HC Deb 29 July 1998 vol 317 cc502-10

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Graham Allen.]

11.55 pm
Mr. Peter L. Pike (Burnley)

rose—[Interruption.]

Mr. Deputy Speaker (Sir Alan Haselhurst)

Will Members who are leaving please do so quickly and quietly?

Mr. Pike

I want to draw attention to an important issue—the use of compressed natural gas in vehicles on our roads. It is an important environmental issue. It also has important implications in my constituency, where, in a few months, 70 people are likely to be made redundant as a result of lack of orders for the gas bottles they make for natural gas vehicles.

Lucas Aerospace converted from defence production to the manufacture of a consumer product, and has done so extremely well. I have taken a close interest in the product since the idea was first considered, when the then site manager of the factory, Mr. Gardiner, invited me to the site to discuss it with the unions and management. The unions and management co-operated extremely successfully in finding a product that could use the existing skills of the work force and could transfer from defence to consumer use.

The product started in production last year. On 24 April this year, I toured the factory, with the bottles, with their finished covering, in full production. I was very impressed by what I saw.

On 17 February, the management sent me a detailed letter, making the case for compressed natural gas. That was from Jon Matthews, who is general manager now. At the time, I sent that letter to Treasury and Trade and Industry Ministers, and subsequently received replies.

The point that Lucas Aerospace made in that letter; as a member of the Natural Gas Vehicle Association, was that it wanted to promote the use of natural gas as a clean, safe and efficient fuel. Its view was: Of all the alternative fuel options, world-wide natural gas has become the preferred option, safe in use and storage, with world-wide availability". I accept that there is also an argument for liquid petroleum gas. One of the problems is that the two are competing with each other. That may be right, but it means that those in the retail trade find it difficult to know which product to supply.

I am glad to see the Minister for Science, Energy and Industry in his place, because he has corresponded with me and met me to discuss the industry, and has been extremely positive and helpful. The work force recognise that he has tried to be positive in the way in which he has tried to help in tackling the problem. On 17 May, he wrote to me: I am convinced that there is an environmental case for natural gas vehicles to take a share of the UK car population. We all agree on the objective. The problem is how we achieve it.

On 22 May, I received a fax from Lucas announcing 70 redundancies. Following that, the union representatives came to London and, together with me, Mr. Maciver, the divisional managing director of Lucas Aerospace, Terry Burns, the works convenor, and others, met the Minister for Science, Energy and Industry on 9 June. The unions had prepared an excellent brief, and presented a petition with a large number of signatures that had been gathered in the town centre in support of the work.

The brief stated: CNG vehicles are better for the environment. Natural gas is virtually pollution-free. Compared to gasoline powered vehicles, natural gas vehicles emit almost no carbon monoxide, much lower levels of nitrogen oxides, and less than half the amount of reactive hydrocarbons." The brief gave a number of reasons why we should change to CNG and pointed out what Lucas had done in this field. An extract from the Leifeld News, under the headline "Peace dividend a real bonus", stated: The Lucas Aerospace facility at Burnley has for 15 years been one of the West's leading suppliers of steel rocket motor cases for missiles. In 1990 it was recognised that future reductions in defence spending would result from the ending of the Cold War. A resourceful management therefore initiated a search for non-defence related products which could be made drawing on in-house expertise in metal forming and utilising existing plant with a minimum of additional investment. The answer—high pressure seamless steel gas cylinders. That has been done extremely well, and represents a remarkable feat of co-operation between management and the work force.

Unfortunately, another letter from Lucas on 15 June reported: There is no visibility of any future orders for this product and therefore the action in respect of our employees will unfortunately have to continue. However, as far as the production equipment is concerned, I can confirm that no action will be taken to dispose of it within the next 3 months. Early-day motion 1443 has been tabled on the subject, and, as of last Thursday, 124 hon. Members from all parties in the House had signed it.

Enterprise plc, Burnley borough council, and Members of the European Parliament Mark Hendrick and Michael Hindley have all tried to find a way forward. We all know that, in a few years, there will be a market for the product, even though the market is not sufficient to justify production at present. The danger is that, if Lucas goes out of production, when the market develops the gas bottles will not be made at Lucas in Burnley or anywhere else in the United Kingdom—we will end up importing them. That is why it is important to find a solution.

In the local government magazine talkback, the Minister for Transport in London, my hon. Friend the Member for Hampstead and Highgate (Ms Jackson), is pictured launching an LPG vehicle. The accompanying article states: Due to drastic reduction in emissions, both LPG and CNG powered engines are ideal for use in urban environments—one of the strong reasons why many municipal authorities have already added Ford alternative fuel vehicles to their fleets. LPG is currently available from more than 80 sites nationally, and CNG from about 12; any lack of local refuelling facilities need not be a problem, however, because a mobile LPG refuelling unit or overnight CNG refuelling unit can be installed at a fleet depot. Matters are not quite as simple as the article would lead one to suppose.

