John
Thurso: My hon. Friend is absolutely right to say that
road-user charging is the most effective way to tax road use; it
impacts on those who create the most environmental problems—in
other words, cause congestion. It has the added benefit of reversing
the current problem: people who live in far-distant places such as the
north of Scotland pay 12p more for their fuel than those in
metropolitan centres. Road-user charging puts more tax on people in
areas with congestion and therefore with alternatives.
Implementing that will take
five or six years at the very least. In the interim, what could my hon.
Friend offer my constituents? Would she favour using the EU derogation,
which would permit such remote areas to have a lower fuel
duty?
Julia
Goldsworthy: I can put my hon. Friend’s
constituents’ minds at ease; I shall support the use of the EU
derogation on that issue. Amendments were tabled in respect of other
measures that would ease the burden of those in rural areas who have no
alternative but to use a car. Unfortunately, they were voted down.
Rob
Marris: The hon. Lady seems to be contradicting herself,
as she did during Committee stage in the House. She criticised the
Government for the fact that the proportion of green taxes has fallen,
but now agrees with the hon. Member for Caithness, Sutherland and
Easter Ross that they should fall further through an EU derogation on
fuel duty. Her position seems entirely contradictory, although that is
not surprising in a Liberal
Democrat.
Julia
Goldsworthy: I am afraid that the hon. Gentleman may have
missed the point. The derogation refers only to a tiny, very isolated,
minority of areas. If alternatives such as improved public transport
were provided in such areas, they would probably end up being less
environmentally friendly than allowing the people there, who have no
other option, to continue to use their cars.
If we are to impact on
behaviour, we have to change the behaviour of those who have other
options. As has been mentioned, any changes would have a massive impact
on the pockets of those living in rural areas, but would not influence
their behaviour. The only reason for using pricing mechanisms to change
behaviour is to make people use an alternative; if they do not have
one, they will have to continue to pay and the objective will not be
achieved.
John
Thurso: I am grateful to my hon. Friend and shall not
intervene on her again. The question to ask the Government is as
follows: why should increases in fuel duty be capped when they reach a
certain point so that people are not adversely affected, when it is all
right for the prices people pay in remote areas—they pay 5 per
cent. more—not to be
capped?
Julia
Goldsworthy: My hon. Friend makes a good point. I shall
close my remarks by expressing my hope that the Minister will provide
clarity on the time scale
to which he will work with the Department for Transport on introducing
road-user charging, so that the changes in the clause represent only a
holding measure rather than a long-term
strategy. 6
pm
Helen
Goodman: I welcome subsections (3) and(4), which
maintain the differential that the environmentally friendly biodiesel
and bioethanol have in the whole regime. Together with the renewable
transport fuels obligation, the provision is providing a significant
incentive for both the domestic and European production of these
fuels. In last
year’s Standing Committee on the Finance Bill, I referred to the
excellent farmers’ co-operative, Farmway, which is on the border
of my constituency and that of the Prime Minister. These measures are
of environmental benefit. They are of benefit to the farming community
because they are providing an alternative outlet for it. They also have
significant employment benefits. In fact, as a result of the additional
incentives, there is a chain of petrol stations called “One
green route” throughout the constituency where people can
specifically buy biodiesel and
bioethanol. I have
some questions on the capital allowance treatment of biodiesel and
bioethanol on which I hope we can have a move to more generous
treatment. As for subsection (2)(c) and the ultra-low sulphur petrol
rate, I understand from the explanatory notes that it affects the rate
of duty on aviation gas as well, which is charged at one half of the
rate set aside for light oil.
Earlier, the Financial
Secretary explained reasonably that we are constrained in what we can
do on aviation fuel due to a network of international treaties. I am
sure that he is aware that the fastest growth in aviation fuel is on
domestic flights. Therefore, does the hon. Gentleman know whether
international treaties apply to fuel bought for domestic as well as
international
flights? Sir
George Young (North-West Hampshire) (Con): I want to
follow the hon. Lady by focusing on subsections (3) and (4), which
maintain the differential rates. The Financial Secretary approached the
matter from a number of angles. He mentioned the agricultural angle.
