Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 7:20 pm on 14th April 2003.

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Photo of Mrs Gillian Shephard Mrs Gillian Shephard Conservative, South West Norfolk 7:20 pm, 14th April 2003

Mr. Etherington could never be accused of not being straightforward. It is a delight to follow him and his straightforward expression of the ideas of old Labour. I would also like to congratulate my hon. Friend Mr. Yeo, who opened the debate for the Conservatives, on his successful exposure of this hope-for-the-best Budget, not to mention the Panglossian statements of the Secretary of State for Trade and Industry.

I wish to devote my remarks to one particular, and particularly disappointing, aspect of the Budget. If the Chancellor had chosen, as he could have done, to make a convincing reduction in duty on biofuels—instead of re-announcing his pre-Budget report figure of 20p per litre as if it were new—he could have moved closer to his own Government's environmental targets. He could have tackled the issue of fuel security, which he has himself described as of increasing concern. He could have given a much-needed boost to the decline in manufacturing, about which we have heard much from the Secretary of State this afternoon. Most importantly of all for my constituents, he could have given real hope to the future of the agriculture sector, which has endured a 50 per cent. reduction in its incomes over the past year alone under the present Government.

Ministers will know from early-day motions, from speeches in the House, from meetings with hon. Members and from the fact that the Select Committee on the Environment, Food and Rural Affairs is to examine the future of biofuels, about the strength of the all-party support for a further reduction in biofuel duty. Indeed, I see some supporters on the Government Benches. Sadly, it is not clear that any one Department is crusading for that cause—certainly not the Treasury. That is strange, given the obvious contribution that a reduction in biofuel duty would make to the Government's oft-repeated commitment to the reduction of greenhouse gas emissions and carbon dioxide emissions. A reduction would also contribute to meeting the target for renewables by 2020. Given that road fuel emissions constitute 25 per cent. of the total requirement, I wonder how the Government think that they will realise their objectives without including biofuel measures. I do not believe that they can.

The rest of us are aware of the many other advantages of biofuels, even if the Treasury is not. The public want access to environmentally friendly fuels without the expense of having to switch to hybrid vehicles or those that have to be adapted. Biofuel duty reduction is supported not only by Members of all parties, but by organisations as diverse as Friends of the Earth, the National Farmers Union, the Country Land and Business Association and several major industries.

Independent research by Sheffield Hallam university demonstrated that CO2 emission reductions from conventionally produced bioethanol would be more than 60 per cent., whereas British Sugar believes that, with the efficient generators in its factories, the figure could be increased to more than 70 per cent. Whatever the precise level of emission reduction, it is clear that a 20p duty reduction is not enough to encourage investment in biofuel production without the security of knowing that there will be a sustainable market for bioethanol. Without that, there will be no investment by British Sugar or any other manufacturer to produce the fuel. Meanwhile, other countries have got the message. Brazil has a minimum mandatory 25 per cent. bioethanol blend in all gasoline fuels and in the US 12 per cent. of cars are powered by biofuel blends. The Government also have to face the demands of the EU biofuels directives.

Encouragement for greater use of biofuels would help manufacturing, especially in rural areas, about which the Secretary of State seemed so enthusiastic this afternoon. It would help the Government to achieve their environmental targets and would contribute to fuel security, but for rural economies it could make a life-or-death difference. As the Government's policy commission on the future of food and farming states,

"England needs a long-term strategy for creating and exploiting opportunities in non-food crops including starch and oils. This area should be a high priority for the research and technology transfers we have outlined. We recommend that the Government should reduce duty on bio-fuels to that charged on other clean fuels. We believe that this will help processors to drive the market forward."

What a carbon copy of the examples provided by the Secretary of State this afternoon: the only difference is that this one is real and the Government are doing nothing about it.

The House will need no reminding of the current plight of agriculture. In East Anglia, the staple crop of sugar beet faces becoming, in effect, a non-food crop by 2006. In Norfolk alone, 10,000 jobs depend on sugar beet. If farming is to continue, the Government must provide more adequate encouragement for the alternative use of food crops. It is worth noting that production of sugar beet or cereals for bioethanol would fall completely outside the current common agricultural policy support system. Sugar beet production has an excellent environmental record and the majority of cereal feedstock would be drawn from the current UK surplus. Both crops would be grown extensively, not intensively. British Sugar has said that it would take only 22 months to convert its existing plants to produce biofuels from cereal and sugar beet, but it will not contemplate doing so without an assured market. That can only be brought about by a more realistic duty reduction.

The Treasury has to balance its books, as we will be told later, by setting an increased biofuel duty reduction against the benefits to the economy that would result. In this Budget it may have had to do that because of its own forecasting and economic mistakes, but what is being done across government to establish the case? What is DEFRA doing to press the case? How is it that the only research being conducted across government is being undertaken by the East of England Development Agency and how does that vacuum of research, evidence and Government resolve square with the boasts of the Secretary of State earlier?

I submit that if the Government had been serious about meeting their environmental commitments, about fuel security and, above all, about the future of manufacturing, agriculture and the countryside, they would not have left that vital work to a development agency but done it themselves—across Departments and in time for this Budget, not the next. Members of all parties must ensure that next time the Government heed their own words, work toward meeting their commitments and give some assurance about the future to people in agriculture and rural communities, which they sorely need.