spokesman. I am not sure when he held that responsibility, but my point is that technology is moving forward.

We all have an interest in improving the environmental impact of the fuels and engines that we use. As new technology takes hold, the relevant companies will invest in supplying the new fuel. Their customers want them to do that. Customer and consumer demand drives the changes in our society, not the Government's pettifogging tax changes.

We welcome any reduction in fuel duty, and we will argue for its extension when we can, because fuel taxes in this country are far too high.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham 5:45, 24 April 2001

It is a pleasure to follow my hon. Friend the Member for Guildford (Mr. St. Aubyn), who said that although the benefits of ultra-low sulphur petrol would be available to his constituents, he was worried about those in rural areas who would be unable to get it. Many of my constituents cannot get ultra-low sulphur petrol. I entirely agree with my hon. Friend's logic. However, I disagree with that of the hon. Member for Shipley (Mr. Leslie), because, if he is right, the extra cost will be borne by constituents such as mine who will probably not have access to that petrol by the due date in June.

I have checked today, and the Petrol Retailers Association tells me that two thirds of the country's garages are now able to supply ultra-low sulphur petrol. It is quite unlikely that the remaining third, including some of the smaller and more remote independent retailers, will be able to supply it by the due date in June. There will therefore be a problem of supply in those small country filling stations that are under so much threat, and customers in those areas will have to pay more.

Photo of Oliver Letwin Oliver Letwin Shadow Chief Secretary to the Treasury

Will my hon. Friend join me in expressing the hope that the assurance provided by the Liberal Democrat spokesman might be tested by the hon. Gentleman s offering personally to meet the additional costs if there are any motorists who fail to get ultra-low sulphur petrol by the due date? If the hon. Gentleman is as confident as he maintains, should he not be willing to give the House that assurance?

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

I agree with my hon. Friend, and I shall certainly give way to the hon. Member for Truro and St. Austell to see whether he will give that assurance. I do not know what a Liberal Democrat cheque is worth, but a promise of something would be better than nothing. I am waiting, but I am sad to say that I do not think that the hon. Gentleman—

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Ah! I give way to the hon. Gentleman.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

If the hon. Gentleman was listening to my earlier remarks, he will have heard me say that if the Conservative party could offer evidence of retailers who were unable to find ultra-low sulphur petrol, we would support an extension of the deadline. However, his Front-Bench spokesman has been unable to offer any evidence of that whatever.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

As we can see, the money is not forthcoming. The hon. Gentleman would be a brave man if he were to take on that bet, because the chances of ultra-low sulphur petrol reaching all corners of these islands by June are remote.

We heard earlier about an explosion at a refinery in Houston, Texas. That has already prompted an increase in the price of petrol. One of the problems is that, with many states in the US now demanding cleaner fuel, the US is importing more and more fuel from Europe to meet that demand because it cannot produce ii itself. British petrol companies were relying on an import of some ultra-low sulphur fuel from Europe to reach the targets involved in meeting the June due date. That petrol may not now be available to them, because it will go to the United States instead. In that case, there will be a considerable likelihood of the deadline not being met.

I would like to illustrate the problems and penalties of living in a remote rural area such as my constituency in Northumberland. Now that one of the small filling stations there has closed down, some of my constituents are faced with a round trip of 60 miles to fill up their car with fuel. That is a considerable burden. Furthermore, the prices charged by rural filling stations are already considerably higher than urban prices. The problem is that the smaller filling stations are not supplied by the major oil companies, which are currently engaged in a battle with the supermarkets. They have to buy their fuel from smaller, independent wholesalers who, in turn, buy it from the large oil companies. Those filling stations, therefore, face an extra stage in the wholesale market before they can start pricing their petrol.

Today, ordinary unleaded petrol costs the wholesalers between 77p and 80p a litre. They then sell it on to the independent retailers, such as the small ones in my constituency, who are faced with charging 82p, 83p or even 84p a litre. That is considerably more than the 77p or so that people currently pay in urban areas. If rural people cannot obtain ultra-low sulphur petrol, 2p will be added to the substantial additional burden that they must bear, which will make ordinary unloaded petrol in rural areas 10p or 12p more expensive than it is in urban areas.

According to the hon. Member for Shipley, if there is a loss to the Treasury it will be made up by my constituents. For safety's sake if for no other reason, I do not see why there should not be an extension. If the Minister does not like the suggested date of 5 April 2002, perhaps the date could be three months after 14 June 2001. That would be better for my constituents. [Interruption.]

This may seem funny to Labour Members. It may be a joke to the Parliamentary Private Secretary. Labour Members like to laugh during debates such as this, but we are not talking about politics now; we are talking about people living in country areas who—in the case of my constituents—are suffering a foot and mouth crisis and a tourism crisis, and may subsequently have to pay 10p or 12p more for their petrol. I do not consider that to be a laughing matter.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

As well as being unnecessary, amendment No. 6 sends out entirely the wrong environmental signals. It seeks to delay our attempts to ensure that cleaner fuels are available from all United Kingdom petrol stations as soon as is practicable.

Clause 1 cuts the duty rates on the main road fuels used in the UK. The Government have a record of using duty differentials to good effect, as I said earlier today. We successfully introduced ultra-low sulphur diesel across the UK five years ahead of the European Union deadline, and we have now built on that success. By using duty incentives in the case of ultra-low sulphur petrol, we have ensured that this cleaner fuel will be available to every petrol station in the UK by June this year. Clause 1 is an important part of that strategy.

I am not sure that the Opposition have thought out what they are proposing, or the reasons for their proposal. I agree with the hon. Member for Truro and St. Austell (Mr. Taylor) that they have come up with no evidence in favour of either the date that they suggest, or the extension.

Ultra-low sulphur petrol offers environmental benefits over and above those of ordinary unleaded petrol when used in modern cars meeting Euro I/II emission standards—that is, cars fitted with catalytic converters. Research suggests that its widespread use in such cars could reduce emissions of nitrous oxides by up to 6 per cent., emissions of hydrocarbons by up to 14 per cent., and emissions of carbon monoxide by up to 11 per cent.

As well as ensuring that emissions from the latest generation of cars remain low, ultra-low sulphur petrol allows the use of new fuel-efficient technologies, as the hon. Member for Truro and St. Austell pointed out. Gasoline direct injection engines, for example, can deliver substantial carbon dioxide savings. The early introduction of GDI and other fuel-saving technologies in new petrol cars is being strongly encouraged by the Government's carbon dioxide-based reforms of graduated vehicle excise duty and company car tax. The early introduction of ultra-low sulphur petrol ensures that fuel quality is not a barrier to the introduction of such technologies.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

The Minister said that the Opposition had provided no evidence in favour of the later date in April next year. She has not yet given us a jot of evidence in favour of the date in June. I hope that we shall hear some.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I trust that the hon. Gentleman will be more generous with his patience than he appears to have been with his research before arriving in the Chamber.

Clause 1 completes the introduction of the ultra-low sulphur petrol duty differential by cutting duty by a further 2p per litre, providing a total incentive of 3p per litre in relation to ordinary unleaded petrol.

The Government recognised that the final stages of transition to ultra-low sulphur petrol had the potential to create competitive distortions in the market, and that short-term constraints on the capacity of UK oil refineries might have meant that it took longer for independent retailers to complete the transition. The Government want to ensure that everyone has access to the environmental benefits of ULSP and the associated duty cut. To ensure a smooth transition to 100 per cent. ULSP across the United Kingdom and to guard against any competitive distortions in the final stages, clause 1 also provides for a temporary cut of 2p per litre in the price of ordinary unleaded petrol.

The reason that that will be withdrawn on 14 June 2001 is that it will no longer be needed by then, as the market shift to ULSP will be virtually complete—in fact, complete.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I will, but I am trying to answer the points that have been raised.

Photo of Oliver Letwin Oliver Letwin Shadow Chief Secretary to the Treasury

The Economic Secretary has just told us, in terms, that the market shift will be complete by 14 June. Will she now, in slightly more serious vein, offer the guarantee that I mentioned earlier in relation to the Liberal Democrat spokesman, on behalf of the Government? Will she give an undertaking that any motorist who fails to find ULSP as of that date will be reimbursed—paid the difference—by the Government?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I will not respond to the hon. Gentleman's points. I want to respond to the substantive points made by members of the official Opposition, which I must say were rather limited.

By 14 June, ULSP will be available to all UK forecourts. One reason why I will not answer the more trivial point made by the hon. Member for West Dorset (Mr. Letwin) is that, although it will be up to petrol retailers to decide whether to make ULSP available, it will be available to them. I understand that 14 June was picked because it matches the oil companies' accounting period, thus minimising compliance costs. It was chosen during discussion with the industry on a practical timetable following the point at which the policy was announced.

