Mr.
Hammond: I think that the Minister is telling the
Committee that, regarding those familiar concessions that might fall
foul of the Wilkinson judgment, the message to taxpayers is that they
will not lose out as a result of this obscure process. Nobody is going
to find that they suddenly have a tax bill when they thought that they
had a concession. If the Minister can confirm that, that would be very
helpful, but can she explain to
me—I am sorry, but I am not a lawyer—how, if a court has
effectively struck down HMRC’s practice and found that unlawful,
HMRC is able to carry on operating these extra statutory concessions in
the meantime, given that I gather that the judgment was made some time
ago? On what basis can that
happen?
Jane
Kennedy: The hon. Gentleman makes several points. First,
there will be no retrospective element regarding the decisions around
Wilkinson and their effect. Secondly, he should never apologise for not
being a lawyer.
Thirdly, in
response to a serious point that the hon. Gentleman makes, HMRC has
been working since the court case to identify the extra-statutory
concessions and to then analyse which are within the law and which are
ultra vires. That work is ongoing. Although I take the point that the
hon. Gentleman makes, HMRC has taken this opportunity to bring forward
a piece of amending legislation that will allow it not to have to wait
until the next Finance Bill to introduce a change that will help people
who rely on concessions regarding the concessions that can be brought
on to a statutory basis.
The hon.
Gentleman said that such a statutory instrument would be unamendable.
We have this discussion about statutory instruments regularly, but I
think that it would be an inefficient and wasteful use of parliamentary
time to enact individual concessions in primary legislation merely to
formalise existing and often long-standing tax treatments. The enabling
power will allow only concessions that are already part of the fabric
of the tax regime to be put on a statutory footing by the Treasury, so
it would not be appropriate for them to be amendable
anyway.
Mr.
Hammond: I think that the Minister’s colleague, the
hon. Member for Islington, South and Finsbury, might have something to
say about the Minister’s comments about lawyers in due
course. Is
the Minister saying that when the powers in clause 154 are used, the
effect will be to treat the extra-statutory concession as having always
been a statutory arrangement? In other words, is the legal effect of
the clause retrospective? Does it provide legal underpinning to the
terms of the extra-statutory concession? I have to confess that, in
practical terms, I like what the Minister is saying. She is, I think,
telling us that no taxpayer will suffer retrospectively and that no one
will find out that their extra-statutory concession for last year has
been withdrawn because it was never valid. Although I am glad that that
will be the effect, I do not understand the mechanism for achieving
that. Ministers cannot wish away the fact that HMRC has been acting
unlawfully. They either have to make HMRC’s actions
retrospectively lawful, or they have to find another way of
underpinning the
concessions.
Jane
Kennedy: I absolutely hear what the hon. Gentleman is
saying and, intuitively, I think he is right. However, my advice is
that the court decision does not strike down the concessions. A
concession exists until the legislation takes over but because that
seems so counter-intuitive to me, too, I would like to examine that in
more detail and write to him with an absolute answer, for the avoidance
of all doubt, about exactly what the legal position is and has been
since the court made its
decision.
Mr.
Hammond: I am somewhat reassured that Ministers are as
confused as we are about exactly what is going on here. I think that we
share an objective. These extra-statutory concessions are useful. They
are a part of the furniture. The most important thing about them is
that they work in practice. I entirely accept her point that the great
majority of them will continue to operate as extra-statutory
concessions. Will she undertake to write to members of the Committee in
due course? This might not be until the review is completed, but we
need to understand which of the concessions are not lawful, which ones
in that group will be dealt with immediately by clause 154, and how the
effective underpinning of their status—their operation over the
period between the judgment and the new legislation coming into
force—will be provided. Which of them are not going to be
enshrined in statute, perhaps because although they are nice to operate
as extra-statutory concessions, they would not be appropriate to
operate as statutory provisions? How are we going to deal with the
situation that arises in that case?
I do not
think there are any huge political axes to grind. We are discussing the
administration of the tax system, but I have no idea how many
individuals receive each of these extra-statutory concessions. If any
of the concessions are widely used, leaving aside the question of
retrospectivity, the arrangements and plans for the future of a
significant number of taxpayers could be thrown into doubt. If the
Minister would write to members of the Committee before Report, it
would give us an opportunity to come back to this, should we need to do
so.
