Standing Committee E
Tuesday 12 May 1998
(Afternoon)
[Part I]
[Mrs. Gwyneth Dunwoody in the Chair]
(Except Clauses 1, 7, 10, 11, 25, 27, 30, 75, 119 and 147) Clause 8
Ultra low sulphur diesel
Question proposed [this day], That the clause stand part of the Bill.
4.30 pm
Question again proposed.
The Financial Secretary to the Treasury (Dawn Primarolo): Before I return to clause 8, I should like to ask your permission, Mrs. Dunwoody, for hon. Members to remove their jackets because it is warm in here.
The Chairman: If hon. Members wish, they may remove their jackets.
Mr. Philip Hammond (Runnymede and Weybridge): On a point of order, Mrs. Dunwoody. The Financial Secretary said this morning that she would make available in good time for the debate on clauses 28 and 29 draft regulations relating to those clauses. I have not received a copy of those draft regulations and I was not able to understand from the exchange this morning what the Financial Secretary meant by "in good time". I once again ask you, Mrs. Dunwoody, to establish when members of the Committee might expect to receive the draft regulations.
The Chairman: Luckily, it is not a matter for the Chair whether Members of Parliament understand what Ministers say. However, the reality is that the Financial Secretary will have heard the hon. Gentleman. The Committee knows that the Chair is not responsible for the provision of individual papers.
Dawn Primarolo: This morning we established that one set of the draft regulations was placed in the Library on 24 April. The remaining set, which will be on the board for members tomorrow morning, should be collected before it goes into their internal post.
The Chairman: Order. We cannot have too many hon. Members wandering around the Committee.
Dawn Primarolo: I draw hon. Members' attention to this because the set of draft regulations could be sent on to their constituency before they manage to intercept it. I hope that that finally deals with
Mr. Nick Gibb (Bognor Regis and Littlehampton) rose
Dawn Primarolo: Obviously it does not.
Mr. Gibb: On a point of order, Mrs. Dunwoody. Will the Financial Secretary confirm whether just one set will be placed on the board? Will there also be a set relating to schedule 4 and clause 32?
Dawn Primarolo: I undertook to make available the two sets of regulations that we discussed this morning. One is available. The second will be on the board tomorrow so that the clauses can be debated. The previous Government did not circulate draft regulations in advance. We are doing all we can to assist members of the Committee.
As for clause 8 and this morning's debate on ultra-low sulphur diesel, I want to conclude my remarks on the recent updating of the European programme for emissions of fuel from engine technology equations. Recent trials involving London Transport buses and London taxis have shown significant reductions in particulate and nitrogen oxide emissions. The reductions in particulates, including those emitted by heavy duty vehicles using city diesel, were larger than the equation indicated. That deals with the points made on vehicle emissions.
Hon. Members asked whether increased refinery emissions would result from the production of ultra-low sulphur diesel and the environmental benefits be lost. In considering the impact on carbon dioxide emissions, we should allow for the fact that the cleaner diesel will be less dense. Therefore, even if fuel consumption does increase, there may still be a reduction in carbon dioxide emissions, reflecting the lower carbon content of a litre of the cleaner, ultra-low sulphur, diesel.
Users have generally experienced a negligible impact on fuel consumption from use of the cleaner diesel, so there will be improvements in carbon dioxide emissions. However, in some cases I refer again to the taxi trials there was a significant improvement in fuel consumption of 5 per cent. to 10 per cent., despite the lower density fuel, from the cleansing effect of city diesel on engines and the resulting improvement to the combustion process. Low sulphur fuels are also needed in order to allow more efficient combustion processes while meeting nitrogen dioxide emissions standards. The new specifications, together with lower density, will mean that 1 litre of ultra-low sulphur diesel will produce less CO2, thus offsetting any greater production emissions.
Hon. Members asked about timing in relation to the specifications. The underlying point is about consultation with the industry. Conservative Members will not be surprised to learn because this was also their practice when their party was in Government that not every taxation measure can be the subject of full and open consultation. There will be instances, such as this, when Ministers choose to reserve the right not to consult in the light of circumstances relating to a particular proposal. The code of practice on consultation, to which hon. Members referred, specifically identifies tax measures as unsuitable for consultation where there is a significant risk of forestalling. Those principles apply in this case. It is also important to remember that the changes were accompanied by an increase in the duty incentive. It is[Dawn Primarolo]
up to the industry to choose whether it reacts to this incentive or not.
I have dealt with consultation, specification and definition, particularly the questions of density and distillation, alignment, or lack of it, with the auto oil standards, the impact on vehicle emissions, the evidence on which the Government based their decision the studies and information about the industry a response to the suggestion that there would be increased emissions and the issue of timing.
