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Regulations on Small Businesses (Reduction)
Mr. John Bercow accordingly presented a Bill to reduce the quantity of regulations on businesses below a certain size: And the same was read the First time; and ordered to be read a Second time on Friday 21 May, and to be printed [Bill 89].
Orders of the Day
Finance Bill
(Clauses Nos. 2, 28 and 99)
The Chief Secretary to the Treasury (Mr. Alan Milburn): Clause 2 increases the rate of duty on petrol, diesel and other fuels.
Diesel duty is now 3p per litre more than the duty on unleaded petrol, to remove diesel's advantage when considering energy and carbon content per litre. The differential is also in recognition of the fact that diesel is more harmful to health than petrol because of the particulate and nitrous oxide emissions associated with it.
We have, however, further increased the incentive for ultra-low sulphur diesel by increasing the duty differential over conventional diesel from 2p to 3p per litre. That increase, if passed on to the consumer, should make ultra-low sulphur diesel cheaper at the pump than conventional diesel, and should further encourage the manufacture and use of that cleaner fuel. The duty rate for ULSD is now the same as that for unleaded petrol. Cleaner diesel already accounts for 70 per cent. of sales. By the end of this year, thanks to the duty changes that we are making, it could account for almost all of diesel sales in this country, with clear benefits for the environment. Similarly, the duty on road fuel gas hasbeen reduced by 6.13p to 15p per kg--a reduction of29 per cent. That reduction reflects the considerable environmental benefit of road fuel gas over other road fuels, especially diesel.
Gas-powered vehicles emit significantly fewer pollutants than those that use petrol or diesel. The Government hope that the substantial reduction will encourage manufacturers to increase the distribution and availability of that environmentally friendly fuel, and that the lower price to the consumer will help to offset the cost of vehicle conversion.
The duty on higher octane unleaded petrol, also known as super unleaded, is increased to 52.33p per litre. However, the duty rate will be cut to 49.21p per litre--2p above the unleaded rate--from 1 October 1999. It may be useful if I explain why.
The current duty rate on higher octane unleaded petrol is close to that of leaded because it contains high levels of benzene, which is a known carcinogen. Benzene levels in petrol, however, will be regulated from 1 January 2000, so there will no longer be a health reason for distinguishing between rates of duty on unleaded and high octane unleaded petrol. However, lead replacement petrol, which is to be introduced in the second half of this year, is dutiable as higher octane unleaded petrol, and will mostly be used in older cars, which are less fuel efficient
and environmentally friendly than newer cars running on unleaded petrol. On that basis, therefore, it is right to apply a higher duty rate, if not as high as previously.
The duty cut will take effect from 1 October 1999, to facilitate the introduction of lead replacement petrol, allowing the industry time before 1 January 2000, when leaded petrol is banned, to sort out its supply logistics. I know that that is a concern, especially for those with older cars.
The clause therefore continues the policy, introduced by the previous Government, of increasing duties on road fuels by more than the rate of inflation. The fuel duty escalator was formally introduced by a Conservative Government in 1993, in an effort to meet the commitments that they made at the Rio earth summit. The present Government are continuing to use the escalator for similar reasons--because it will help us to meet the commitments that we made at Kyoto.
Mr. John Hayes (South Holland and The Deepings)
rose--
Mr. Dale Campbell-Savours (Workington)
rose--
Mr. Milburn:
I shall give way to the hon. Gentleman and then to my hon. Friend the Member for Workington (Mr. Campbell-Savours).
Mr. Hayes:
Does the right hon. Gentleman recognise that we are discussing a cumulative problem? The escalator may have been introduced by a previous Government, but that means that there is no obligation on the present Government to continue it. Will he at least give an assurance to those who are most worried about increases--especially people in rural constituencies such as mine, for whom cars are a necessity, not a luxury--that the increases will not continue year on year? The implication of what the right hon. Gentleman is saying is that the escalator will be used ad infinitum.
Mr. Milburn:
I intend to discuss rural areas and the special transport needs of people living in the countryside. Very often, for such people, a car is a necessity rather than simply a luxury.
The hon. Gentleman asks about the continuation of the escalator. We made it perfectly clear in the Budget report this year that, as the Chancellor said in his 1997 July Budget, road fuel duties would be increased on average by at least 6 per cent. in real terms in future Budgets. That was the stated position in the Red Book; it remains the position today.
Mr. John Swinney (North Tayside)
rose--
Mr. Milburn:
May I take one intervention at a time? I give way to my hon. Friend.
Mr. Campbell-Savours:
About three weeks ago, I asked my right hon. Friend the Minister of Transport whether some research might be done on transport costs per tonne per mile in each European country, including the United Kingdom.
I believe that that is the statistic that matters, because it will show that costs for British hauliers are now substantially higher than those of their European counterparts. I have been elected to represent a constituency 300 miles from London, from which freight must be carried to the major conurbations. That distance creates substantial on-costs for industry, and those calculations and that research are important. Can my right hon. Friend tell me whether that work is being carried out? If it is, will the Government take the results on board if they reveal what I suspect?
Mr. Milburn:
I am aware, first, that a variety of statistics are connected with the road haulage industry, in particular, those relating to the impact of the fuel duty escalator and, secondly, that my hon. Friend questioned my right hon. Friend the Minister of Transport about it at Question Time about a fortnight ago. I understand that my right hon. Friend replied positively. If that is the case, I am sure that the Department of the Environment, Transport and the Regions is looking at precisely the issues that my hon. Friend asked it to look at.
Mr. Campbell-Savours:
I understand that the Department may be doing that, but I want to know whether Treasury Ministers are involved in that research and whether they are prepared to respond if it shows what I believe to be true--that British hauliers, irrespective of the KPMG report and all the other issues, are paying more. I am deeply disturbed, because of the on-cost for companies in my constituency, which is 300 miles from London.
Mr. Milburn:
At the danger of starting on the wrong foot--
Mr. John Bercow (Buckingham)
rose--
Mr. Milburn:
May I answer one question at a time? I know that the hon. Gentleman is very keen in such debates, but can he contain himself for a moment?
It is important that, on this issue, we do not reinvent the wheel. If my hon. Friend the Member for Workington has put to my right hon. Friend the Minister of Transport--[Interruption.] Conservative Members have finally got the pun. If my hon. Friend has put the issue to my right hon. Friend and he has agreed to look at it, I am sure that he will do precisely that. The issue is properly the preserve of the Department with which my hon. Friend raised it.
Mr. Geoffrey Clifton-Brown (Cotswold)
rose--
Mr. Milburn:
I shall give way to the hon. Member for North Tayside (Mr. Swinney) and will take the other interventions later.
Mr. Swinney:
I am grateful to the Chief Secretary for giving way. I return to the point raised by the hon.
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