Like my hon. Friend the Member for Ludlow, I have a rural constituency
where there is enormous interest in diversification—an appetite.
They have got to have either a new crop of houses or a new crop of
biofuels. Within an appropriate balance, I would prefer to have the
biofuels rather than an excess crop of houses in some of the scenery.
Two points arise from
that. First, the
Minister mentioned enhanced capital allowances. What progress have the
Government made in the application for state aids clearance? Is the
Minister still confident that he will get the necessary clearance and
that the scheme will be up and running by 2007? Because without that,
the infrastructure to support the diversification may not be
available. I want to
raise a second, broader issue. The Minister is maintaining a 20p
differential, but what is the logic behind 20p? Why has that figure
been chosen? Is there any flexibility or are we stuck with 20p for ever
and a
day because that figure was put in initially? Some targets in the Red
Book seem to be rather modest against a background of 0.25 per cent. of
road fuels being accounted for by biofuels. That does not seem a high
base, but the targets are to hit 5 per cent. by using the RTFO by
2011. The Minister
said that the RTFO was a new invention. In a sense it is, but it is a
close relative of the non-fossil fuel obligation, which was introduced
by the previous Administration and applied to the supply of electricity
and fuel. I welcomed that. However, if the Government are serious about
reducing carbon dioxide emissions, will a target of 5 per cent.
deliver? The higher target of 5 per cent. after 2010 and 2011 is
heavily qualified. Page 766 of the Red Book
says: “The
Government intends that the target should rise beyond 5 per cent. after
2010-11, so long as infrastructural requirements and fuel and vehicle
technical standards allow, and subject to the costs being acceptable to
the consumer.” That is
important small print. Should not one approach the matter from the
other direction? Given that there is a strong commitment to reduce
carbon dioxide emissions and that transport costs account for such a
high percentage, should we not find out the percentage reduction that
has to be achieved through the RTFO and work backwards through that
and, perhaps, end up with a different differential from the one that we
have at the moment? Perhaps we should do that, rather than starting
from where we are and arriving at a solution that may not enable the
Government to hit their carbon dioxide emission
target. I should like
to know whether there would be any flexibility in the
Government’s approach, if it turned out that their targets were
not ambitious enough to deliver the Kyoto targets to which I believe
they remain
committed.
Stewart
Hosie: Some hon. Members may recall that, in last
week’s Committee of the whole House debate concerning vehicle
excise duty in sparsely populated rural areas, the point was made that
the major financial pain felt by people in such areas was from the
price of fuel, not the one-off cost of vehicle excise duty. Indeed,
with petrol and diesel in the Western Isles today sitting at around
£1.06 a litre, the time has come for some form of change to the
duty system. The
Financial Secretary said earlier that he had had numerous discussions
and consultations and published a large amount of information. I want
to question him on how he got to the duty rates that will be
implemented from September 2006. I welcome the comments that he made
earlier about discussions with those who use rebated fuels. In his
discussions on setting this year’s rates, did he consult the
haulage industry, particularly, which is continuing to find trading
difficult, in no small measure due to the high cost of fuel and not
least because, as Committee members know, the largest element of the
cost of a litre of fuel—slightly under 50 per cent.—is
duty, with the remainder, up to around 65 per cent. of that cost, being
VAT? In the Financial
Secretary’s consultations, did he speak to organisations other
than the obvious
ones concerned with the production, refining and distribution of fuel
and the large motoring organisations? Did he speak to some of the
smaller, sectoral and geographic interests, where the high price of
fuel is particularly punitive, being based on a high duty regime? Did
his review and his consultations and discussions not only lead him to
set this year’s duty rates, but will those in any way inform
debate in future—perhaps on the need for a more sensitive fuel
duty regulation regime? Will he consider in future, notwithstanding the
