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6.30 pm

Mrs. Gillian Shephard (South-West Norfolk) (Con): I am delighted to be called to speak in this Budget debate. I make no excuse for changing the subject to that of biofuels: that will be no surprise to the Economic Secretary. I am not deterred by the fact that we usefully debated biofuels 10 days ago, on 11 March. That debate, of which I should like to remind the House, allowed hon. Members on both sides to examine with remarkable unanimity the excellent report on biofuels by the Select Committee on Environment, Food and Rural Affairs, which was published last September. During the debate, the hon. Member for Southampton, Test (Dr. Whitehead) said that

"to get the attention of the House for an idea, one has to enunciate it at least six times."—[Official Report, 11 March 2004; Vol. 418, c. 1731.]

He went on to say that he had talked about a bioethanol escalator at least five times. I am aware that I am raising the issue of biofuels for at least the fifth or sixth time; I feel as though I am recycling in person.

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The debate on 11 March illustrates the fact that although there is no problem in gaining the attention of the House on this subject, there seems to be a problem—perhaps rather less so since the Budget—in gaining that of the Government. In that debate, the Minister for the Environment said:

"I can honestly say that I have attended few debates during which the case has been made so persuasively, and Members have spoken with such authority . . . All their contributions made a great deal of sense".

He went on to point out—albeit to an audience of Members who had demonstrated that they needed no persuasion—that substitution of biofuels for fossil fuels would save millions of tonnes of carbon per year, and he added:

"The question is: how can the Government support this process?"—[Official Report, 11 March 2004; Vol. 418, c. 1743–45.]

At that moment—I am so glad that he is here—the Economic Secretary entered the Chamber, and there was a frisson of excitement as hon. Members allowed themselves to wonder for a moment whether an announcement was imminent—but no, he had come in to walk the Consolidated Fund (No. 2) Bill, and no pronouncement followed. Perhaps we will have one today.

As the Minister for the Environment said on 11 March, there is enthusiasm and support from both sides of this House, from the other place, and from a huge range of organisations on the need for more Government help for the development of biofuels. Bioethanol and biodiesel offer proven environmental benefits compared with petrol, because they provide air quality benefits, security of fuel supply, and alternative markets for UK agricultural producers.

Over the past year, the House has seen several well supported early-day motions, a number of debates and a unanimous report from the Select Committee. The Government can be in no doubt about the size of the political lobby in favour of more support for biofuels. Ministers, especially the Economic Secretary, have received many delegations. Nationally, there is strong support from the CBI, major manufacturers, Friends of the Earth, British Chambers of Commerce, the agriculture industry and many others. Until the Budget announcement last week, the collective view was that although the duty reduction of 20p per litre announced in last year's Budget was very welcome, it was not enough to stimulate further development of the industry. One witness to the Select Committee described biofuels manufacture in the UK as

"an extremely small cottage industry",

and on 11 March the hon. Member for Sherwood (Paddy Tipping) described it, rather unflatteringly, as "some chip oil recycling".

The debate on 11 March—it was timely, because it took place before the Budget—revealed enthusiasm and support not only for our cause, but for a variety of solutions to the problem. The Chairman of the Select Committee, my right hon. Friend the Member for Fylde (Mr. Jack), pointed out that in order for the Government to follow EU guidelines targeting 2 per cent. biodiesel by 2005, there would need to be an 80-fold expansion of production, to 32 million litres per month, compared with current production of 400,000

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litres per month. He drew the House's attention to an amendment to the Energy Bill tabled in the other place, which would

"'require all producers selling road transport fuel in the United Kingdom to show that over the course of a calendar year a specified proportion of such fuel was biofuel.'"—[Official Report, 11 March 2004; Vol. 418, c. 1718.]

He added that such a requirement would be without cost to the Government. The hon. Member for Sherwood supported that proposal and suggested that the Government might consider a further duty derogation and capital grants and allowances. The hon. Member for Southampton, Test spoke of an ethanol escalator, which he has advocated with great knowledge on several occasions.

