Examination of Witnesses (Questions 40
WEDNESDAY 13 DECEMBER 2000
TIMMS MP AND
40. Can you not somehow force the oil companies
to pass that on? If you were cutting duty you would be very surprised
if you cut duty in beer or wine or cider and suddenly found that
was not being passed on to people in the pubs. They would be rightly
(Mr Timms) It would not be the first time.
41. Can you not actually ensure this is going
(Mr Timms) No. We do not have retail price maintenance
on petrol and we are not proposing to introduce it. The reality
is that competition for the supply of petrol will see to it that
the duty reduction is passed on but that is not a matter which
42. You mentioned that two pence would happen
once nationwide access was achieved for ultra low sulphur petrol.
How are you going to determine when that nationwide access has
been achieved? What is the criterion? Is it number of stations
which have it across the country, percentage of stations, what
is the criterion?
(Mr Timms) What we have said is that we want to make
sure that the fuel will be available in all parts of the country.
At the moment, it is rising to round about 40 per cent of petrol
sold being ultra low sulphur petrol. I am pretty hopeful, and
certainly the oil companies have been quite reassuring, that by
the time we get to the budget it will be available in all parts
of the country but that is going to be the criterion we use.
(Mr Maxwell) It is that regional dimension which is
regarded as most important, partly because clearly petrol is supplied
from refineries in different parts of the country. That is one
reason why it is important that it is not areas around particular
refineries which are getting low sulphur petrol but that it is
available to all areas of the country.
43. Is it that it reaches 50 per cent of all
petrol stations, 60 per cent, 40 per cent? At what time do you
actually say fine, we now have nationwide access therefore bring
in the two pence cut?
(Mr Timms) What we want is that everybody, wherever
they are in the country, are within reach reasonably of ultra
low sulphur petrol.
44. Even in the rural areas.
(Mr Timms) Yes; certainly.
45. That is very reassuring to hear. On the
actual diesel side that has been extremely successful because
we now have 100 per cent usage of ultra low sulphur diesel. Therefore
any further cuts in duty there will simply be a duty cut. Now
that you have 100 per cent of the market you cannot actually encourage
more of that market by cutting the duty level. So will you cut
(Mr Timms) What we have wanted to ensure was that
the current playing field, which we think is a fairly level playing
field between petrol and diesel, is maintained. We want to introduce
the incentive for ultra low sulphur petrol, for the reasons we
have just been talking about, but in order not to tilt the playing
field that requires a reduction of the same amount for low sulphur
46. Even though it is now 100 per cent of the
(Mr Timms) Yes. Clearly we are not aiming to incentivise
further ultra low sulphur diesel because it is effectively 100
per cent already but we do not want to mess up the competitive
position between petrol and diesel. We want to keep the current
equilibrium which we think is about right.
47. To maintain your metaphor of the level playing
field, the playing field is very level between petrol and diesel
in this country. If we extend the playing field across the Channel,
the playing field between petrol on either side of the Channel
is rather sloped. The playing field between diesel on either side
of the Channel is a precipice. What consideration does the Treasury
give to the relative prices of fuel on either side of the Channel
or indeed within Ireland?
(Mr Timms) I am the Treasury Minister on the Road
Haulage Forum and one of the topics we have been looking at on
the Road Haulage Forum has been the competitive position of the
UK haulage industry compared with the industry elsewhere in Europe.
Clearly the different models of fuel duty here and elsewhere are
an important element of that consideration but it is not the only
one. Other tax levels also are important and the fact, for example,
that we have very low levels of corporation tax is also a consideration,
that we have much lower levels in National Insurance.
48. Yes, but we cannot transport corporation
tax. I know you can shift the company but in Ireland you can easily
transport the fuel from one side of the border to the other, so
it is a different issue.
(Mr Timms) Yes; indeed.
49. You can transport it across the Channel
as well but not quite as easily as you can in Ireland.
(Mr Timms) I take your point. Your question is: what
attention do we pay to these matters? I was just making the point
that we have been looking at the levels of taxation being applied
to the haulage industry in the different countries of the EU.
However, we have not only looked at fuel duty, we have looked
at the other taxes as well. Specifically about Ireland and the
encouragement to people to smuggle fuel across the land border,
that is something we have looked at very carefully. I have received
two deputations now from petroleum retailers in Northern Ireland
who were obviously very concerned about the position. Our response
has been to increase the customs input very substantially across
Northern Ireland to the problem of petrol and diesel smuggling.
The initial results I have seen from that have been very encouraging,
that we are identifying substantially greater amounts than we
were before of smuggled fuel and I hope that will have the effect
of curtailing that problem, which has been a very serious problem
for petroleum retailers in Northern Ireland.
50. Do you think there are any good historical
examples of countries being able to maintain a hugely different
rate of revenue on a product which is transportable for any length
(Mr Timms) Yes; I think there have been numerous examples
51. Can you give me some then?
(Mr Timms) We have had different rates of fuel duty;
at one time we had a significantly lower rate than in Ireland.
