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Rob Marris: I welcome the increase in excise duty on LPG. I am not an expert and the right hon. Member for Fylde will perhaps correct me, but I do not think that LPG is nearly as clean as its proponents claim, particularly in terms of its outputs of carbon monoxide and nitrous oxide. There were some interesting figures in The Sunday Telegraph about two months ago, indicating that LPG vehicles pollute more than petroleum vehicles—not in every case, but there are significant differences. That gap has increased historically to the point where LPG vehicles have been, to coin a phrase, overtaken by petroleum vehicles due to developments in petroleum technology in vehicles, particularly cars. Those developments include the common rail diesel engine and Volkswagen's FSI high-pressure petroleum engines. LPG vehicles are now passé technology—a road transport dead end in terms of environmental Column Number: 026 friendliness, because they burn more fuel per mile. A few years ago, there was an excise incentive for their use, because they were then thought to be less environmentally damaging than petroleum engines. That is no longer the case, and I welcome the increase in excise. It is unfortunate for those who have invested in that technology—whether individuals or the industry—but it is a dead end and the Government have rightly recognised that. They are right to put up the excise duty and should increase it by more.Mr. Jack: May I at the outset remind the Committee of my business interests, which I fully declared on Second Reading? It is a pleasure to be under your chairmanship again, Mr. McWilliam. The hon. Member for Wolverhampton, South-West reflected some arguments that I have made in my advocacy of improved fuels for diesel engines, such as biofuels and bioethanol, which we shall come on to later. He is right: it depends where one starts. I should like to ask the Economic Secretary, when he responds to the debate, to justify why 40p was chosen as the rate that will now reduce the inducement for people to run on liquefied petroleum gas. The hon. Member for Wolverhampton, South-West is right to point out that natural gas-driven vehicles have detriments, particularly carbon dioxide emissions, and are not as good as the best of modern diesel engine technology. In terms of air quality and certain pollutants that have an adverse impact on health, particularly in congested city centres, LPG has a good case to make. It would appear that the Government considered that health improvement objectives have a higher value and that LPG should attract a higher level of discount than biodiesel. When the LPG discount came in, that generation of diesel engines was not as well controlled as modern ones are today. If we are to understand the logic of the Government's alternative fuel policy, can the Economic Secretary tell us in detail why the rate of 40p has been chosen? What is the logic of the numbers that have been selected, and why is the clause drafted in that way that it is? Has the Treasury done any research to justify the change, and if so, will he lay it in the Library of the House of Commons, so that we can understand with greater clarity the way that the Government are approaching the new fuel world in which we are operating? We are going to debate aspects of bioethanol, and that relates to the question of the future approach towards the hydrogen economy. It also touches on clause 1 of the Energy Bill, which deals with the Government's obligations on national fuel security; it comes before the House next Monday. I look forward to detailed and specific responses to the questions that I have posed. John Healey: I shall try to respond to the points that have been raised; they are important in helping to set the context for the proposal in clause 6. I should say first to the hon. Member for Chichester that Matthew Carrington has form in the view that he might take of policies originating from the Labour Government. The hon. Gentleman quoted Matthew Carrington, so I shall quote three other sources, which are just as, or arguably more, informed and more Column Number: 027 representative of the views of those affected in the industry by the measures that we propose.Howard Kerr, whom I met in the run-up to the Budget decision, is managing director of Calor Gas Ltd. and chairman of the LPG Association. He said that following the Budget announcement, Calor was looking further to expand the number of refuelling sites in the UK. Clive Mather, chairman of Shell, said that the stability offered will enable it to
Tom Fidell, director general of the LPG Association, wrote after the Budget decision to thank us for what he described as
