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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 155

Fuel 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 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.
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.
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