Several other general points were raised about the proposals. The first related to the lack of a green book with the Budget. I draw the Committee's attention to the fact that the measures specifically identified as environmental measures are included in the Red Book, along with their contribution to air quality or CO2 emission targets. The question whether the green book should be separate or integrated into the Red Book has been discussed by the Select Committee on Environment, Transport and Regional Affairs and by many environmental groups. The general view is that environmental matters should be integrated into the Red Book and not separated from economics.
As Committee members have pointed out, the Treasury Select Committee and the Select Committee on Environmental Audit expressed views about that development, and when I gave evidence during the public hearing of the transport sub-committee of the Select Committee on Environment, Transport and Regional Affairs you chair that sub-committee, Mrs. Dunwoody the same point was made to me.
Those Committee members who said that the Government's policy lacks direction and specific objectives are wrong. In the Red Book, road fuels are mentioned in paragraph 3.30 on page 72. Paragraph 5.2 on page 74 sets out the Government's objectives for the structure of duties on road fuel over time. Paragraph 4.3 contains targets for the local air pollution and national air quality strategy, and table C1, item 38 on page 153 refers to the relationship between ultra-low sulphur diesel and diesel. We intend over the next few years to use incentives in the tax system to encourage people to use ultra-low sulphur diesel and to encourage refineries to produce it.
Mr. Tim Loughton (East Worthing and Shoreham): A green book was promised before the election, and when the Financial Secretary appeared before the Select Committee on Environmental Audit she gave the impression that all future Budgets would be accompanied by a full green book that contained all environmental Treasury considerations. There is a world of difference between that green book and a few page references in the Red Book. Is the Financial Secretary going back on the green book per se, and will she report that through the Select Committee on Environmental Audit?
Dawn Primarolo: No, Mrs. Dunwoody. If the hon. Gentleman reads the evidence that was submitted and reconsiders my comments, he will realise that the Government are not pulling back from including an environmental assessment in the Budget. This is the first time that any Government have sought to make the environmental impact clear in the Red Book. As we discussed in relation to clause 8, it is important to assess whether a measure is targeted, what its objectives are and whether it will reach them, and we are committed to making such an assessment.
The hon. Member for Runnymede and Weybridge (Mr. Hammond) said that the Government are anti-car or perhaps he said that we give the impression of being anti-car. He also made the important point, with which I agree, that the Government support responsible use of the car and we believe that it is important to recognise the environmental consequencs of the use of cars. We concentrate on the use of the car rather than on ownership. When we discuss vehicle excise duty, we shall highlight that matter. Transport is the fastest growing sector that produces CO2 emissions, but it is not the only sector. As the hon. Member for Runnymede and Weybridge will know, a climate change consultation will take place following the Kyoto decisions and the agreements reached in New York by my right hon. Friend the Deputy Prime Minister.
4.45 pm
A transport White Paper will shortly be published. Air quality targets are being refined. Sir Colin Marshall has been asked to review the possible use of an industrial energy tax. Moreover, the Bill's proposals on vehicle excise duty and on road fuel gases are bearing down on those matters. The Government are seeking to construct a full strategy, and to establish the targets that the hon. Member for Runnymede and Weybridge rightly says are necessary. The Government are also consulting on an aggregates tax and on water pollution. Moreover, the Bill contains proposals on landfill.
I shall not discuss the Government's environmental agenda further, Mrs. Dunwoody, for fear of stretching your tolerance too far. However, I remind the Committee that the 50 parts per million standard for ultra-low sulphur did not deliver sufficient emissions benefits to justify a duty advantage of 1p per litre, particularly if used without a particulate trap, as the hon. Member for Cotswold (Mr. Clifton-Brown) noted. In such circumstances little benefit was gained in particulate emissions, and an approximate saving on nitrogen oxides of only four per cent. was achieved.
The Government are anxious to see real benefits. Although the new standard for ultra-low sulphur diesel is tougher, an extra 1p per litre has been added to the differential. That should help to ensure that a fuel is produced that delivers real emission benefits. The table to which I drew the Committee's attention lays out the Government's intentions in subsequent years.
The criteria of density and distillation were decided after consultation with the Department of Environment, Transport and the Regions, and with the Department of Trade and Industry. Those criteria took into account pre-Budget representations by other Ministers and by the trade. Other criteria such as aromatics content and cetane were considered, but density and distillation were thought to give the best balance between emissions benefits and cost of production. That balance is exactly the one that the hon. Member for Runnymede and Weybridge implored us to strike.
As I have said, not everything in the tax sphere can sensibly be the subject of consultation. Nevertheless, the Government have conducted a great deal of relevant research, and have drawn on information and pre-Budget submissions.
The Budget measure is not about auto-oil and possible fuel standards in seven years' time. It is about a fuel for today that delivers real benefits in our congested and polluted urban areas. It is too easy to focus on the clause's technical aspects at the expense of an increased duty incentive that will be increased further in the next Budget. We are anxious to obtain the maximum emission benefits balanced against the duty incentive. We will therefore keep the specification under review.
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