Clause 9 - Mixing of rebated oil

Finance Bill – in a Public Bill Committee at 11:00 am on 6th May 2004.

Alert me about debates like this

Question proposed, That the clause stand part of the Bill.

Photo of Andrew Tyrie Andrew Tyrie Shadow Financial Secretary

This is a concession to allow the mixing of fuels, and deal with the excise on the mixing of fuels. It gives oil companies certainty about the duty rate and is welcome for that reason. The clause need not detain the Committee for long. It replaces provisions that were made in legislation in 1996, which charged duty when two road fuels of differing duty rates were mixed. The clause removes those provisions in an attempt to simplify the introduction of new, more environmentally friendly fuels. We shall not oppose it on this side of the Committee.

I have only one question of substance, and I would be grateful if the Minister answered it. Is the clause intended to provide a permanent concession in the rules or will it apply for only a short, transitional period? Will the Minister give us some confidence that this concession on the mixing of fuels will remain on the statute book unaltered?

Photo of John Healey John Healey The Economic Secretary to the Treasury

The clause underlines our continuing commitment to promoting the use of cleaner, environmentally friendly fuels. It is designed to aid the smooth introduction of sulphur-free fuels. Those cleaner fuels will come on-stream in the UK well ahead of the EU imperative to do so, as we discussed under clause 7.

At first glance, the clause may appear to be more substantial than it is. It replaces and updates an entire section of the Hydrocarbon Oil Duties Act 1979. In doing this, the sections covering road fuels are omitted, thereby allowing the mixing of fuels and aiding the introduction of sulphur-free fuel. The problem we faced and the problem raised by the industry, to which the clause is a response, is that under the current duty system for hydrocarbon oils duty is charged when two road fuels of differing duty rates are mixed together. The rules were originally introduced as an incentive to make new fuels available to the consumer and ensure that environmental benefits were not lost by mixing cleaner fuels with

lower-grade alternatives. However, in reality, the mixing provisions have hindered the introduction of new fuels. Some mixing will inevitably and always occur at filling stations, and the additional duty has discouraged oil companies from making a rapid changeover.

In September, with the introduction of sulphur-free fuels, the UK faces its biggest changeover of fuel since the introduction of ultra-low sulphur petrol and diesel. We have therefore reviewed the measures that may be required to ensure a smooth transition.

I have discussed the matter at least twice with the Association of UK Oil Independents and received representations from it in the in the run-up to the Budget, as it felt that the change in clause 9 was needed to enable its members to make the switch. The clause removes the hindrance of the mixing provisions and it will ensure a smooth changeover to sulphur-free petrol and diesel.

The clause also rationalises the existing rules on mixing non-road fuels, which remains prohibited. The clause is permanent. It is introduced to aid the changeover and it will smooth and accelerate the transition to sulphur-free fuels from September. Its main use will be in the transition period, but it will remain on the statute book if the Committee agrees to it. The Government believe that the clause will assist the oil industry and help to meet consumer demand for sulphur-free fuels, which we all want, more quickly. On that basis, I commend it to the Committee.

Question put and agreed to.

Clause 9 ordered to stand part of the Bill.