Photo of Oliver Letwin Oliver Letwin Shadow Chief Secretary to the Treasury

I am doubly grateful to the Economic Secretary. Now that we understand her logic—which is perfectly rational—may I ask her to adopt a slightly different formulation? Will she guarantee to refund the differential to any retailers who cannot find ULSP to service their own forecourts?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

Let us go through the figures—a process that has been notably absent in the contribution of Opposition Members.

DTI figures show that from early April ULSP was available from 81 per cent. of retail sites—up from 68 per cent. in late March—and made up 94 per cent. of unleaded sales, up from 77 per cent. in late March. By 1 June, 98 per cent. of the network should be covered. By the middle of June, ULSP will be available to every petrol station in the country. Of the oil majors, Esso and Shell already have ULSP at 100 per cent. of their retail sites.

BP has it at 99 per cent., TotalFinaElf at 98 per cent. and Texaco at 87 per cent. All the oil majors will achieve 100 per cent. by 1 May.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

Did not the Government claim that those major oil suppliers would have the arrangements in place by the end of March?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

The reason for the 14 June date is that that is when it needs to be done by, and that is when we are saying it will be done by. The figures show that we are very close to being 100 per cent. there already. I realise that the hon. Gentleman may be a little embarrassed, having come to the debate with no evidence in support of an amendment asking for a postponement, and no real justification for the date that he has selected.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

I came to the debate with some evidence. I spoke to the Petrol Retailers Association today. The DTI figures given by the Minister do not take into account the consequences of the explosion in the Texas refinery the other day, which will have a substantial effect on United States demand for petrol from Europe. All we are asking the Minister is this. If she is wrong, the DTI figures are not reliable and the oil companies do not meet that target date, what will happen? Who will reimburse the motorists, particularly those in rural constituencies, who will lose out?

6 pm

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I have already explained that ULSP will be available to all retailers. Obviously, it is up to retailers whether they retail it or not, but the fact is that it will be available to all retailers, and that is the point.

The hon. Gentleman mentions the problems of refinery supply. There was a recent explosion at the Conoco refinery on Humberside, but we believe that that should have a negligible impact on supply as the refinery was preparing for shutdown for maintenance shortly. Indeed, the DTI figures anticipate the shutdown.

The amendment is unnecessary. I have placed very good evidence before the Committee that we have made extremely good progress in implementing the commitment and that we are well on target to meet the 14 June deadline. We do not believe that it is necessary to extend a duty redaction for a fuel which will not be in use after June and which carries with it environmental disbenefits that I am sure hon. Members would want to see minimised.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

I have listened carefully to the Minister's response and I think that the Government are in retreat. She is not prepared to back up her words and the assurances of the past with the guarantee that my hon. Friend the Member for West Dorset (Mr. Letwin) has sought. Nor have the Government been able even to make good the claim by the Financial Secretary that the major oil companies were on track to meet their target to supply ULSP nationwide at their retail sites by the end of March"—[Official Report, 26 February 2001; Vol. 363, c. 511W.] The Minister has made it clear that that target has not been met by the major oil companies, let alone the independent retailers that often serve the rural communities to which my hon. Friend the Member for Hexham (Mr. Atkinson) adverted.

The hon. Member for Truro and St. Austell (Mr. Taylor), the Liberal Democrat spokesman, asked what evidence the Opposition had as to what the position would be by 14 June. Of course, neither the Opposition nor, it would appear, the Government are in a position to give cast-iron guarantees as to what the position will be on 14 June, but two things are clear. First, the danger of some motorists who rely on unleaded petrol facing a 2p increase because of the non-availability on a universal basis of ULSP will be greater on 14 June than it would be on 5 April—the Government are forcing the companies to meet the deadline. That cannot be gainsaid.

Secondly, if that scenario transpires and we have people from parts of the country complaining that they cannot obtain ULSP and that the 2p that was taken off on 7 March is coming back on 7 June, the first people to denounce the Government will be the Liberal Democrats, who will say that they argued against this all along and warned the Government of the danger of a 2p increase. We know the Liberal Democrats well. That is one thing that is absolutely certain.

We are not satisfied by the Minister's response. It would appear that there is a risk of motorists facing a 2p increase on 14 June after the Chancellor had made a reduction of 2p on 7 March—2p off on 7 March, 2p back on on 14 June, when fuel taxes are already at a very high level because of the Government's fuel taxation policies. We think that there is that risk, perhaps especially in rural areas, and we intend to press the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 126 Noes 324.