Jane
Kennedy: I will, of course, undertake to write before
Report, and although I will not be able to give details, I can
certainly clarify whether HMRC can withdraw an unlawful concession. I
understand that HMRC must give notice before any concession can be
withdrawn.
Question
put and agreed
to. Clause
154 ordered to stand part of the
Bill.
Clause
155Fuel
duty: definition of “ultra low sulphur
diesel” Question
proposed, That the clause stand part of the
Bill.
Justine
Greening (Putney) (Con): It is a pleasure to see you back
in the Chair after our lunchtime break, Sir
Nicholas. We
should pause and read this important clause carefully. The
Treasury’s explanatory notes tell us that the clause is intended
to help oil companies to ensure the supply of sulphur-free
diesel—an important fuel in helping to improve vehicle
emissions. When that is combined with ultra low sulphur diesel, the
duty rates paid at the moment, which are in line with those for heavy
oil, are unfair. There should thus be amendment
so that combining sulphur-free diesel and ultra low sulphur diesel does
not lead to rates of duty than are higher than they should
be. It
might be helpful to put the clause in a wider context. The Department
for Transport brought forward statutory instrument 2007/1608, which
said that oil companies had to supply sulphur-free diesel to garages
that sell more than 3 million litres a year, and ultra low sulphur
diesel to garages selling less than 3 million litres a year, with
effect from 4 December 2007. I understand that this was part of a
broader attempt to help to move the industry towards the UK and
European Union deadline of petrol and diesel at all garages being
sulphur-free by 1 January 2009. However, there is an anomaly regarding
ultra low sulphur diesel and sulphur-free diesel because, for various
reasons, oil companies sometimes have to combine the two fuels. Rather
than continuing to pay a duty in line with that for ultra low sulphur
diesel, or for sulphur-free diesel, duty is charged at the rate for
heavy oil—regular diesel—because the mixed fuel does not
meet either definition of the two diesels.
Clause 155
amends the definition of what constitutes ultra low sulphur diesel by
removing density and distillation requirements for the mixture to
qualify as ultra low sulphur diesel, which means that the correct rate
can be charged, rather than the rate for heavy oil. We do not
necessarily oppose this attempt to correct an apparent unfairness in
the duty rates, but I want to clarify a couple of points.
First, the
clause provides that the provision is treated as having come into force
on 4 September 2007. I want to check that, because statutory instrument
2007/1608 introduced a requirement to supply sulphur-free diesel to
garage forecourts with effect from 4 December 2007, as was confirmed in
a written ministerial statement on 26 July. The key date thus seems to
be 4 December 2007.
I challenge
that, because the background note to the clause in the explanatory
notes
states: “The
Government introduced a measure requiring oil suppliers to supply
sulphur-free diesel...to garage forecourts from 4
September.”
However, the
ministerial statement said that the requirement would come into force
on 4 December. Will the Minister clear up the confusion about which
date should be included in the clause? Should it be 4 December, which
was when the SI came into force, or should it be 4
September, the date in the Bill? It is not clear why there should be a
three-month difference.
It is a
somewhat retrospective move to allow oil companies to get a rebate for
oils that they have mixed in the past. Will the Minister tell us what
calculations the Treasury has made about the revenue impact of clause
155 and the fact that oil companies will now be able to get a rebate
for those blended fuel mixes for which they have paid at the standard
rate rather than the reduced rate? The latest HMRC statistics show that
about 12 million litres of sulphur-free diesel was released for
consumption in 2006-07. What is the Treasury’s assessment of the
amount of diesel that was blended that would qualify for that
retrospective
rebate? We
understand why the Government want to clear up what could be called an
unfairness in the way in which the oils duty has worked for oil
companies, but what about those who buy the fuel? With road tax, they
are hit by retrospective tax rises that they cannot undo or avoid, yet
the Government seem happy to tackle
retrospectivity for oil companies. We do not disagree with the measure,
but I take this opportunity to urge the Minister to consider the
unfairness of retrospectivity in other areas of motoring, such as
vehicle excise duty. I shall make
one more brief point. On broader issues, such as on vehicle excise
duty, I am still waiting for answers to parliamentary questions that
were due to be answered by 8 May. That was well over a month ago. I
would appreciate it if the Minister would finally provide me with
answers to those important questions, alongside her response to the
issues that I have raised about the
clause. 5
pm Dr.