I submit that the measures are not likely to drive the industry out of business in the way that Matthew Carrington apparently believes. I caution my hon. Friend the Member for Wolverhampton, South-West against placing too much reliance on figures that he reads in the Sunday papers. The industry is not a dead end in terms of providing road fuel for the future, and we can make environmental gains through greater use of LPG fuel. However, it is relatively less green than it was in 2001, and the environmental gains are relatively less substantial than they were then. In part, that answers the point made by the right hon. Member for Fylde. I refer him and the hon. Member for Chichester to December's pre-Budget report and the Budget documentation. They set out the logic of the policy that we are pursuing and the results of the research and consultation that we conducted in reaching the principal decision in the pre-Budget report and deciding on the specific duty in the Budget and clause 6. Mr. Tyrie: Does the Minister believe that the industry has invested enough in the LPG sector for it to be self-sustaining? John Healey: I will make some specific points about the development of the industry later. However, since we made the commitment on duty rates in 2001, we have seen a sustained increase in investment in the industry, an expansion in the number of retail outlets for LPG and an expansion in the fuel's use and production. Alongside the industry's investment, the Government have made an equally substantial investment in seeing the industry establish itself and begin to flourish. In the Budget decisions, we were keen to avoid alterations in the duty rate that, although justified on environmental grounds, would have led to the industry taking the sort of nosedive that Matthew Carrington argues it is about to do. We want to see the continued development of, and investment in, the industry, which the chairman of Shell and others clearly see in prospect. The Government will continue to support the development of the industry in several ways, including the PowerShift programme and the duty rate discount. Column Number: 028 The comments so far have concentrated on liquid petroleum gas, but in the pre-Budget report last year, we announced that we would treat natural gas differently from LPG. Clause 6 creates a separate rate of duty for natural gas used as a fuel in road vehicles and increases the rate of duty on LPG and other gases used as fuel in road vehicles. In the pre-Budget report in December, we published the alternative fuels framework, which included our principles for setting duty differentials for environmentally friendlier alternative fuels. At the heart of that is the principle that support for fuels from the Government and taxpayer will be based primarily on the environmental benefits that they offer. Reflecting that, we announced in the Budget that the duty differential for LPG would have to be reduced over time towards a level that is more commensurate with its environmental benefits, and that the duty differential for natural gas would be frozen at its current rate until at least 2007. Mr. Jack: Is the Economic Secretary prepared to place in the Library the detailed formulations that show how the environmental benefits to which he has referred are calculated? Clearly, there is a range of alternative fuels. The Department for Transport is running a consultation exercise on these matters, and it would be helpful to know how the value of the gains is calculated. John Healey: I will undertake to look back at the pre-Budget report and the Budget documentation. We have published the results of the consultation and of the research and analysis that we have done on the environmental benefit and the implications for duty changes. Those judgments and analyses underpinned the production of the alternative fuels framework. If I believe that they do not answer the right hon. Gentleman's question, I will certainly do as he suggests. I recognise that clause 6 marks a departure from the policy that we established in 2001, but it reflects our desire to assess and respond to the changes that have occurred over the past few years and to set tax rates accordingly. When we made the commitment in 2001, few vehicles used natural gas or LPG. Since then, the market has developed. Natural gas vehicles need large fuel tanks, so the fuel is typically used by larger vehicles, such as delivery vehicles and buses. The fuel does not generally lend itself to private motorists and cars. Natural gas vehicles can deliver significant environmental benefits as compared with diesel vehicles, particularly in terms of noise reduction in urban areas late at night and early in the morning. LPG is used differently: it is more commonly used in cars. As I hope the Committee will recognise, the UK can be proud of the growth in the industry since 2001. More than 100,000 such vehicles are on the road, and drivers throughout the country have access to the fuel. LPG vehicles still offer some environmental benefits, but traditional petrol and diesel vehicles—the benchmark against which we measure them—have got cleaner, as the right hon. Member for Fylde said. There have been genuinely impressive advances in engines and vehicle technology. Today's vehicles have Column Number: 029 a much lower climate change and air quality impact, even compared with the situation four years ago.As I hope I have explained, we are no longer comparing like with like. We have decided to treat the two fuels differently, because the vehicles in which they are used are different. The differential for LPG will be reduced to reflect better the environmental benefits that it offers. In line with the alternative fuels framework, we have set out how that will happen. There will be a reduction of 1p a litre in 2004 and a further reduction on the same scale in 2005 and 2006.
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| ©Parliamentary copyright 2004 | Prepared 6 May 2004 |