Division No. 191][6.4 pm
Ainsworth, Peter (E Surrey)Duncan, Alan
Amess, DavidEvans, Nigel
Ancram, Rt Hon MichaelEwing, Mrs Margaret
Arbuthnot, Rt Hon JamesFabricant, Michael
Atkinson, Peter (Hexham)Fallon, Michael
Baldry, TonyFlight, Howard
Bercow, JohnForth, Rt Hon Eric
Blunt, CrispinFox, Dr Llam
Boswell, TimFraser, Christopher
Bottomley, Peter (Worthing W)Gale, Roger
Bottomley, Rt Hon Mrs VirginiaGarnier, Edward
Brady, GrahamGibb, Nick
Brazier, JulianGill, Christopher
Brooke, Rt Hon PeterGillan, Mrs Cheryl
Browning, Mrs AngelaGreen, Damian
Bruce, Ian (S Dorset)Greenway, John
Burns, SimonGrieve, Dominic
Clappison, JamesGummer Rt Hon John
Clarke, Rt Hon Kenneth (Rushcliffe)Hague, Rt Hon William
Hamilton, Rt Hon Sir Archie
Clifton-Brown, GeoffreyHammond, Philip
Collins, TimHawkins, Nick
Cormack, Sir PatrickHeald, Oliver
Cran, JamesHeathcoat—Amory, Rt Hon David
Davies, Quentin (Grantham)Horam, John
Davis, Rt Hon David (Haltemprice)Howard, Hon Michael
Day, StephenHowarth, Gerald (Aldershot)
Dorrell, Rt Hon StephenHunter, Andrew
Jack, Rt Hon MichaelRandall, John
Jenkin, BernardRedwood, Rt Hon John
Johnson Smith, Rt Hon Sir GeoffreyRobathan, Andrew
Robertson, Laurence (Tewk'b'ry)
Key, RobertRobinson, Peter (Belfast E)
Kirkbride, Miss JulieRoe, Mrs Marion (Broxbourne)
Laing, Mrs EleanorRoss, William (E Lond'y)
Lait, Mrs JacquiRuffley, David
Leigh, EdwardSt Aubyn, Nick
Letwin, OliverSalmond, Alex
Lewis, Dr Julian (New Forest E)Shepherd, Richard
Lidington, DavidSoames, Nicholas
Lilley, Rt Hon PeterSpelman, Mrs Caroline
Lloyd, Rt Hon Sir Peter (Fareham)Spicer, Sir Michael
Loughton, TimSpring, Richard
Luff, PeterStanley, Rt Hon Sir John
Lyell, Rt Hon Sir NicholasSteen, Anthony
MacGregor, Rt Hon JohnStreeter, Gary
McIntosh, Miss AnneSwayne, Desmond
MacKay, Rt Hon AndrewSyms, Robert
Maclean, Rt Hon DavidTapsell, Sir Peter
McLoughlin, PatrickTaylor, Ian (Esher & Walton)
Madel, Sir DavidTaylor, John M (Solihull)
Malins, HumfreyTredinnick, David
Maples, JohnTrend, Michael
Mates, MichaelTyrie, Andrew
Mawhinney, Rt Hon Sir BrianViggers, Peter
May, Mrs TheresaWalter, Robert
Morgan, Alasdair (Galloway)Waterson, Nigel
Nicholls, PatrickWhittingdale, John
Norman, ArchieWilletts, David
O'Brien, Stephen (Eddisbury)Winterton, Mrs Ann (Congleton)
Ottaway, RichardWinterton, Nicholas (Macclesfield)
Paice, JamesYeo, Tim
Paisley, Rev Ian
Paterson, OwenTellers for the Ayes:
Portillo, Rt Hon MichaelMr. James Gray and
Prior, DavidMr. Keith Simpson.
Adams, Mrs Irene (Paisley N)Browne, Desmond
Ainger, NickBuck, Ms Karen
Ainsworth, Robert (Cov'try NE)Burden, Richard
Allan, RichardBurgon, Colin
Allen, GrahamBurnett, John
Anderson, Rt Hon Donald (Swansea E)Butler, Mrs Christine
Campbell, Alan (Tynemouth)
Armstrong, Rt Hon Ms HilaryCampbell, Mrs Anne (C'bridge)
Ashton, JoeCampbell, Ronnie (Blyth V)
Atherton, Ms CandyCampbell-Savours, Dale
Atkins, CharlotteCann, Jamie
Austin, JohnCaplin, Ivor
Bailey, AdrianCasale, Roger
Baker, NormanChapman, Ben (Wirral S)
Banks, TonyChidgey, David
Barnes, HarryClapham, Michael
Battle, JohnClark, Rt Hon Dr David (S Shields)
Bayley, HughClark, Dr Lynda (Edinburgh Pentlands)
Begg, Miss Anne
Beith, Rt Hon A JClarke, Charles (Norwich S)
Bell, Martin (Tatton)Clarke, Eric (Midlothian)
Benn, Hilary (Leeds C)Clarke, Rt Hon Tom (Coatbridge)
Benn, Rt Hon Tony (Chesterfield)Clelland, David
Bennett, Andrew FClwyd, Ann
Bermingham, GeraldCoffey, Ms Ann
Best, HaroldCohen, Harry
Betts, CliveColeman, Iain
Blears, Ms HazelColman, Tony
Blizzard, BobConnarty, Michael
Boateng, Rt Hon PaulCook, Frank (Stockton N)
Borrow, DavidCooper, Yvette
Bradley, Rt Hon Keith (Withington)Corbett, Robin
Bradshaw, BenCorbyn, Jeremy
Brake, TomCorston, Jean
Breed, ColinCotter, Brian
Brinton, Mrs HelenCousins, Jim
Cranston, RossHumble, Mrs Joan
Cryer, John (Hornchurch)Hurst, Alan
Cummings, JohnHutton, John
Curtis-Thomas, Mrs ClaireIddon, Dr Brian
Dalyell, TamIllsley, Eric
Darvill, KeithJackson, Ms Glenda (Hampstead)
Davey, Edward (Kingston)Jackson, Helen (Hillsborough)
Davey, Valerie (Bristol W)Jamieson, David
Davidson, IanJenkins, Brian
Davies, Rt Hon Denzil (Llanelli)Johnson, Alan (Hull W & Hessle)
Davies, Geraint (Croydon C)Johnson, Miss Melanie (Welwyn Hatfield)
Dean, Mrs Janet
Denham, Rt Hon JohnJones, Rt Hon Barry (Alyn)
Donohoe, Brian HJones, Helen (Warrington N)
Doran, FrankJones, Jon Owen (Cardiff C)
Dowd, JimJones, Dr Lynne (Selly Oak)
Drew, DavidJones, Martyn (Clwyd S)
Drown, Ms JuliaJones, Nigel (Cheltenham)
Dunwoody, Mrs GwynethJowell, Rt Hon Ms Tessa
Eagle, Angela (Wallasey)Joyce, Eric
Eagle, Maria (L'pool Garston)Kaufman, Rt Hon Gerald
Edwards, HuwKeeble, Ms Sally
Efford, CliveKeetch, Paul
Ellman, Mrs LouiseKelly, Ms Ruth
Feam, RonnieKemp, Fraser
Field, Rt Hon FrankKennedy, Rt Hon Charles (Ross Skye & Inverness W)
Fisher, Mark
Fitzpatrick, JimKennedy, Jane (Wavertree)
Flint, CarolineKhabra, Piara S
Follett, BarbaraKidney, David
Foster, Rt Hon DerekKilfoyle, Peter
Foster, Don (Bath)King, Andy (Rugby & Kenilworth)
Foster, Michael Jabez (Hastings)King, Ms Oona (Bethnal Green)
Foster, Michael J (Worcester)Kingham, Ms Tess
Gapes, MikeKirkwood, Archy
Gardiner, BarryLadyman, Dr Stephen
George, Andrew (St Ives)Lammy, David
George, Rt Hon Bruce (Walsall S)Lawrence, Mrs Jackie
Gerrard, NeilLeslie, Christopher
Gibson, Dr IanLevitt, Tom
Gidley, SandraLewis, Ivan (Bury S)
Gilroy, Mrs LindaLewis, Terry (Worsley)
Godsiff, RogerLiddell, Rt Hon Mrs Helen
Goggins, PaulLinton, Martin
Golding, Mrs LlinLivsey, Richard
Gordon, Mrs EileenLloyd, Tony (Manchester C)
Griffiths, Jane (Reading E)Llwyd, Elfyn
Griffiths, Nigel (Edinburgh S)Lock, David
Griffiths, Win (Bridgend)McAvoy, Thomas
Grocott, BruceMcCabe, Steve
Grogan, JohnMcDonagh, Siobhain
Hain, PeterMcDonnell, John
Hall, Mike (Weaver Vale)McFall, John
Hall, Patrick (Bedford)McIsaac, Shona
Hanson, DavidMcKenna, Mrs Rosemary
Harvey, NickMaclennan, Rt Hon Robert
Healey, JohnMcNulty, Tony
Heath, David (Somerton & Frome)MacShane, Denis
Henderson, Doug (Newcastle N)Mactaggart, Fiona
Hendrick, MarkMcWilliam, John
Hepburn, StephenMahon, Mrs Alice
Heppell, JohnMallaber, Judy
Hesford, StephenMandelson, Rt Hon Peter
Hewitt, Ms PatriciaMarshall, David (Shettleston)
Hill, KeithMarshall, Jim (Leicester S)
Hinchliffe, DavidMartlew, Eric
Hodge, Ms MargaretMeacher, Rt Hon Michael
Hoey, KateMerron, Gillian
Hood, JimmyMichael, Rt Hon Alun
Hoon, Rt Hon GeoffreyMichie, Bill (Shef'ld Heeley)
Hope, PhilMichie, Mrs Ray (Argyll & Bute)
Hopkins, KelvinMilburn, Rt Hon Alan
Howells, Dr KimMiller, Andrew
Hoyle, LindsayMoffatt, Laura
Hughes, Ms Beverley (Stretford)Moore, Michael
Hughes, Kevin (Doncaster N)Moran, Ms Margaret
Morgan, Ms Julie (Cardiff N)Smith, Jacqui (Redditch)
Morris, Rt Hon Sir John (Aberavon)Smith, John (Glamorgan)
Smith, Llew (Blaenau Gwent)
Mountford, KaliSoley, Clive
Mudie, GeorgeSouthworth, Ms Helen
Mullin, ChrisSpellar, John
Murphy, Denis (Wansbeck)Squire, Ms Rachel
Murphy, Jim (Eastwood)Starkey, Dr Phyllis
Naysmith, Dr DougSteinberg, Gerry
Oaten, MarkStevenson, George
O'Brien, Bill (Normanton)Stewart, David (Inverness E)
O'Brien, Mike (N Warks)Stewart, Ian (Eccles)
Olner, BillStrang, Rt Hon Dr Gavin
Öpik, LembitStuart, Ms Gisela
Organ, Mrs DianaStunell, Andrew
Osborne, Ms SandraSutcliffe, Gerry
Pendry, Rt Hon TomTaylor, Rt Hon Mrs Ann (Dewsbury)
Pickthall, Colin
Pike, Peter LTaylor, Ms Dari (Stockton S)
Plaskitt, JamesTaylor, David (NW Leics)
Pollard, KerryTaylor, Matthew (Truro)
Pope GregTemple-Morris, Peter
Prentice, Ms Bridget (Lewisham E)Thomas, Simon (Ceredigion)
Prentice, Gordon (Pendle)Timms, Stephen
Primarolo, DawnTipping, Paddy
Prosser, GwynTodd, Mark
Quinn, LawrieTonge, Dr Jenny
Radice, Rt Hon GilesTouhig, Don
Rammell, BillTickett, Jon
Raynsford, Rt Hon NickTurner, Dennis (Wolverh'ton SE)
Reed, Andrew (Loughborough)Turner, Dr Desmond (Kemptown)
Rendel, DavidTwigg, Derek (Halton)
Robertson, John (Glasgow Anniesland)Tyler, Paul
Tynan, Bill
Roche, Mrs BarbaraWareing, Robert N
Rogers, AllanWatts, David
Rooney, TerryWebb, Steve
Ross, Ernie (Dundee W)White Brian
Rowlands, TedWhitehead, Dr Alan
Roy, FrankWicks, Malcolm
Ruane, ChrisWigley, Rt Hon Dafydd
Ruddock, JoanWilliams, Rt Hon Alan (Swansea W)
Russell, Bob (Colchester)
Russell, Ms Christine (Chester)Williams, Alan W (E Carmarthen)
Salter, MartinWillis, Phil
Sanders, AdrianWinnick, David
Savidge, MalcolmWinterton, Ms Rosie (Doncaster C)
Sedgemore, BrianWoodward, Shaun
Shaw, JonathanWoolas, Phil
Sheldon, Rt Hon RobertWorthington, Tony
Simpson, Alan (Nottingham S)Wright, Anthony D (Gt Yarmouth)
Skinner, DennisWright, Tony (Cannock)
Smith, Rt Hon Andrew (Oxford E)
Smith, Angela (Basildon)Tellers for the Noes:
Smith, Miss Geraldine (Morecambe & Lunesdale)Mrs. Anne McGuire and
Mr. Ian Pearson.

