Fuel duties: aqua methanol etc

Finance Bill – in a Public Bill Committee am 2:30 pm ar 7 Gorffennaf 2016.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss that schedule 17 be the Seventeenth schedule to the Bill.

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Chief Secretary to the Treasury, Member, Labour Party National Executive Committee

Clause 141 and schedule 17 provide for a reduced rate of excise duty for aqua methanol that is set aside for use or used as a fuel in any engine, motor or other machinery. That reduced rate, which is 7.9p per litre, will take effect on 1 October 2016.

The stated aim of the clause is to incentivise the uptake of aqua methanol as a greener fuel relative to petrol and diesel. In the 2014 Budget, the coalition Government announced that they would introduce a lower rate of duty on aqua methanol used in road vehicles, similar to the reduced rates that apply to other alternative fuels, to encourage the use of that cleaner alternative. That was to be legislated for in the 2015 Finance Bill, but the Bill that was introduced after the March 2015 Budget was agreed very quickly, with minimal debate, due to the timing of the Dissolution for the election. That was done with cross-party approval, but the coalition Government removed a few clauses from that Bill, with a view to introducing them at a later stage. Clause 141 is one of those.

Clause 141 and schedule 17 introduce that lower rate of duty. The schedule also prohibits mixing aqua methanol on which lower duty has been charged with biodiesel, bioethanol, bioblend, bioethanol blend or hydrocarbon oil. At the time of the measure’s initial announcement, the cost to the Exchequer was expected to be £5 million in 2015-16, £10 million in 2016-17, £20 million in 2017-18 and £40 million in 2018-19. The measure has taken a while to come to fruition, so perhaps the Minister can provide some up-to-date figures on the cost of the reduced duty rate. Further, the initial proposal, as printed in the 2014 Budget, said that the rate would be set at 9.32p per litre, so will the Minister confirm why the reduced rate will now be 7.9p?

Aside from those minor points of clarification, the Opposition are more than happy to support clause 141 and schedule 17. Indeed, I am glad that the Government are taking some action, however small, to promote cleaner, greener fuel, given the concerns about vehicle excise duty that I have outlined.

Photo of Damian Hinds Damian Hinds The Exchequer Secretary

The clause will introduce a reduced duty rate for aqua methanol that is set aside for use as fuel in any engine, motor or other machinery. Aqua methanol is a new, greener fuel that is 95% methanol and 5% water. The reduced duty rate is intended to incentivise the uptake of aqua methanol, as the hon. Lady said, as a greener alternative fuel to petrol and diesel.

The Government are committed to improving air quality in the UK through the reduction of carbon dioxide and nitrogen dioxide emissions. Every year, around 50,000 people die prematurely due to poor air quality. Road vehicles account for around 92% of UK transport carbon dioxide emissions and 80% of nitrogen dioxide emissions in roadside locations.

Successive Governments will need to de-carbonise the road transport sector in the UK if we are to deliver on our commitments to reduce greenhouse gas emissions —as I know both the hon. Lady and I are committed to doing. Indeed, the fourth carbon budget requires successive Governments to reduce greenhouse gas emissions by 51% relative to their 1990 levels by 2027. Any action to meet those targets will need to include the deployment of new greener alternative fuels, and aqua methanol is one of those. Incentivising its use has the potential to contribute to the UK meeting its air quality targets through reductions in the use of diesel, which is the largest source of nitrogen dioxide emissions.

In the 2013 autumn statement, the Government announced that the differential between the lower duty rate for alternative road fuel gases and the main duty rate for petrol and diesel would be maintained until 2024. In the 2014 Budget the Government went further, announcing that we would also apply a reduced fuel duty rate to aqua methanol. The clause follows through on that commitment. It introduces a reduced duty rate of 7.9p per litre for aqua methanol to the main rate of 57.95p per litre. The decisions on aqua methanol were outlined in the autumn statement in 2014 and the costings of the policy remain consistent with our forecasts at that time, although the delay to the introduction of the new rate means costs to the Exchequer have also been delayed.

The reduced duty rate was recalculated based on fuel duty changes and the energy content. The clause legislates for the reduced rate of excise duty for aqua methanol, which will incentivise the uptake of that alternative fuel and help us to deliver on the commitment to reduce greenhouse gas emissions and improve air quality in our towns and cities.

Question put and agreed to.

Clause 141 accordingly ordered to stand part of the Bill.

Schedule 17 agreed to.

Clause 142