That carried on for quite a few years. I am not sure precisely
what the differential was but there are several examples one could
52. Would you agree that the fuel protestors
and the transport lobby were essentially arguing a case for tax
harmonisation? Did they not have a point? Answer the first rather
than the second bit because I realise it is an easier political
question to answer.
(Mr Timms) I certainly did not see any banners saying
"Harmonise Fuel Duties". The process in the EU that
we have of course supported has been the development of the draft
energy products directive, which would raise the minimum levels
of duty which are applied to energy products. That is a process
we have supported and supported for quite a long time. Some other
members of the European Union take a rather different view to
us and my impression is that that process is somewhat stalled
at the moment. Certainly it would be helpful from a UK point of
view and the point of view of lots of other countries as well,
if there could be some progress in achieving a directive.
53. What about the fuel protestors? Were they
actually arguing for fuel harmonisation, whatever they may have
called it? They may have called it a level playing field but that
is another phrase for the same point.
(Mr Timms) I am not sure what you mean. Certainly
lots of people in the fuel protest, the hauliers in particular,
were raising the fact that fuel cost less in other countries than
it does in the UK. I do not think they would have expressed their
demand in terms of harmonisation of fuel duties but the essential
point you were making was certainly raised frequently nevertheless.
54. Earlier on in answer to Mr Chaytor you did
say that when you were looking at the prospect of abandoning the
fuel duty escalator you took account of social and environmental
factors. Given that this Committee has really stressed the importance
of environmental appraisal, I should be really interested to know
what environmental appraisal you have carried out of the impacts
of the new package of duty/VED measures which do not any longer
include the fuel duty escalator.
(Mr Timms) The measures we formally announced in the
PBR are reflected in Table 6.2 in the PBR documentation and that
sets out what our assessment is of the environmental impact of
those measures. Those measures we are consulting on at the moment
with a view to introducing in the budget we will set out there
in the budget documentation what our assessment of the environmental
impact, of the overall package, is. To the extent that measures
have already been announced to be implemented, we have presented
those, but there will be further information at the time of the
55. What confidence do you have about the environmental
appraisal methodology that you are actually using?
(Mr Timms) It is as good as you can get. There is
some uncertainty in these matters and we are still learning as
we go along. It is an exercise which we take seriously and I think
the assessment we have made is as good as one can hope for, given
the state of the art.
56. All the detail on that has been made available
to this Committee has it?
(Mr Timms) Certainly the data in Table 6.2 is available.
If you would like further information, that request will be made.
57. In terms of the analysis of air quality
benefits delivered relative to other emission reduction policies,
what assessment has been made of air quality benefits in respect
of the measures which are now proposed in the Pre-Budget Report?
(Mr Timms) There are several measures which are intended
to address air quality and I particularly point you to the way
that diesel engines are being treated compared with petrol engines
because there is a significantly greater local air pollution problem
with diesel engines than there is with petrol. The surcharge for
diesel is being waived in the case of diesel engines which meet
the Euro 4 standard, precisely because the problems have effectively
been resolved with that new technology. So there are several measures
in the package which address that. Table 6.2 is on page 139 of
the Pre-Budget Report. There are several references there to impacts.
58. My concern really is with the quality of
the analysis and the quality of the environmental appraisal, not
just in respect of air quality but in respect for example of CO2
emissions as well. If we are going to have a full environmental
appraisal I should have thought that we really want to have an
analysis which looked at option one, option two, option three
and which looked at the effect for example on air quality, perhaps
increased amounts of emissions which could contribute to global
warming. To my mind if that analysis is really going to be the
quality analysis which I would have thought the Treasury would
want, I should also want to see some reference to the kind of
issues perhaps raised by Greenpeace in respect of renewable energy
and green fuels, so that you took all the options into the equation
rather than perhaps just came out with one aspect of it, so that
you looked at it as a whole and on the strength of that analysis
could then really do a genuine environmental appraisal. How much
has that kind of entire environmental appraisal been taken on
board by the Treasury and do you or do you not have the tools
to do that? If you have not, where might you go to find them?
(Mr Timms) On each occasion I have spoken to the Committee
you have spent some time on Table 6.2 and its equivalent in previous
publications so I hope the Committee will feel that what we now
present is significantly improved on where we started. Certainly
it has changed significantly and contains a good deal more information
now than it did when we started and that is not least because
of the points which have been made by this Committee. The aim
of this documentation is to set out the impact of the measures
which have been announced in the Pre-Budget Report. It is not
to set out a range of alternative scenarios. That would be a rather
different kind of exercise.
Chairman: Should you not be doing that?
59. If you had your own environmental appraisal,
would that not be the way to go forward? I appreciate that we
are in early days in terms of environmental appraisals and perhaps
we are having to wait a long time before it gets to the Treasury
in its entirety, but should we not really be doing that, not just
looking at the effects of one change or adaptation to policy but
really looking at the options and making an environmentally based
decision which looks at all the different impacts on the environments
of every single kind? Should the Treasury not be doing that?
(Mr Timms) Across government certainly large parts
of that are being done but in rather different exercises to the