Question accordingly negatived.

Photo of Alan Beith Alan Beith Liberal Democrat, Berwick-upon-Tweed

I beg to move amendment No. 5, in clause 1, page 2, line 3, at end insert— '(3A) The rate of excise duty for biodiesel and bioethanol when used as road transport fuels, shall be 33p per litre below the rate fixed for ultra low sulphur diesel as defined by the Hydrocarbon Oil Duties Act 1979.'.

I have great pleasure in moving this amendment, which would reduce the duty rate for biodiesel and bioethanol to that for road gas fuels, which is around the 7p mark. If offers the Government and the Committee an opportunity to do a deal of good for the environment and for our distressed farming industry at one and the same time. What could be better than that?

Biodiesel offers an unrivalled range of environmental benefits as compared with alternative transport fuels. It is sustainable and renewable, with very positive energy balances; it is safely biodegradable; it is far better in terms of greenhouse gas emissions than fossil fuels; it offers scope for recycling waste oils; it recycles carbon; and it produces far fewer local air pollutants than fossil diesel. Bioethanol is also renewable, sustainable and environmentally friendly and has excellent emission properties. On balance, biofules offer better environmental advantages than even the road fuel gases liquified petroleum gas, compressed natural gas and liquified natural gas—LPG, CNG and LNG.

My amendment seeks to put the biofuels on all fours with the road fuel gases. Biodiesel compares favourably with those fuel gases and enormously favourably with fossil fuels. The Government have shown environmental logic in granting a substantial reduction to road fuel gases, and the same logic directs that a similar reduction should also be made for the biofuels. Granting a major reduction in duty rates to biodiesel and bioethanol would enable those fuels to make a significant and rapid contribution to reducing atmospheric pollution.

Biodiesel can be used straight or blended in place of fossil diesel in all modern diesel engines, without modification. Bioethanol, blended with petrol, can be used in normal engines or purpose-built bi-fuel vehicles. Ten per cent. ethanol blends are already routinely used in the United States to curtail local air pollution. Life-cycle emissions of greenhouse gases from biodiesel and from bioethanol are at least 55 per cent. and 62 per cent. lower respectively than from fossil diesel Tailpipe emission figures are also much better for the biofuels. Particulates emissions from biodiesel are 20 per cent. to 39 per cent. better than low sulphur diesel and 10 per cent. to 29 per cent. better than ultra-low sulphur diesel. On almost all normal tests, biodiesel has an extremely favourable score.

A duty rate of 7p per litre has been promised for gas fuels for road vehicles, but the Government have merely indicated that next year there will be a smaller reduction in duty—of 25p—for biodiesel. That s not on the face of the Bill: the Chancellor has simply indicated that that will happen. A much better signal should be sent to the industries involved that they should make the investment.

Major companies are ready to produce such fuels. The necessary crops would provide much-needed new business for agriculture, and the whole country would benefit from cleaner air as biofuels were substituted for fossil fuels.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

Can the right hon. Gentleman confirm that, even if the reduction in duty rate, is made next year, the price of biodiesel fuels will remain above that of road fuel gases because of the high level of duty on them?

Photo of Alan Beith Alan Beith Liberal Democrat, Berwick-upon-Tweed

That is correct, and I cannot see the logic of the Government's position. It is sensible that the same chain of arguments should apply to biodiesel and bioethanol as applies to road fuel gas. In many cases, those arguments apply more powerfully to biodiesel and bioethanol. There is no logic to the Government's position with regard to duty levels—let alone to the year's delay in the implementation of any reduction.

In fairness to the Government, it should be acknowledged that the situation has moved on because of the crisis in agriculture. The matter merits a fresh look. A clear signal from the Government to farming that the current crisis means that there are other directions in which the industry should move would be timely and helpful. Farmers may decide to move out of livestock and into arable at precisely this stage. Those who have lost their livestock and are in receipt of compensation might be ready to make new investment in this area.

The National Farmers Union supports the amendment. It considers that the further duty reduction proposed in the amendment is essential if biofuels are to become price competitive and deliver the benefits to the environment and the agricultural industry that they so clearly offer. The NFU also strongly supports the extension of these reductions to bioethanol, which is extensively used in Brazil and the US where duty rates are more favourable to environmentally friendly fuels. The NFU adds: You will be well aware that the agricultural industry is deep in crisis. The Government has often urged farmers to diversify into new enterprises, and we are firmly convinced that the emergent biofuels industry offers a realistic opportunity for diversification and for a new market for British farmers. Incidentally, it is significant that we are currently exporting oilseed rape to countries that produce and use biodiesel.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

What the right hon. Gentleman is saying is important and welcome. Will he give the House an indication of the possible scale of biofuel use if the amendment were to be accepted?

Photo of Alan Beith Alan Beith Liberal Democrat, Berwick-upon-Tweed

Such a forecast would be difficult, and it is not one that I have come prepared to make. The Government are no more prepared to give a clear indication of what they think will be the take-up of road fuel gases. Such calculations are difficult, and they are a job for industry. Making risky decisions about how extensive investment should be is something at which industry excels. Governments of all parties have a bad record in that regard.

However, for industry to make such decisions, there must be a reasonable taxation basis. Giving industry an incentive to invest in road fuel gases and not in biofuels is likely to lead to the wrong investment decisions, or discourage investment that could be very beneficial in terms of both industry and agriculture.

Photo of David Heath David Heath Shadow Spokesperson (Environment, Food and Rural Affairs)

I agree with the strong points that my right hon. Friend makes, especially on behalf of farmers across the country. However, is he aware that the Government could adopt a policy of substituting at least 15 per cent. of road fuel with ethanol as from tomorrow? The French have relaxed taxation on the ethanol component in fuel, and the Government could do the same. In that way, they could encourage what is an important and environmentally friendly industry.

Photo of Alan Beith Alan Beith Liberal Democrat, Berwick-upon-Tweed

My hon. Friend makes a good point. He underlines my earlier point that conversion would be easy: indeed, people would only need to put a different fuel in their tanks at petrol stations. No engine adaptation is required, so the change would be easy to make.

I mentioned the strong support for the amendment in the agriculture industry, and I draw the Government's attention to this week's edition of Farmers Weekly. In a very strong editorial, it criticises the advice given by the Ministry of Agriculture, Fisheries and Food on this subject. Referring to "misguided MAFF advice", the editorial asks: Why does MAFF make so many mistakes? It states that the Ministry's advice could have denied UK growers their biggest break for years. What was that MAFF advice? It was that an increase in oilseed rape production could conflict with Government targets to reduce the decline in farmland birds". That argument was demolished by the Royal Society for the Protection of Birds. The RSPB supports renewable energy schemes, including biofuels. Farmers Weekly reported that the organisation considers that growing more oilseed rape could help stem the decline in seed-eating birds such as linnets and bullfinches.Farmers Weekly reported that, although oilseed rape, as a winter-sown crop … would not favour ground-nesting birds, it is better than winter cereals. The RSPB's secretary, Graham Madge, is reported as saying: Long term if we don't do something to stem greenhouse gases there will be problems for all birds. Essentially, in terms of its effect on birds, growing oilseed rape for fuel is no different from growing any other crop—except for the benefits that it offers seed-eating birds. Alternative habitats would need to be arranged for ground-nesting birds, and headlands are an obvious choice in that regard. The Government's arguments simply do not stand up. Given that their policy has clearly been shown to be wrong, I hope that the Treasury will dismiss it from its calculations, and that unfortunate Ministers in the Lords will not be required to trot out an argument that makes no sense.

