HC Deb 27 March 1996 vol 274 cc1114-9
Mr. Roger Gale (North Thanet)

I beg to move amendment No. 24, in page 2, line 22, leave out '£0.2817' and insert `£0.10'.

I begin by congratulating the Government on the fact that the provision already in the Bill proposes a 15 per cent. cut in excise duty on gas used as a road fuel. That is an important, indeed a vital, step—a step towards sustainability and towards protecting the health of adults and children in all our towns and cities.

It is accepted that vehicles using gas fuel pollute much less than their petrol and diesel counterparts. To someone standing on any traffic-filled high street, the case for gas-fuelled vehicles is self-evident. If one stays there long enough, one does not need to read recent Government reports to know that vehicle emissions are far too high.

In local and national newspapers, the subject of air quality is now discussed. As an asthma sufferer myself, I have a heightened awareness of the effects of polluted air. Regrettably, local government activities sometimes make that worse. I happen to favour traffic calming measures, but the fact remains that, as we introduce them, especially road humps, we cause petrol and diesel vehicles to pollute more.

The extra acceleration and deceleration caused by traffic calming substantially increases vehicle emissions into our city streets. That is all the more serious because vehicle emissions rise geometrically rather than arithmetically, so the increases in pollution are sixfold, eightfold or even tenfold. More gas vehicles will undo such damage, and help to stop one form of protection for our children—slower speeds—exacerbating another—emission pollution.

Recently, my hon. Friend the Minister for Transport in London announced the publication of a report by the energy technology support unit highlighting the benefits of gas as a road fuel. Furthermore, gas is transported by pipeline, thus avoiding the need to use road-based oil tankers, so it offers additional quality-of-life benefits. Those of us who travel on Kent's roads recognise only too clearly the need to reduce the heavy traffic that uses them, including the rural roads, as rat runs.

I wholeheartedly endorse the existing clause that compensates for the extra costs of delivering compressed natural gas to vehicles. The 15 per cent. cut will allow gas fuel to be sold at the same price as petrol and diesel, and that sends the right fiscal message to the marketplace. Unfortunately, the signal is neither strong enough nor clear enough, which is a great shame, because it is the right signal. If we are to develop a large and growing gas fleet, with all its attendant air quality benefits, clearly we need to do more. We need not only to equalise the fuel costs but to allow for the additional costs of gas vehicles themselves.

Whether they are new or converted, gas vehicles are currently more expensive. That is not inevitable. In time, once the industry has begun mass production, gas vehicles need be no more expensive than existing petrol or diesel vehicles. But for the moment, and probably for some time to come, they are bound to cost more, because they lack the economy of scale of their rivals.

The Government's existing provision already accepts the benefits of gas fuel, but I suggest that, without greater incentives, especially for fleet operators, the environmental benefits of compressed natural gas usage will not be delivered. My amendment addresses that problem. It would create a differential of 16p a litre between petrol and diesel, on the one hand, and gas on the other.

My amendment would also lower the duty rate to the European Union minimum. Our current duty on natural gas is 340 per cent. of that minimum, while our duty on diesel is only 160 per cent., and on petrol only 140 per cent. We have a tremendous opportunity to give the market an unequivocal message by reducing our gas duty to the minimum permitted under EU rules.

The figure that I have selected is not random, for another reason. It has been carefully selected, because it would give gas vehicles life-cycle costs similar to those of petrol and diesel vehicles.

It is believed that the natural gas vehicle industry is ready to take off. Its specific early targets are buses, taxis and mid-range trucks—for example, the refuse trucks found in every town and city. These are all largely urban vehicles, and are obvious polluters in the eyes of the public. Research that I have seen suggests that all that is holding fleet managers back is the significant price differential. By making gas fuel substantially cheaper than petrol and diesel, we can compensate them for the extra capital costs of the vehicles and allow the industry to take off. That is what the amendment will do.

I should emphasise to my right hon. Friend the Paymaster General that I see the enhanced reduction as a temporary measure, lasting only until the economies of scale to which I have referred take effect. Once the industry achieves 20 per cent. of the share in any market, the economies of scale will begin to take hold, and unit costs will fall. The markets will then move to become more environmentally friendly, and the need for such a large differential—I accept that I am suggesting a large differential—will disappear.