Nick Palmer (Broxtowe) (Lab): This clause, unlike some of
the more abstruse ones, deals with an issue that we often get
correspondence about. I would like to ask the Exchequer Secretary
whether the difference in the price of diesel—there is no
difference for unleaded petrol—between Britain and the continent
reflects the standards of sulphur reduction in Britain, or whether
other factors are involved, and whether that has influenced the setting
of the
duty. Mr.
Peter Bone (Wellingborough) (Con): I have probably got
this wrong, but if the forecourt sells the diesel at a higher price
because it expects to pay duty at a higher level and is therefore
passing that on to the customers, that duty should go to the Treasury
and the company should not get a rebate. I am not entirely sure that
that has happened, but if it has it seems wrong that the Treasury is
giving effectively a profit to the oil
company. Sir
Peter Viggers (Gosport) (Con)
rose—
The
Chairman: Before I call Peter Viggers, perhaps it would be
appropriate to congratulate him on the award of a knighthood in the
Queen’s birthday honours list. It is richly deserved and we all
congratulate
him.
Sir
Peter Viggers: Thank you, Sir Nicholas. Praise from you is
praise
indeed. When
the Exchequer Secretary responds, she owes us another sentence or so of
explanation. The explanatory note on the clause uses the passive, which
is always used when someone is trying to obscure an issue. It
says: “The
Government introduced a measure requiring oil suppliers to supply
sulphur-free diesel (SFD) to garage forecourts from 4
September 2007. It was recognised that occasions might arise when SFD
and ULSD need to be mixed to guarantee the
supply.” It
was recognised by whom, and when? We would like to know the chronology,
because a mistake has been made. There has been a failure to realise
the full implications of mixing the two kinds of diesel. I do not fully
understand that note, and I hope that the Exchequer Secretary will be
able to make it
clear.
Angela
Eagle: I hope that I can clear up the confusion, which has
grown as the debate has progressed. This is a modest technical issue,
which should not worry people too much. I will explain how it came
about. Clause
155 amends the definition of ultra low sulphur diesel with
retrospective effect from 4 September 2007. The hon. Member for Putney
is right about the wider
issue of the Department for Transport issuing regulations for the
provision of sulphur-free diesel. That is a good thing—let us
get that on the record. Moving from ultra low sulphur to sulphur-free
diesel is of benefit to air quality and lowers emissions. We all ought
to recognise that that is progress. The Department for Transport made
that mandatory from 4 December, and set the duty rate at the same level
as for ultra low sulphur diesel, namely 50.35p per litre. As the hon.
Lady hinted, there is a higher duty rate for heavy oil of 56.94p per
litre. Due to the distribution mechanisms, which get the different
forms of oil and petrol mixed and then out to distribution centres and
thenceforth on to the forecourts, there was an issue with the
changeover period and with the run-in to sulphur-free diesel supply
becoming mandatory. The problem that it caused was that under existing
legislation, although sulphur-free diesel and ultra low sulphur diesel
have the same duty rate, mixtures of the two did not meet either of the
definitions in place from earlier times, and the law said that an oil
that did not meet those definitions would automatically qualify for the
higher
rate. Members
of the industry suggested that there were practical problems in the
transition from the old duty rate to the new mandatory regime with
sulphur-free diesel and that, as a result of how the pipes and
distribution systems work, if they happened to mix ultra low sulphur
diesel and sulphur-free diesel in order to get supplies to the pumps in
an appropriate way, the resulting oil, which would sometimes contain a
tiny residue of other oils, would not meet either definition. We
therefore created a circumstance for that period. Retrospectivity
applies so that they could gear up to supplying sulphur-free diesel.
Retrospectively, we will not charge them the higher rate if there
happen to be traces of oils from the mixing necessary for their
distribution. It is all perfectly simple, as hon. Friends and
Opposition Members can
see. Because
the industry was moving toward supplying sulphur-free diesel in a
timely fashion for the mandation on 4 December, and in order for
members of the industry to get their distribution mechanisms right, we
gave the industry assurance that we would not charge a higher rate of
duty for three months before, as any inadvertent mixing might put
industry members outwith the definitions then in law. It is a
transitional measure to facilitate getting supplies of sulphur-free
diesel where they needed to be in a timely fashion for the mandation to
come into effect appropriately on 4 December. I see that the hon.
Member for Putney is itching to get to her feet, so I will gladly give
way.
| 
