Select Committee on Trade and Industry Fifth Report


57. The Pre-Budget Report was published on 8 November 2000. The Chancellor told the House that he recognised and understood the "very genuine concerns that motorists and hauliers have".[197] He announced an across-the-board duty freeze on all fuels, to last initially until April 2002. If the oil price remained high by then, there would be a duty freeze for a further year. He also announced his intention to cut the duty on Ultra Low Sulphur Diesel (ULSD) by 3p per litre in Budget 2001, to maintain the existing balance between duty rates on the most commonly available petrol and diesel, to cut the duty on Ultra Low Sulphur Petrol (USLP) and widen its differential with standard unleaded petrol by a further 2p per litre in Budget 2001.[198] Amongst other measures announced were:

    —  support for scrapping or converting older lorries;

    —  the introduction of a 'vignette' system by which non-UK companies and lorries pay for using UK roads;

    —  reform in vehicle excise duty for lorries consolidating the existing 100 separate rate bands into 7;

    —  freezing red diesel tax at the current rate and the abolition of VED on tractors and agricultural vehicles.

58. In oral evidence to the Committee prior to the Pre-Budget Report, Mr Malcolm Brinded, Country Chairman of Shell UK pointed out that "where fuel taxes are essentially important is to think about the distinction of different levels of fuel tax between different products".[199] Differential rates of taxation have, for example, been helpful in bringing unleaded petrol much more extensively into the market than a decade ago. Mr Jones of Total Fina Elf remarked "we have seen that certainly last year with the introduction of ULSD in the market with a 3p a litre differential on the old derv diesel. We have seen almost complete movement of this cleaner burning product in the marketplace".[200] Some concern has been expressed as to how quickly the oil companies will pass on the cut in duty. The Minister for Energy told us during oral evidence on 14 February 2000 that he had recently met with all the oil companies "and they have assured me they will pass on the duty and cuts whenever they are implemented, and they are determined to do that".[201]

59. The Treasury calculate that the Pre-Budget package would cut hauliers' costs by the equivalent of 8p per litre in the price of diesel.[202] The RHA responded by stating that the proposals "are worthy of careful consideration". They welcomed the consultation on a 'Brit disc' whilst wishing to know how it would affect the reduction in VED rates, and welcomed the VED reduction. The RHA would, however, have preferred a reduction in fuel duty.[203] The FTA welcomed the tax reductions in the Pre-Budget Report as a "good overall package", although they would have preferred the Chancellor to go further.[204] The Financial Secretary told us in oral evidence in February "the industry has warmly welcomed the package of measures that the Chancellor announced in November. Hauliers I have spoken to have welcomed it very warmly".[205]

197  HC Deb, 8 November 2000, col 322 Back

198  Cm 4917, p127 (On 21 February 2001, the Government announced that any reduction in duty on ULSP in the Budget will be matched with a reduction in duty on 'ordinary' unleaded petrol for a temporarily period until 14 June 2001) Back

199  Q3 Back

200  Q3 Back

201  Q469 Back

202  Cm 4917, p131, para 6.72 Back

203  RHA Press notice, 08/11/00 Back

204 Back

205  Q435 Back

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