In year one, the revenue impact of what I am suggesting would be minimal, as the actual number of vehicles that could conceivably take advantage of any cut this year is 5,000 at the very most. The potential net cash loss to the Treasury would therefore be relatively small—about £7 million at most. Clearly, the extra reduction could cost more in the longer term.

Were 200,000 vehicles to convert to natural gas, the Treasury would lose about £200 million a year, but even this would be more than offset by the estimated environmental and social benefits of reduced pollution. It is estimated that 200,000 gas vehicles could save about £240 million a year, and recent reports laying greater emphasis on the health problems caused by particulates suggest that even that may be an underestimate.

The precedent and example for a lower rate for environmentally better fuels lies with our treatment of unleaded petrol. We all know that the first—minor—cut in the rate led to a small increase in the number of people using the fuel, and it required a second larger cut before the policy affected public behaviour. My amendment avoids a repetition of that mistake with gas as a road fuel.

The Government have shown in the Bill that they are committed to their approach to the subject. My amendment offers the added benefit of sending a clear and unequivocal signal to the market. The current clause is highly desirable, but I do not believe that it will be sufficient to convert expressions of interest into firm orders. My amendment will be to the benefit of all who live in, work in and visit all our towns and cities. I look forward to hearing my right hon. Friend's reply, and I hope that he will treat my proposal sympathetically.

9 pm

Mr. David Jamieson (Plymouth, Devonport)

In rising to support the amendment tabled by the hon. Member for Thanet, North (Mr. Gale), I should first declare an interest. I have given advice to the Natural Gas Vehicle Association, but have no financial contract with it.

The amendment—which essentially proposes to use a fiscal measure to promote the use of compressed gas vehicles—gives the Government the opportunity to do three things: first, to create a cleaner environment, particularly in terms of air quality; secondly, to develop new technology at which we could be at the leading edge; thirdly, to greatly assist our balance of payments. I shall address a few comments to each of those matters.

First, the environmental case for moving from diesel and petrol motor vehicles to compressed natural gas is overwhelming. The emissions from natural gas vehicles are substantially lower in almost every category than from diesel and petrol vehicles. Evidence shows that diesel in particular is giving out particulates that are carcinogenic, and much of the evidence from America shows that cancers are developing early in young people as a result of their breathing in diesel fumes. In particular, slow-moving vehicles such as buses, taxis, refuse collection vehicles and other vehicles seen in our city centres give out high levels of pollution. The environmental case is so strong that there is no need to say any more on it.

Secondly, this country has for many years been at the leading edge of vehicle production—in particular, car production. We should be developing the new technology in this country, but it is instead being developed in other parts of Europe, Japan, America and Canada. We could be losing out by not providing new technology that could be sold right across the world if we could grasp our home market and develop it as we should.

I have named some countries, but Argentina and Italy, for example, are also ahead of us in this area. Italy has a third of a million gas vehicles on its roads, while we have only a few hundred. The industry needs the critical mass of filling stations to give it a kick start, and that can only be done by the fiscal measures proposed in the amendment.

Finally, we could substantially help our balance of payments by not importing the oil that presently fuels our vehicles. Some 60 per cent. of oil for our vehicles is imported from other countries—mainly the middle east. Natural gas would come almost in its entirety from the gasfields around the United Kingdom.

A topical argument is that oil comes to this country across the sea in tankers and is then taken in tankers along our roads, which is, as recent experience in south Wales has shown, an environmental hazard and a hazard to safety and life on our roads; whereas gas is delivered through pipes, which is much safer.

Clearly, there is cross-party support on such an important matter. The amendment is an opportunity for the Government to reduce the excise duty, which would encourage the use of much cleaner fuels in vehicles on our roads.

Mr. Robert Atkins (South Ribble)

I apologise to you, Mr. Deputy Speaker, to the House and to my hon. Friend the Member for North Thanet (Mr. Gale) for missing the start of my hon. Friend's brief remarks on the amendment, particularly since I added my name to the list of those supporting the amendment. I will speak but briefly, knowing largely what my hon. Friend and the hon. Member for Plymouth, Devonport (Mr. Jamieson) have said.

When I was Minister of State for the Environment Countryside, the hon. Member for Devonport and I slid) ed a platform, and we talked about this very issue. I pleased to do so, because it is an important issue.