rates set for this year, the EU derogation option, which has been
raised on a number of occasions by the Liberal Democrats? I am straying
ever so slightly, but do the Financial Secretary’s discussions
lead him, perhaps, to changes in subsequent years’ excepted
vehicles amendment to schedule 1 to the Hydrocarbon Oil Duties Act 1979
statutory instrument? Those are important
questions. I hope that
in the Financial Secretary’s discussions he considered the
effectiveness of the fuel duty regime in relation to business
competitiveness, not least because a litre of unleaded petrol, at
94.6p, is cheaper in every other European country, with the exception
of Denmark, Finland, the Netherlands and Norway, and because a litre of
diesel, at 97.8p, is cheaper in every other country reported by the
European Road Information Centre, based in
Geneva. I should like
briefly to give a few examples: the Automobile Association’s
figures from April show that the 97.8p average price in the UK is
opposed to 73.2p in Austria, 78.91p in Belgium, 77.84p in France,
69.27p in Spain, and so on. Is the Financial Secretary confident that
those increases, delayed as they are until September, remain the only
way to proceed, or does he keep an open mind about whether a more
sensitive regulatory regime may be appropriate and whether future
derogations may be appropriate? Will he consider options to help
sectoral and remote geographical interests?
Mr.
Newmark: I shall take a slightly different focus. I notice
from the explanatory notes that the decision to defer the increase
until 1 September was expected to cost £275 million to the
Exchequer in revenue forgone in 2006 and 2007. Part of the rationale
for the delay, as I understand it from the Government’s
announcement regarding the 2005 Budget, was that the increases would
not go ahead because in the short term uncertainty and the risk of
price volatility remained high, with oil trading at the end of the week
preceding 6 June at above $59 per barrel. That was a year ago. The
price of crude has gone up, and I believe that it is more than
£70 now.
Mr.
Newmark: I am sorry. The price is fairly close to $70, so
it has gone up and volatility has gone up. I read from the explanatory
notes:
“Changes in oils duty
rates would normally take place on Budget day, but, owing to continued
volatility in the oil market, the Government has decided to defer
increases in fuel duty rates until 1 September
2006.” Volatility has
increased since the production of that document and since the report
last year, and prices are even higher than they were in 2005. So, I am
curious
about why 1 September 2006 is still the magic date for increasing duty,
when the situation has not only remained the same, but gotten worse. I
look forward to the Minister’s
response. Rob
Marris: It was an interesting exchange with the hon.
Member for Falmouth and Camborne, because principles are all right for
the Liberal Democrats until they are inconvenient. We heard the
principle that the proportion of taxes from green tax should rise until
it is a bit inconvenient to her hon. Friend from the north of Scotland,
the hon. Member for Caithness, Sutherland and Easter Ross (John
Thurso), when the proportion would drop—but we heard that that
is all right, because it is only a tiny drop. There go the principles.
I understand: it is pragmatism.
Julia
Goldsworthy: It is an issue of reconciling principle with
fairness. If we are going to take difficult decisions with a view to
having an impact on consumer behaviour, we must consider the areas in
which the burden will fall heaviest. It will fall heaviest on those who
are least able to afford it and have no alternative. I see no
contradiction in pursuing fairness and greater environmental
measures.
Rob
Marris: I agree with the hon. Lady’s general
proposition that there is no contradiction. Unfortunately, in the
proposition that she set out earlier, there was just that
contradiction, which is what I highlight to the Committee.
Secondly, the biodiesel and
biofuel chemistry lesson was helpful—esterification and all that
stuff. It would be interesting if the hon. Lady explained her
party’s view on the E85 fuel, which is being pioneered in her
region. I am happy to take an intervention.
Julia
Goldsworthy: I thank the hon. Gentleman for his invitation
to intervene. Of course we fully welcome the fuel. I was asking for
clarification, because there is confusion among consumers about what
rebates they may be entitled to and what support may be available to
them to make a more environmentally friendly conversion to their
vehicle.
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