Another argument that does not stand up is the one advanced by the Financial Secretary in a letter sent to the chairman of the British Association of Biofuels and Oils on 23 April. The Financial Secretary explained why road gas fuels attracted a lower rate of duty than biofuels, and said: A 20 pence per litre duty cut ensures no disproportionate cost to society of securing reductions in carbon emissions, while providing recognition for the environmental benefits from biodiesel. Incentives for road fuel gases, on the other hand, are directed predominantly at improvements in local air quality where cleaner road transport has a key role to play. Because the proposed incentives for biofuels are focused on climate change improvements, a direct comparison in not appropriate.

That is nonsense. The tailpipe emissions record of biofuels is every bit as good as that for road fuel gases, and in many cases better. The Financial Secretary was wrongly advised that the benefits arising from biodiesel and bioethanol were confined to the climate change benefits. The tailpipe emission benefits are also extremely important, and biofuels score on both counts. Now that that argument has been shown to be mistaken, I hope that it will not again figure in the Treasury's calculations.

As I said earlier, biofuels perform very well when standard tests for local, tailpipe emissions of carbon monoxide, particulates, sulphur oxides and other pollutants are carried out. Therefore, the comparison that the Financial Secretary sought to make was false: biofuels perform well in terms of both climate change improvements and tailpipe emissions.

The amendment offers an attractive course for the Government to adopt. Conventional oilseed rape varieties such as are grown now could produce up to 6 per cent. of the UK's requirements for road vehicle diesel fuel. Substantial environmental benefits would be achieved. The technology already exists, and subsidies would not be needed to persuade growers to grow the crop. No new research would be heeded to develop growers' skills, as the crop is already being grown. No capital advances would be required for processing, as the UK already has crushing and esterification plants.

In addition, the industry would be ready to increase investment, as long as is it knew that the relevant tax regime would work. Britain already exports oilseed rape to Germany and Austria, and those countries use what they import to produce biodiesel. We are denying ourselves environmental advantages that we could have. We are failing to give agriculture a benefit that could be extremely valuable at a difficult time such as this.

The Government clearly realise that they should be doing something. That is the reason for the Chancellor's indication of a 20p cut next year. However, what they are contemplating comes too late and is insufficient. To wait until next year risks investments not being made. To preserve a significant difference between road fuel gas duty and duty on biofuels risks giving the industry the wrong signal.

I invite the Government to accept my amendment in principle. I know that they will want to redraft it and present it in different terms—that is in the nature of parliamentary proceedings. However, it surely makes sense to secure an equivalent rate of duty.

Photo of James Paice James Paice Shadow Spokesperson (Environment, Food and Rural Affairs) 6:30, 24 April 2001

I congratulate the right hon. Member for Berwick-upon-Tweed (Mr. Beith) on his speech, and on his wisdom in making this proposal.

I confess that I am slightly less generous than the right hon. Gentleman in my view of the Government's motives. I suspect that at some stage in drafting the Budget, the Chancellor said, "I had better put something green in the Budget, especially if it will not actually cost anything. What can I do?" On the face of it, the Government's proposal looks extremely green, but it is not going to cost anything because it is not sufficient to create the desired result. My cynical belief is that the Chancellor will get away with it, at least for a time, like everything else he does, until people see what is underneath. The 20p reduction, as the right hon. Gentleman said, will not change the economies sufficiently to encourage a massive increase in production and use of biofuels.

The right hon. Gentleman spoke about America and one or two other countries. Unusually for a Liberal Democrat, he did not mention Europe much, yet there are some good examples on our doorstep. Other European Union countries have already seen the benefit of such a measure. France provides a total exemption to its duties which equates roughly to 35p a litre, which is in the same ball park as the right hon. Gentleman's proposal. France has done that because it wants the use of biofuels to increase.

The energy technology support unit, the body that advises the Department of the Environment, Transport and the Regions on biofuels, told the Science and Technology Committee two years ago that the problem with biodiesel is its poor energy balance: it produces only twice as much energy as is used in its production. ETSU also said that every litre of biodiesel used reduces carbon dioxide emissions by approximately 1.5 kg. That is a major reduction. Even if we accept that first statement at face value, it is only half the story, because what also matters is the source of that energy in the energy balance.

Biofuels cannot emit more carbon dioxide than was taken up in the growing process in the first place—that is basic chemistry. In the simplest comparison, they are energy neutral. They are not, of course, because one must include the energy that was used in growing the crop, producing the fertilisers and the subsequent use of energy in processing it into biodiesel or ethanol. Even allowing for that, we are faced with a major net gain of energy balance. Even if the energy sources used for production and processing are from fossil fuels, as the majority of our energy is, there is still a gain. However, they do not have to come from fossil fuels. There is no reason why other forms of biofuel, such as miscanthus for producing energy at power stations, could not be used to create the first energy and produce a double benefit.

Amazingly, the policy on this issue in Europe has not had much coverage. European Union rules allow up to 15 per cent. by volume substitution of ETBE, an ethanol derivative, in our petrol. It is already there. In answer to the hon. Member for Banff and Buchan (Mr. Salmond), who is no longer in his place, the Farmers Weekly article to which the right hon. Member for Berwick-upon-Tweed referred gave some statistics. Europe currently produces 700,000 tonnes a year of biodiesel and has set production targets of 2.3 million tonnes by 2003 and 8.3 million tonnes by 2010. Germany is on course, as are Austria, Italy, Spain and France. Britain, at the moment, will produce almost zero towards that very sensible target.

Some people claim that biofuels are not sufficiently positive in energy use terms to justify the effective subsidy that is required, which is the subject of the amendment. Much of that opinion is based on historical studies carried out in 1991. Conversion technologies have improved considerably and, as we have heard, the husbandry and every other aspect of the scientific production side is fully covered. In addition, the price of crude oil—the main comparator—has increased dramatically. Although less than it was a few months ago, it is still much higher than it once was. At the same time, prices for grain and oilseed rape, the two major sources of biofuels, have collapsed to little more than half of what they were when these studies were carried out in 1991.

All those arguments about energy balance could be significantly damaged if it were not for the fact that both my party and the Government have already conceded the principle of using a taxation instrument to encourage environmentally friendly fuels. As the right hon. Gentleman said, road fuel gases will be taxed at 6p a litre to encourage their use. They are inevitably much cleaner than conventional petrol or diesel, but they are still fossil fuels. All the carbon dioxide that is emitted when road fuel gas is burned contributes to global warming and carbon dioxide levels. In reducing duty for environmental benefit, I think that we must go considerably further than the 20p proposed by the Government.

The right hon. Gentleman referred to the article and critical editorial in Farmers Weekly. I will not go through it again because he demonstrated clearly how daft the comments of the Ministry of Agriculture, Fisheries and Food are. The Ministry has not exactly covered itself with glory in recent months, and this adds to the pile of criticisms.

No one envisages that the development of the biofuels market will manifestly change the face of agriculture. As the right hon. Gentleman said, British agriculture is in serious difficulties, even without the foot and mouth crisis. However, the reduction would provide an alternative market for oilseed rape and cereals. The price of rape or grain would not rise dramatically because the market would set its own levels. If the reduction on fuel duty were fixed at the 33p that we are discussing, that would feed back to a maximum price that people could afford to pay for the raw materials. The market would therefore limit the acreage of grain or oilseed rape being produced, commensurate with that price. If the price of rape went up too much, the economics would go out of the window yet again. So it would be a self-levelling device. It would, as the right hon. Gentleman said, help agriculture at a time of desperate need.

If the reductions in the Budget for next year are a genuine and serious attempt to encourage the production of biofuels, I hope that the Government will listen to those who say that a cut of 20p will not produce the result that they want. I can understand that the Government would look cynically on anything said from the Conservative, and perhaps, occasionally, the Liberal Democrat, Benches, but they should listen to people such as Peter Clery, to whom the right hon. Gentleman referred, who have spent the past 20 years working to develop biofuels.

In the late 1980s, for some unknown reason, the bus company in Reading tried running buses on biodiesel. The only environmental result was that the whole of Reading smelled like a fish and chip shop because the buses were burning vegetable oil, but the technology proved its worth.

Photo of David Heath David Heath Shadow Spokesperson (Environment, Food and Rural Affairs)

In case the House has the impression that buses necessarily smell of fish and chips when they run on biodiesel, can the hon. Gentleman confirm that the entire Stockholm bus fleet runs on that fuel without any such problem?