The hon. Gentleman is wrong on one point, however: the technology is being developed in my constituency at the Leyland technical center—the former Leyland Trucks site, where a lot of work is being done in the field and on designing buses and trucks which, as my hon. Friend the Member for North Thanet rightly said, are being used in other parts of the world. We already have a lead that we can build on and on which Britain can score a few runs, from both the environmental and industrial points of view.

I am therefore delighted to be associated with the amendment. Allowing for the fact that it has revenue implications that might not be wholly acceptable to my right hon. Friend the Paymaster General, I ask him to realise the strength of feeling that is beginning to build up among—to put it politely—three hon. Members who would consider themselves involved in the issue and who I would hope the House would realise have a genuine and abiding interest. I hope that he will be sympathetic in his response tonight and in the way in which he treats this matter, which has ramifications for health, the environment and pollution control, and would also allow us to make a product that we can sell to the world.

Mr. Alan Simpson (Nottingham, South)


Mr. Deputy Speaker (Sir Geoffrey Lofthouse)

Does the hon. Member for Nottingham, South (Mr. Simpson) want to speak on this amendment?

Mr. Simpson

No, Sir.

Mr. Heathcoat-Amory

The case for the use of natural gas, or liquefied petroleum gas, has been well made during this short debate. I listened with care to the remarks of my right hon. Friend the Member for South Ribble (Mr. Atkins), my hon. Friend the Member for North Thanet (Mr. Gale) and the hon. Member for Plymouth, Devonport (Mr. Jamieson) in support of the amendment. I detect that it is chiefly a probing amendment, but that it nevertheless has a serious intent.

The Government well understand the advantage that natural gas and LPG can have, particularly in reducing urban pollution. The use of such fuel reduces most of the main pollutants—one cannot escape the production of carbon dioxide, but, for example, sulphur emissions are considerably lower than when such vehicles burn diesel.

In recognition of those advantages, the duty on road fuel gas was frozen in the November 1994 Budget. It was made clear at the time that further research was necessary, and that further consideration would be given to a possible cut. That was indeed done in the 1995 Budget, when my right hon. and learned Friend the Chancellor of the Exchequer, after examining the environmental and other cases, concluded that a 15 per cent. reduction was appropriate. That was designed approximately to equalise the running costs of vehicles using gas with those using diesel or petrol. Now there is no disincentive to the use of road fuel gases, and it is up to consumers and the market to decide whether to convert or purchase vehicles using those fuels.

As my right hon. Friend the Member for South Ribble said, some vehicles are already using the fuel. There is at least an embryo industry using them.

My hon. Friend the Member for Thanet, North urged a dramatic cut in duty because of the problems of conversion. A reduction in the cost of the fuel would tend to encourage high-mileage users rather than the lower-mileage urban use that all hon. Members who spoke thought to be the more achievable use for such vehicles. It may therefore be better to examine whether the cost of conversion could be encouraged through more capital-directed assistance, possibly through changes to vehicle excise duty. I at least offer him the prospect of that being considered.

We intend to consider carefully using VED as a means to encourage low-emission vehicles. If there was evidence to support that, it could be possible to use it as the incentive to undertake conversion work. That might be a better targeted measure than a simple further cut in the cost of the fuel. I cannot prejudge the outcome of the studies, and I do not wish to give my hon. Friend too certain a steer, but I can undertake that it will be closely considered.

As to future research, the energy technology support unit is about to produce a report on alternative fuels right across the board. In addition, it has a programme of research into gases and other fuels that will be published next year. I hope that I have said enough to show those interested in the subject that I am at least sympathetic to their points. I can offer no immediate relief but I understand the point about the cost conversion, in addition to the help that we have already given by cutting by 15 per cent. the taxes in the current Budget.

Mr. Gale

I am grateful to my right hon. Friend, especially for recognising in his closing remarks the burden of the additional cost of conversion. I am also grateful to my right hon. Friend the Member for South Ribble (Mr. Atkins) and to the hon. Member for Plymouth, Devonport (Mr. Jamieson) for their support.

This issue is not going to go away, but, equally, I know that my right hon. Friend has not come to write out the cheque for the relatively modest sum that we ask to stimulate the industry. I am also conscious that the House wants to move on to an important debate. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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