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Rob Marris: I am listening carefully to the right hon. Gentleman's Cargill figures, but will he repeat them? Perhaps I misunderstood, but I thought that he said that Cargill had suggested that an 80-fold increase was needed on 100,000 litres, but that that produced a figure of 32 million litres, which is not an 80-fold increase. Will he go through the figures again?
Mr. Jack: I apologise if the hon. Gentleman did not hear. Let me read the paragraph again:
- "If the Government were to follow the EU guidelines targeting 2% biodiesel by 2005, this 400,000 litres per month must be expanded 80-fold".
In further seeking to justify his position, the Economic Secretary said in other remarks to Cargill that the 20p per litre figure for the current derogation was higher than the derogations available in Spain and Austria, but lower than those in Germany, France and Italy. It is interesting to consider the production figures. Cargill kindly sent me a chart showing that Spain effectively does not rate on the same scale in overall production. Austria produced less than 50,000 tonnes of biodiesel in 2002, but the situation is different in areas where there is a better derogation than ours. The figure goes up to 200,000 tonnes in Italy, 350,000 tonnes in France and 450,000 tonnes in Germany. There does genuinely seem to be a correlation between the rate of duty derogation and the amount that is produced.
3.30 pm
I turn to an even more detailed analysis of why Cargill feels that the 28.2p per litre derogation that I seek through my amendment is correct. Its calculations show that
- "the derogation has failed to create a level playing field between biodiesel and ULSD"—
- "A derogation of 28.20 pence per litre would be necessary based on current prices for new-crop 2003 rapeseed oil and on a total production cost of £488.05 a tonne for biodiesel (which equates to an ex-tax price of 42.70 pence per litre). This compares with ULSD wholesale price of 14.5 pence per litre before tax. A rate of 28.20 pence per litre would, therefore, compensate for the difference in the production costs of ULSD and biodiesel. If such a derogation was forthcoming, Cargill would anticipate producing between 150,000 and 200,000 tonnes of biodiesel annually. This would initially represent 1 per cent. of total UK diesel sales."
My argument is entirely in compliance with the Government's approach to sustainability, both in general terms and in agriculture. I argue it from the point of view of the positive effect that it would have on UK agriculture and on employment in rural Britain. I argue it on the basis of an expert opinion from within grain purchasing—namely, the Cargill company, which has a great deal of knowledge. It is up to the Minister to give the House as much detail as I have given, so that if he intends to stick to 20p, he can justify it. I have suggested to him a way of making a fractional increase in the duty on other forms of liquid hydrocarbon fuels. The policy would cost the Treasury not one penny and is entirely compliant with the approach that has
been taken to electricity in relation tothe renewables obligation. That is a sound, powerful, well-argued and sustainable economic case, and I look forward to the Economic Secretary's reply.
Mr. Baron: Clause 5 increases the duties on red diesel and fuel oil by 1p per litre in addition to inflation. The farming industry continues to be in crisis, and that measure does nothing to help. Indeed, it can only add to the costs to an industry that already has many problems. Farmers in my constituency have certainly suffered in recent years. In 1996, the total income from farming stood at around £5 billion; by last year, it had more than halved, to £2.4 billion. The average farmer earns about £3.60 an hour, and more than two-thirds of farmers work for more than 60 hours a week.
Mr. Bercow : Less than the minimum wage.
Mr. Baron: As my hon. Friend says, less than the minimum wage.
Farming incomes rose slightly in 2002, but during the foot and mouth outbreak in 2001 they were at their lowest in real terms since the depression in the 1930s. The agricultural industry accounted for 0.7 per cent. of the total economy in 2001, down from 3 per cent. in 1973—quite a steep decline. Agriculture accounts for 15 per cent. of rural businesses. However, in the two years prior to 2002, more than 3,000 VAT-registered businesses closed, with a net loss of 25,000 agricultural jobs. Meanwhile, agricultural borrowing is rising, with an estimated total debt of £10 billion, yet investment is at its lowest for 30 years. It is not a pretty picture. Furthermore, despite the fact that food prices for consumers are rising, the share that farmers receive is static or falling. For example, the average price of a pint of milk in the shops is about 35p, but farmers receive an average of only 9p per pint.
Meanwhile, like most small businesses, farmers have been subjected to regulation after regulation. I shall not go into all the detail, but needless to say, since the beginning of the year there have been numerous regulations on various aspects of the industry. It is important to allow farmers to farm free from too much interference and bureaucracy. The current round of common agricultural policy reform is a case in point. There is little doubt that the current round of the CAP keeps prices to the consumer artificially high. Although reform is imperative, EU enlargement means that mid-term review will neither fulfil the need for reform nor allow British farmers the necessary freedom to farm for the market.
Rob Marris: Would the hon. Gentleman get rid of milk quotas?
Mr. Baron: That should be considered, but the mid-term review is proving a great disappointment to many farmers in my constituency and, I am sure, throughout the country because it does not fundamentally deal with the reforms that are required. That causes consternation, especially about the promises that the Government made or suggested, before the review.
Farming is struggling, and there is burdensome regulation and little prospect of CAP reform. The Government should do what they reasonably can to help farming through a difficult period. Increasing the duties on red diesel and fuel oil by 1p per litre above inflation makes life more difficult for the farmers in my constituency and throughout the country. That cannot be in the national interest. They should do much more here and in the international marketplace to create better conditions for British farming to thrive, so that we produce more domestically grown goods both for the home market and export.
Agriculture accounts for more than three quarters of the management of land in rural areas. The Government tend to forget that. Agriculture has a dual purpose of producing food and overseeing environmental management, which is important to the economy, not least because agriculture generates more than £7 billion of the £9 billion a year that rural tourism generates. Farmers and growers are the custodians of our landscape and we would do well to remember that. The countryside is a resource, but everyone should enjoy it. Agriculture plays a key role, which needs to be better recognised.
The Government should scrap the increase in red diesel and fuel duties and not lumber farming with yet another increase in costs, especially at such a difficult time.
Mr. Djanogly: My right hon. Friend the Member for Fylde (Mr. Jack) is very knowledgeable about this subject. I was amazed to learn that 25 per cent. of farmland could fuel the country. It is a remarkable figure, and I do not know how well it is known.
Farming should be greatly encouraged. I recently visited a farmer in my constituency—a Mr. Field—who has devoted one of his fields to the production of a biocrop. I had an interesting time learning about that. Its advantage is that it means winners all round. Farmers—who are currently having a hard time, as other hon. Members pointed out—can use it to diversify. Many are desperately searching for ways in which to diversify while maintaining the quality of their land and doing that in an environmentally friendly way, not only for their land but for the energy that they produce.
The comparatively low duty on biodiesel is still not enough to encourage commercial use of the fuel, which is environmentally friendly but not competitive with fossil diesel under the current tax structure. The British Association for Bio Fuels and Oils wants the rebate to be increased from 20p per litre to 40p per litre. As long as such a rebate was guaranteed over a period of time, it would probably lead to major firms being willing to begin production. However, there are no guarantees over a period of time. I get the feeling that it is a side issue for the Government and they want to get away with paying lip service to the needs of the environmental lobby. We should be more serious about biodiesel. It is environmentally friendly, it provides excellent opportunities for diversification for farmers, and it helps a rural sector that deserves more input than it is receiving from the Government today.
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