Photo of James Paice James Paice Shadow Spokesperson (Environment, Food and Rural Affairs)

The hon. Gentleman is entirely right and my comment was a bit flippant, even if, since I was talking about the mid-1980s, it was true. I use that example to demonstrate that the technology was not developed in the 21st century but has been around for close on 20 years. It is time that this country gave it the promotion that it deserves. I hope that the Government will take heed of those who have studied it for many years and will realise that 20p is insufficient to bring the result that we all want. I hope that they will look favourably on the amendment.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

I support the amendment and what has been said about the inadequacy of the Government's proposals. The hon. Member for South-East Cambridgeshire (Mr. Paice) said that the technology, far from being new, had been around for at least 20 years. In fact, it is as old as the diesel engine itself, since the first of them were designed to run on vegetable oil, not black gold from the ground once the oil companies muscled in. Even modern diesel engines have for years been able to run without adaptation on biodiesel or a mixture of biodiesel and conventional diesel. There is no technological problem about moving to a 50 per cent. mix of bioethanol or an even greater proportion of biodiesel. Nor do they smell of fish and chips, unless salt and vinegar are added to the mix.

The Treasury team would have done well to study in more detail the Environmental Audit Committee pre-Budget report 2000, "Fuelling the Debate" before they produced the Finance Bill. Several of our debates tonight have revealed a lack of clear thought about real environmental benefits in Government proposals that purport to bring them. Paragraph 97 of the report states: It is clear that whichever the preferred fuels, past experience indicates that long-term fiscal signals will need to be maintained to provide the necessary certainty so that industry and consumers can plan and invest against a particular tax regime. In the UK there have been incentives to encourage autogas for five years, but the market is only now beginning to take off.

My constituency experience supports that. We have only one autogas refuelling station in Ceredigion, which is a rural area, and conversion to autogas is unlikely to take off. Yet the infrastructure exists in conventional fuel stations for biofuels of all types.

I chair a biomass working group in my constituency, which is trying to promote biomass in terms of heat production. We have also considered opportunities for farmers in Ceredigion and west Wales to produce biofuels. For the future of farming, in addition to value added products that we have advocated for years and increasing organic production, we should consider energy production. It is disappointing that we have had so many mixed signals from the Government on that.

The hon. Member for South-East Cambridgeshire and I participated in a debate in Westminster Hall a month ago at which the Ministry of Agriculture, Fisheries and Food seemed to give encouraging signals about support for energy crops. Yet the Finance Bill offers only a sop, not a measure sufficient to take matters forward. The 20p reduction in biofuels barely brings the cost of production down to that of conventional petrol and diesel. We need a greater impetus and stronger long-term signals if the industry is to take off. The amendment provides those signals, and I support it.

Photo of Dr Michael Clark Dr Michael Clark Conservative, Rayleigh

Order. We must conclude our proceedings on clauses 1 to 3 by 7 pm. If hon. Members will co-operate with me, I shall co-operate with them. I intend to call Mr. Brake and ask him to be fast, and I shall then call Mr. Clappison.

Photo of Tom Brake Tom Brake Opposition Whip (Commons), Shadow Secretary of State for Communities and Local Government, Liberal Democrat Spokesperson (Communities and Local Government), Liberal Democrat Whip 6:45, 24 April 2001

I shall be very quick in supporting the amendment and offering one example of why it should be agreed to. The "people, paper, oil and cans" project in Wandsworth works with the bio-regional development group based in my constituency. The core of the project is the conversion of cooking oil to biodiesel that can be used in vehicles which collect aluminium cans and white office paper for recycling. It seeks to create a virtuous circle, and the biodiesel will also be used in vehicles providing a service for users of the centre from which the project is being run.

The project sponsors say that the major stumbling block to success is the fuel duty. Even the promised 20p reduction would be inadequate, and the project would not be viable. A reduction of at least 40p—more than the amendment proposes—is required, in their view. The amendment would at least help that sort of innovation to proceed, and I hope that the Government will consider the points that have been made.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

We welcome the debate. The right hon. Member for Berwick-upon-Tweed (Mr. Beith) made an interesting case in support of his amendment, and other interesting points have been made, particularly in the characteristically well-informed contribution of my hon. Friend the Member for South-East Cambridgeshire (Mr. Paice), who has a long-standing interest in these matters.

We have already said that we want a reduction in duty on biodiesel and bioethanol. There are environmental grounds for such a reduction. In addition, those fuels give hard-pressed British farmers the hope of another market. If farmers were under pressure before the outbreak of foot and mouth, they are even more so now. It is right to explore every avenue to see what help can be given to them, and there is potential in a market for biodiesel and bioethanol.

The Minister has heard some expressions of farmers' opinions already. My hon. Friend and the right hon. Member for Berwick-upon-Tweed referred to the article in last week's Farmers Weekly, and I commend that article to her. I invite her to consider the analysis of Government policy under the headline, "Labour applies brakes to oilseed opportunity", and the opinion column, which expresses the view that the present state of Government policy has left biodiesel and oilseed rape stuck on the forecourt". Let us see whether we can get the Government to move from there.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I am pleased to hear support from the Liberal Democrat and official Opposition Benches for the Chancellor's Budget announcement of a new lower duty rate for biodiesel. That consensus is welcome, but the amendment seeks to cut the rate for biodiesel not by 20p per litre, as we propose, but by 33p. That is a bigger reduction than can be justified. The amendment also suggests extending the duty cut to bioethanol and bringing the reduction forward from next year. That would be premature.

The Government are keen to stimulate development of viable alternative fuels that offer environmental advantages. Indeed, it was because of climate change benefits associated with biodiesel that the Government announced the 20p per litre reduction in duty. Although we recognise that the promotion of biodiesel can provide useful greenhouse gas emission savings, that should not be achieved regardless of cost. Many of the arguments advanced failed to take sufficient account of the costs of some of the current alternatives. Our climate change programme emphasises the principle that measures to tackle climate change must provide value for money—that is only sensible. A 20p per litre duty cut, while providing recognition for the environmental benefits of biodiesel, will ensure that there is no disproportionate cost to society in securing the reductions in carbon emissions.

Furthermore, it will take time to introduce a duty rate cut for an alternative fuel such as biodiesel. Not only do we need to settle on a UK specification for biodiesel to benefit from the duty reduction, and to seek the appropriate derogation from the EU mineral oils directive, we also need time to set up administrative arrangements to protect the revenue, and to protect legitimate biodiesel producers, motorists and hauliers by ensuring that poor quality biodiesel does not find its way into the UK distribution chain. Those are practical matters; they may involve time, but they are none the less relevant.

Photo of Alan Beith Alan Beith Liberal Democrat, Berwick-upon-Tweed

Will the hon. Lady clarify why, in her judgment, the higher rate of reduction is justified for road fuel gas but not for biodiesel? She has explained that she regards a 20p reduction as sufficient for biodiesel, but she is prepared to make a much larger reduction for road fuel gas, although the same arguments apply to both types of fuel.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

The point relates to the environmental cost or the saving that will be made. I will run through a few figures. Before the Budget, the biodiesel lobby was pushing for a duty incentive of about 35p per litre relative to ultra-low sulphur diesel. That would have resulted in a cost of £2,333 per tonne of carbon saved, which would fall to £1,129 by 2010. It is true that the amendment suggests only 33p, but the cost would be nearly as large as that for a 35p per litre cut; in climate to change abatement terms, that would still be extremely high. For example, the duty incentive of 20p per litre for recovered vegetable oil relative to ultra-low sulphur diesel would actually cost £281 per tonne of carbon saved. There is a significant difference between the figures.

Photo of James Paice James Paice Shadow Spokesperson (Environment, Food and Rural Affairs)

Will the Minister tell us the total cost to the Exchequer of a duty of 6p per litre on road fuel gas? As the right hon. Member for Berwick-upon-Tweed (Mr. Beith) points out, she cannot trot out the figures for one side without giving the other side. This is a question not merely of a 1p reduction, but of the whole duty concession—from that on ultra-low sulphur right down to the 6p that she rightly proposes on road fuel gas. What is that cost to the Exchequer per tonne of carbon saved?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

Biodiesel does not offer the same air quality benefits as road fuel gases—[Interruption.] The Department of the Environment, Transport and the Regions has made an analysis; it is in the Library and hon. Members can study it. Road fuel gases provide significant benefits relative to diesel—especially with regard to particulates and nitrous oxides—but there are no such air quality benefits from biodiesel. That is one of the points that hon. Members are not taking on board.

Photo of James Paice James Paice Shadow Spokesperson (Environment, Food and Rural Affairs)

The hon. Lady must compare like with like. A diesel engine cannot run on gas, so we have to compare ethanol with gas and normal diesel with biodiesel. Will the hon. Lady tell the Committee how she can suggest that biodiesel is no better for the environment than conventional diesel? That is the comparison she should make—not a comparison with gas.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

What is relevant is the environmental cost of production as well as the environmental benefits—as the hon. Gentleman said during his speech, although he did not produce any figures for actual environmental benefits and costs. His arguments were about the general idea. Indeed, we are in favour of the general idea; that is why we are incentivising it in this way. However, the particular options must work in practice. For that to happen, the sums must add up, and the options must offer value for money; all our care for the environment makes no sense if we do otherwise.

