Memorandum from Calor Gas
SUSTAINING THE MOVE IN TAXATION FROM ENVIRONMENTAL
GOODS TO BADS
1. At first sight it may seem that lower
fuel prices are incompatible with the Government's stated commitments
to reduce pollution and fulfil its commitments to the Kyoto greenhouse
gas targets. In fact, lower duty rates targeted at road fuel gases
in such a way as to create a significant, self-sustaining market
for them would contribute significantly towards the Government's
environmental objectives rather than detract from them. When this
measure is combined with other fiscal incentives for the road
fuel gas industry, proposals for which are outlined in this document,
the commercial benefits to transport providers would encourage
a rapid and extensive up-take on gas powered vehicles for the
benefit of the UK's commerce, industry and environment.
2. In recent years, Budget after Budget
has introduced modest incentives to encourage the use of liquefied
petroleum gas (LPG) as an environmentally-friendly motor fuel.
Gradually, fleet operators and owner-drivers are beginning to
respond to these price signals. Some 16,000 LPG vehicles are expected
to be sold this year, and there are some 500 refuelling points
around the country. The UK LPG industry estimates that there could
be over 250,000 LPG vehicles on the road over the next few yearsgiven
the right policies.
3. A big shift to use of LPG vehicles could
mean significant improvements for the environment and human health:
Lower emissions of dangerous carcinogens.
Lower emissions of particulates.
Lower emissions of oxides of nitrogen
and carbon monoxide.
Lower emissions of ozone precursors.
Lower emissions of greenhouse gases.
Lower emissions of acid gases with
less damage to crops, buildings and our cardiovascular systems.
Lower incidence of hospital admissions
and premature death.
4. We are aware that there have been widespread
demands for easing of the tax burden on the motorist and hauliers.
We are writing to you to request that if there is to be any relief
a significant part of it should be reserved to providing incentives
for people to switch to LPG usage. This is a summary of our proposals:
(i) Reduce the duty on LPG to the EU minimum
5. The Lords Select Committee on Science
and Technology (Nov 1996, para 4.18) recommended a duty reduction
to the EU minimum (currently 6p/kg [=0.1 Euro/Kg] cf the actual
rate levied of 15p/kg). The abolition of the fuel duty escalator
adds to the case for duty on LPG to be reduced to the EU minimum
so that progress towards green objectives is maintained. This
move would give a welcome signal, especially to vehicle fleet
managers. Assurances about the maintenance of any differential
favourable to LPG (ideally about its duty remaining at the EU
minimum for a reasonable planning period) should be reaffirmed
with a longer time perspective.
(ii) Provide capital allowances for the conversion
of vehicles to run on LPG and for the installation of LPG refuelling
6. We propose writing-down allowances of
100 per cent (rather than the standard 25 per cent) for commercial
operators on the cost of converting cars, taxis, vans, and buses
to run on LPG in the year of conversion; and, for garage owners
installing LPG refuelling points. Since the market for LPG remains
modest at present the notional loss to the Exchequer would be
small. The concession would represent the acceleration of relief
that would in any case be given over the following years.
(iii) Appropriate VED/Company Car Concessions
for LPG powered vehicles
7. The Finance Act (No 2) in 1998 made provision
for vehicles certificated as producing lower pollution to bear
lower VEDThis concession applies to new LPG vehicles provided
directly from the manufacturer. Cars, taxis, buses, lorries and
vans that have been converted to run on LPG should also be able
obtain batch certification rather than have to seek individual
certification (note that most LPG vehicles are currently converted
rather than bi-fuel from new). The administration of this could
be simplified by applying the concession to vehicles on the Powershift
register. Recognition should also be given through the VED system
to vehicles which produce lower emission profiles of pollutants
other than CO2. This would help integrate the Government's
climate change policy and its AQS. We would also propose that
a 6 per cent discount be applied to company car driver's car benefit
charge for good quality LPG vehicles. This will have the effect
of incentivising directly the driverincreasingly responsible
for vehicle selectionfor choosing an environmentally sensitive
(iv) Boost the Powershift Programme
8. The Powershift programme operated by
the Energy Savings Trust (EST) currently receives some £16m
from the DETR. It has made a massive contribution to advancing
fuel technologies and the use of cleaner, alternative fuels. There
is a strong general argument for raising Powershift's funding
significantly to undertake initiatives of this nature.
9. The Automotive liquefied petroleum gas
(LPG) industry in the UK includes major fuel suppliers, such as
Calor Gas, market leading vehicle manufacturers, a nationwide
network of professional vehicle converters and a growing number
of businesses who have made a commitment to run their vehicle
fleets on LPG. They all stand ready to help deliver the cleaner
vehicles of the future; current policies do not make the best
of their potential. We are requesting for the Budget to include
our proposals thereby unlocking that potential.