The Government are not short of support or suggestions on the way forward—nor, indeed, of obligations into which they entered on their own account. Their own policy commission on food and farming recommended in the Curry report that

"the Government should reduce duty on biofuels to that charged on other clean fuels."

The Government have committed themselves by introducing the 20p per litre fuel duty reduction that was announced in the previous Budget. They signed up to the requirements of the EU biofuels directive, which will require the UK to notify to the EU Commission by 1 July this year the volume of biofuel that will be used in the UK by the end of 2005—in other words, those decisions will have to be made within the next four months. The Government's own energy White Paper, which was produced a year ago, gave a commitment to produce

"an assessment of the overall energy implications of both a hydrogen economy and of large scale biomass based fuels, and to develop road maps of the possible transition to these new fuels and vehicles."

In the light of all that, what does the Budget offer? The 20p per litre duty incentive in favour of biodiesel will be maintained until at least 2007; the same incentive for bioethanol, which was announced last year, will be introduced from 1 January 2005, again with the differential guaranteed until at least 2007; the Government will undertake consultation over the summer to examine in detail the implications of input-based taxation for biofuels; and there will be discussion on the applications of capital allowances to support investment in the most environmentally beneficial biofuels processing plants, with a view to announcing the outcome in the 2004 pre-Budget report.

Those moves are positive in that they announce stability of duty levels for a given period and point to further consideration of the issue—as well as to further delay, of course. However, I am bound to say to the Economic Secretary that the Budget disappointed people in the field. Global Commodities UK Ltd., which is based in Dereham in Norfolk, says that the Government have failed to listen. The company had been hoping to boost the county's agricultural economy by using rapeseed oil for fuel production, but told the Eastern Daily Press on 18 March:

"The Germans have just cut tax on their biofuels to zero. It is just not a level playing field. Farmers in Europe are growing rape seed to produce fuel but ours can't."

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British Sugar, which was planning to create a £55 million bioethanol plant at Wissington in my constituency, said:

"Many European governments have already put fiscal support measures in place that are proving sufficient to encourage the development of large-scale industries. Regrettably the level of support announced by the Chancellor today is insufficient to create a similar situation in the UK."

So where do we go from here? The Economic Secretary has said that he has been impressed by the coherence and force of the lobbying for more action to help biofuels. He should know, because he has received, with great courtesy, many delegations and lobby groups on the matter. However, in the House of Commons and the other place, there is perhaps a need to provide a stronger focus at parliamentary level. I am therefore delighted that the hon. Members for Sherwood, for Nottingham, South (Alan Simpson) and for South-East Cornwall (Mr. Breed), all of whom knew that I intended to raise the matter this afternoon, agreed to join me in forming an informal, all-party pressure group to provide such a focus. The Economic Secretary will be hearing more from us.

Earlier, I referred to the variety of approaches that the Government might adopt in encouraging biofuel production. Let me draw hon. Members' attention to another, extremely imaginative approach that was presented as an entry to the East of England Development Agency's Landmark competition, which is now reaching its final stages. The project, which is called Star of the East, is backed by the university of East Anglia in partnership with Powergen. It has attracted wide, cross-party support in Norfolk and Norwich. It proposes a renewables power station, based on a derelict site in Norwich, with a major research and development component, which will burn biomass, develop new ways of processing biofeedstocks and have a biofuels facility. If the Star of the East wins the East of England Development Agency Landmark competition, the Government will get high-level research, a renewables power station, genuine encouragement for biofuels, an outlet for agricultural produce and a world-class site. I shall happily send the details to the Economic Secretary.

I have given the Treasury spokesman rather a battering this afternoon, but the Budget affects all aspects of our lives. Many hon. Members have concentrated on health. Biofuels could affect the health of the nation and, indeed, the international community. We have to reduce carbon emissions and be responsible, for the sake of this generation and the next. If the Government gave more encouragement to the production of biofuels, they could congratulate themselves on their initiative. I hope that they will consider increased encouragement in future.

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