The Budget has already given strong indications that have led at least three producers to commission the construction of large biodiesel plants. More than 100 million litres of biodiesel should be produced by the end of 2002. We have given a signal that is being read and is receiving responses.

In his opening remarks, the right hon. Member for Berwick-upon-Tweed (Mr. Beith) asked why we said that a 33p cut would not be cost-effective. I have already covered that up to a point. The incentives for road fuel gases are directed predominantly at improvements in local air quality, in which cleaner road transport has a key role to play. The proposed incentives for biofuels are focused on climate change improvements, so a direct comparison is not appropriate. The evidence suggests that a 20p per litre incentive for biodiesel is a cost-effective means of delivering climate change benefits from the transport sector, so that is what we propose. We recognise that the promotion of biodiesel can provide useful greenhouse gas emission savings, but those should not be made regardless of cost.

The amendment also suggests a duty cut for bioethanol. The Government believe that would be premature. Greenhouse gas savings from ethanol depend very much on the feedstock used. The production of ethanol from wheat, for example, which was mentioned by several contributors to the debate, is well established, but unfortunately, on a life-cycle basis—taking account of the carbon dioxide implications of crop growing and processing the fuels, as well as its use as a motor fuel—it offers few greenhouse gas savings. I accept that the hon. Member for South-East Cambridgeshire (Mr. Paice) took some account of that fact. There are few savings because wheat cultivation and ethanol production are both relatively energy-intensive processes, so the environmental case for the promotion of ethanol in the UK is weak, if wheat is to be the predominant feedstock. The feedstock does not necessarily have to be wheat, but as there was some discussion of wheat I wanted to make that point.

Greenhouse gas savings of about 80 per cent. can be achieved by using ethanol produced from woody—lignocellulosic—biomass feedstocks; for the benefit of Members who do not know much about the subject, I should explain that those are wheat straw and forestry residues. However, that process is still very much at the research and development stage. The first generation of commercial production plants is not likely to be operational until about 2004.

Given the potential climate change benefits, we are keen to ensure that UK industry can contribute to research and development. That is why the Chancellor announced in the Budget statement that viable pilot projects for bioethanol would be supported through duty exemptions or reductions. That will help UK industry to build on existing biomass research, which is also supported by our new and renewable energy programme.

The amendment urges the Government to introduce lower duty rates for biofuels. I assure the right hon. Member for Berwick-upon-Tweed that we intend to do so. However, we shall not produce rushed legislation. Indeed, if we did so, I should no doubt be hauled before the House or one of its Committees to give an explanation. Furthermore, we do not believe that we should pay over the odds for those greenhouse gas savings when the revenue forgone could be more effectively directed towards other climate change abatement projects.

I hope that explains that although we have much sympathy with where the right hon. Gentleman is coming from, the practical difficulties have led us to adopt the present position.

Photo of Alan Beith Alan Beith Liberal Democrat, Berwick-upon-Tweed

That is a very disappointing reply. It is not true that local air quality would not be improved very significantly by biofuels, nor is it true that the 20p reduction is a clear signal to industry, so I must ask the House to support me in this matter.

Question put, That the amendment be made:—

The Committee divided: Ayes 162, Noes 286.

Division No. 192][7 pm
Ainsworth, Peter (E Surrey)Flight, Howard
Allan, RichardForth, Rt Hon Eric
Arbuthnot, Rt Hon JamesFoster, Don (Bath)
Ashdown, Rt Hon PaddyFox, Dr Liam
Atkinson, Peter (Hexham)Fraser, Christopher
Baker, NormanGale, Roger
Baldry, TonyGarnier, Edward
Beith, Rt Hon A JGeorge, Andrew (St Ives)
Bell, Martin (Tatton)Gibb, Nick
Bercow, JohnGidley, Sandra
Blunt, CrispinGill, Christopher
Boswell, TimGillan, Mrs Cheryl
Bottomley, Peter (Worthing W)Gray, James
Bottomley, Rt Hon Mrs VirginiaGreen, Damian
Brady, GrahamGreenway, John
Brake, TomGrieve, Dominic
Brand, Dr PeterHague, Rt Hon William
Breed, ColinHamilton, Rt Hon Sir Archie
Brooke, Rt Hon PeterHammond, Philip
Browning, Mrs AngelaHarris, Dr Evan
Bruce, Ian (S Dorset)Harvey, Nick
Burns, SimonHawkins, Nick
Campbell, Rt Hon Menzies (NE Fife)Hayes, John
Heald, Oliver
Chidgey, DavidHeath, David (Somerton & Frome)
Clappison, JamesHeathcoat—Amory, Rt Hon David
Clarke, Rt Hon Kenneth (Rushcliffe)Horam, John
Howard, Rt Hon Michael
Clifton—Brown, GeoffreyHowarth, Gerald (Aldershot)
Collins, TimHunter, Andrew
Cormack, Sir PatrickJack, Rt Hon Michael
Cran, JamesJenkin, Bernard
Davey, Edward (Kingston)Johnson Smith, Rt Hon Sir Geoffrey
Davies, Quentin (Grantham)
Davis, Rt Hon David (Haltemprice)Jones, Nigel (Cheltenham)
Day, StephenKeetch, Paul
Dorrell, Rt Hon StephenKey, Robert
Duncan, AlanKirkbride, Miss Julie
Evans, NigelKirkwood, Archy
Ewing, Mrs MargaretLaing, Mrs Eleanor
Fabricant, MichaelLait, Mrs Jacqui
Fallon, MichaelLeigh, Edward
Fearn, RonnieLetwin, Oliver
Lewis, Dr Julian (New Forest E)Salmond, Alex
Lidington, DavidSanders, Adrian
Livsey, RichardShepherd, Richard
Lloyd, Rt Hon Sir Peter (Fareham)Simpson, Keith (Mid—Norfolk)
Llwyd, ElfynSmith, Sir Robert (W Ab'd'ns)
Loughton, TimSoames, Nicholas
Luff, PeterSpelman, Mrs Caroline
Lyell, Rt Hon Sir NicholasSpicer, Sir Michael
MacGregor, Rt Hon JohnSpring, Richard
McIntosh, Miss AnneStanley, Rt Hon Sir John
MacKay, Rt Hon AndrewSteen, Anthony
Maclean, Rt Hon DavidStreeter, Gary
Maclennan, Rt Hon RobertSwayne, Desmond
McLoughlin, PatrickSyms, Robert
Madel, Sir DavidTapsell, Sir Peter
Malins HumfreyTaylor, Ian (Esher & Walton)
Maples, JohnTaylor, Jonn M (Solihull>
Mawhinney, Rt Hon Sir BrianTaylor, Matthew (Truro)
May, Mrs TheresaTaylor, Sir Teddy
Michie, Mrs Ray (Argyll & Bute)Thomas, Simon (Ceredigion)
Moore, MichaelTonge, Dr Jenny
Morgan, Alasdair (Galloway)Tredinnick, David
Nicholls, PatrickTrend, Michael
Norman, ArchieTyler, Paul
Oaten, MarkTyrie, Andrew
O'Brien, Stephen (Eddisbury)Viggers, Peter
Öpik, LembitWalker, Cecil
Paice, JamesWalter, Robert
Paice, JamesWaterson, Nigel
Paisley, Rev IanWebb, Steve
Paterson, OwenWhittingdale, John
Prior, DavidWiddecombe, Rt Hon Miss Ann
Randall, JohnWigley, Rt Hon Dafydd
Redwood, Rt Hon JohnWilletts, David
Rendel, DavidWillis, Phil
Robathan, AndrewWinterton, Mrs Ann (Congleton)
Robertson, Laurence (Tewk'b'ry)winterton, Nicholas (Macclesfield)
Robinson, Peter (Belfast E)Yeo, Tim
Roe, Mrs Marion (Broxbourne)
Ross, William (E Lond'y)Tellers for the Ayes:
Ruffley, DavidMr. Andrew Stunell and
St Aubyn, NickMr. Bob Russell.
Abbott, Ms DianeBrowne, Desmond
Adams, Mrs Irene (Paisley N)Buck, Ms Karen
Ainger, NickBurden, Richard
Ainsworth, Robert (Cov'try NE)Burgon, Colin
Allen, GrahamButler, Mrs Christine
Anderson, Rt Hon Donald (Swansea E)Campbell, Alan (Tynemouth)
Campbell, Mrs Anne (C'bridge)
Armstrong, Rt Hon Ms HilaryCampbell, Ronnie (Blyth V)
Ashton, JoeCampbell—Savours, Dale
Atherton, Ms CandyCaplin, Ivor
Atkins, CharlotteCasale, Roger
Austin, JohnChapman, Ben (Wirral S)
Bailey, AdrianChisholm, Malcolm
Banks, TonyClapham, Michael
Barnes, HarryClark, Rt Hon Dr David (S Shields)
Battle, JohnClark, Dr Lynda (Edinburgh Pentlands)
Bayley, Hugh
Begg, Miss AnneClarke, Charles (Norwich S)
Benn, Hilary (Leeds C)Clarke, Eric (Midlothian)
Benn, Rt Hon Tony (Chesterfield)Clarke, Rt Hon Tom (Coatbridge)
Bennett, Andrew FClelland, David
Bermingham, GeraldClwyd, Ann
Best, HaroldCoffey, Ms Ann
Betts, CliveCohen, Harry
Blears, Ms HazelColeman, Iain
Blizzard, BobColman, Tony
Blunkett, Rt Hon DavidConnarty, Michael
Boateng, Rt Hon PaulCook, Frank (Stockton N)
Borrow, DavidCooper, Yvette
Bradley, Rt Hon Keith (Withington)Corbett, Robin
Bradshaw, BenCorbyn, Jeremy
Brinton, Mrs HelenCorston, Jean
Cousins, JimJohnson, Miss Melanie (Welwyn Hatfield)
Cranston, Ross
Cryer, John (Hornchurch)Jones, Rt Hon Barry (Alyn)
Cummings, JohnJones, Helen (Warrington N)
Curtis—Thomas, Mrs ClaireJones, Jon Owen (Cardiff C)
Dalyell, TamJones, Dr Lynne (Selly Oak)
Darvill, KeithJones, Martyn (Clwyd S)
Davey, Valerie (Bristol W)Jowell, Rt Hon Ms Tessa
Davidson, IanJoyce, Eric
Davies, Rt Hon Denzil (Llanelli)Kaufman, Rt Hon Gerald
Davies, Geraint (Croydon C)Keeble, Ms Sally
Dean, Mrs JanetKemp, Fraser
Denham, Rt Hon JohnKennedy, Jane (Wavertree)
Donohoe, Brian HKhabra, Piara S
Doran, FrankKidney, David
Dowd, JimKilfoyle, Peter
Drew, DavidKing, Andy (Rugby & Kenilworth)
Drown, Ms JuliaKing, Ms Oona (Bethnal Green)
Dunwoody, Mrs GwynethKingham, Ms Tess
Eagle, Angela (Wallasey)Ladyman, Dr Stephen
Eagle, Maria (L'pool Garston)Lammy, David
Edwards, HuwLawrence, Mrs Jackie
Ellman, Mrs LouiseLeslie, Christopher
Field, Rt Hon FrankLevitt, Tom
Fisher, MarkLewis, Ivan (Bury S)
Fitzpatrick, JimLewis, Terry (Worsley)
Flint, CarolineLiddell, Rt Hon Mrs Helen
Follett, BarbaraLinton, Martin
Foster, Rt Hon DerekLloyd, Tony (Manchester C)
Foster, Michael Jabez (Hastings)Lock, David
Foster, Michael J (Worcester)McAvoy, Thomas
Gapes, MikeMcCabe, Steve
Gardiner, BarryMcCartney, Rt Hon Ian (Makerfield)
George, Rt Hon Bruce (Walsall S)
Gerrard, NeilMcDonagh, Siobhain
Gibson, Dr IanMcDonnell, John
Gilroy, Mrs LindaMcFall, John
Godsiff, RogerMcIsaac, Shona
Golding, Mrs LlinMcKenna, Mrs Rosemary
Gordon, Mrs EileenMcNulty, Tony
Griffiths, Jane (Reading E)MacShane, Denis
Griffiths, Nigel (Edinburgh S)Mactaggart, Fiona
Griffiths, Win (Bridgend)McWilliam, John
Grocott, BruceMahon, Mrs Alice
Grogan, JohnMallaber, Judy
Hain, PeterMandelson, Rt Hon Peter
Hall, Mike (Weaver Vale)Marshall, David (Shettleston)
Hall, Patrick (Bedford)Marshall, Jim (Leicester S)
Hanson, DavidMartlew, Eric
Healey, JohnMaxton, John
Henderson, Doug (Newcastle N)Meacher, Rt Hon Michael
Hendrick, MarkMerron, Gillian
Hepburn, StephenMichael, Rt Hon Alun
Heppell, JohnMichie, Bill (Shef'ld Heeley)
Hesford, StephenMilburn, Rt Hon Alan
Hewitt, Ms PatriciaMiller, Andrew
Hill, KeithMoffatt, Laura
Hinchliffe, DavidMoran, Ms Margaret
Hoey, KateMorgan, Ms Julie (Cardiff N)
Hood, JimmyMountford, Kali
Hoon, Rt Hon GeoffreyMudie, George
Hope, PhilMullin, Chris
Hopkins, KelvinMurphy, Denis (Wansbeck)
Howells, Dr KimMurphy, Jim (Eastwood)
Hoyle, LindsayNaysmith, Dr Doug
Hughes, Ms Beverley (Stretford)O'Brien, Bill (Normanton)
Hughes, Kevin (Doncaster N)O'Brien, Mike (N Warks)
Humble, Mrs JoanOlner, Bill
Hurst, AlanOrgan, Mrs Diana
Hutton, JohnOsborne, Ms Sandra
Iddon, Dr BrianPendry, Rt Hon Tom
Illsley, EricPickthall, Colin
Jackson, Helen (Hillsborough)Pike, Peter L
Jamieson, DavidPlaskitt, James
Jenkins, BrianPond, Chris
Johnson, Alan (Hull W & Hessle)Pope, Greg
Powell, Sir RaymondStevenson, George
Prentice, Ms Bridget (Lewisham E)Stewart, David (Inverness E)
Prentice, Gordon (Pendle)Stewart, Ian (Eccles)
Primarolo, DawnStrang, Rt Hon Dr Gavin
Prosser, GwynStraw, Rt Hon Jack
Quinn, LawrieStuart, Ms Gisela
Radice, Rt Hon GilesSutcliffe, Gerry
Rammell, BillTaylor, Rt Hon Mrs Ann (Dewsbury)
Raynsford, Rt Hon Nick
Reed, Andrew (Loughborough)Taylor, Ms Dari (Stockton S)
Robertson, John (Glasgow Anniesland)Taylor, David (NW Leics)
Temple—Morris, Peter
Roche, Mrs BarbaraTimms, Stephen
Rogers, AllanTipping, Paddy
Rooney, TerryTodd, Mark
Ross, Ernie (Dundee W)Touhig, Don
Rowlands, TedTrickett, Jon
Roy, FrankTurner, Dennis (Wolverh'ton SE)
Ruane, ChrisTurner, Dr Desmond (Kemptown)
Ruddock, JoanTurner, Neil (Wigan)
Russell, Ms Christine (Chester)Twigg, Derek (Halton)
Salter, MartinTynan, Bill
Savidge, MalcolmWareing, Robert N
Sedgemore, BrianWatts, David
Shaw, JonathanWhite, Brian
Sheerman, BarryWhitehead, Dr Alan
Sheldon, Rt Hon RobertWicks, Malcolm
Simpson, Alan (Nottingham S)Williams, Rt Hon Alan (Swansea W)
Skinner, Dennis
Smith, Rt Hon Andrew (Oxford E)Williams, Alan W (E Carmarthen)
Smith, Angela (Basildon)Winnick, David
Smith, Miss Geraldine (Morecambe & Lunesdale)Winterton, Ms Rosie (Doncaster C)
Woodward, Shaun
Smith, Jacqui (Redditch)Woolas, Phil
Smith, John (Glamorgan)Worthington, Tony
Smith, Llew (Blaenau Gwent)Wright, Anthony D (Gt Yarmouth)
Soley, CliveWright, Tony (Cannock)
Southworth, Ms Helen
Squire, Ms RachelTellers for the Noes:
Starkey, Dr PhyllisMrs. Anne McGuire and
Steinberg, GerryMr. Ian Pearson.

Question accordingly negatived.

It being after Seven o'clock, THE TEMPORARY CHAIRMAN put forthwith the Question necessary to dispose of proceedings on clauses 1 to 3, pursuant to Orders [7 November 2000 and 9 April].

Clause 1 to 3 ordered to stand part of the Bill