I have had letters from various Ministers, including the Financial Secretary and the Minister for Roads. There has also been correspondence with Moscow, where we tried to find a market for the product. Unfortunately, the market in Russia is falling. In addition, the Russians do not use such a high-quality gas bottle. As a result, they want a much cheaper product.

On 8 July, Mr. Maciver from Lucas wrote to tell me that there was an additional six weeks' work, which will take work to mid-September, when the redundancies will now take place.

I received today a letter from Ford. I had written to the company in the USA. The letter that I received was written by Peter Pestillo, the executive vice-president. He wrote: We believe that in the long-run there will be a natural gas market, but as you know, it remains an emerging market. Underscoring our belief in the long-term strength of the CNG market is Ford's substantial investment in CNG vehicles. The letter continues: Towards that end we welcome government assistance in developing much needed infrastructure. The key issue is securing that infrastructure.

My hon. Friend the Minister for Science, Energy and Industry sent me a detailed letter on 22 July, in which he set out what the Government are trying to do and pointed to where he sees the problems. My hon. Friend has to admit at the end of the day that the Government are not able to come forward with the type of package that, in the short term, would secure the production of these gas bottles at Lucas at Burnley.

British Gas, or whatever it is called these days—I never remember what its new name is—has written to me as follows: Natural gas has significant environmental advantages over petrol and diesel and could, given the right incentives, play a major role in cutting vehicle emissions: it is virtually free of lead, sulphur and aromatic hydrocarbons. It produces less Carbon Monoxide, Nitrogen Oxides, Benzene, Carbon Dioxide and particulates than petrol and diesel. Natural gas buses have a quieter car-like ride and therefore have a significant role to play in attracting people to make better use of public transport, meeting the objectives of the Transport White Paper. Urban depot-based transport operators often have restricted operating hours because of the noise impact of diesel-engine HGVs on the neighbourhood. HGVs powered by natural gas are significantly quieter, allowing these constraints to be lifted. This could lead to less congestion at peak hours." British Gas adds: the Government could reduce the duty on natural gas … towards the EU minimum. It believes that that would be a help.

Metrocab has written to me as follows:

"The key issues seem to be:

  1. 1. The additional initial cost of the gas vehicle. Maybe £1500—£2000
  2. 2. The operating costs even with the differential in pricing between diesel and gas, are marginally higher.
    3. 505
  3. 3. The limited number of refuelling points."
That is another problem. The fourth one is described as the lower range between refuelling for a given size of tank. Those are the situations that Metrocab sees as problems.

The Energy Saving Trust has a powershift programme that aims to encourage demand for these fuels from businesses, local authorities and, ultimately, the general public". That is something that may well need to be followed up and encouraged, because it could lead to a solution.

The letter from Energy Saving Trust adds that that aim is accompanied by commitments from fuel companies and vehicle manufacturers. It seeks to make clean fuel vehicles more affordable through stimulating demand. This is being done by bringing companies and local authorities together to wield enough collective purchasing power to ensure substantial capital cost reductions, and offering up to 75% of the difference in the cost of clean fuel vehicles above the price of petrol/diesel vehicles." We all know of the situation which existed when we first had unleaded fuel. It was only when the Government introduced a sufficiently wide price differential that garages began to supply the fuel. It was only when we knew that we could go to any garage and obtain unleaded fuel that we were reasonably confident of buying a vehicle that operated on it.

London Taxis International, makers of the famous black cab, says that it is dedicated to producing a fully accessible low emission' taxi. As part of a study towards this end we have produced a vehicle which is in service, running very successfully on either petrol or CNG and we have also built a dedicated CNG vehicle … Whilst CNG creates lower local emissions, the difficulties for Taxi operators are that the vehicles do not follow a defined route nor necessarily return to a base at night, hence the need for a comprehensive refuelling infrastructure or a large driving range for the vehicles, both of which seem to be beyond us at the moment. Mobil CNG has also written to me. It welcomes the Government's 'New Deal for Transport' … in particular the call for environmentally cleaner fuels and quieter vehicles. Mobil CNG offers the UK the most viable fuel option that is significantly cleaner and quieter than diesel vehicles. This means that it is particularly suitable for the commercial sector and bus fleets, being ideally suited to Mr. Prescott's bus for the 21st Century … We believe that CNG is the fuel for the future and that the Government should combine with industry to develop and manufacture environmentally friendly vehicles for the new millennium. Today, I received a fax from the unions. They think that Lucas has not done all it could. They recognise that investment in the aerospace industry takes a long time to pay back, but they also believe that a more positive approach could be achieved if Lucas Aerospace took such a view about CNG bottles. They think that the Government are committed to CNG, but are perhaps not doing quite as much as they could to get over this short-term difficulty.

I recognise the problem, but we are considering something that will have a market in the next century. It would be a tragedy if we failed to save this production unit and did not encourage CNG vehicles to ensure that, when we have more of them on the road, their gas bottles are not imported, but made in this country.

12.11 am
Mr. Gordon Prentice (Pendle)

I shall spend no more than a couple of minutes emphasising the points made by my hon. Friend the Member for Burnley (Mr. Pike).

Many of my constituents work at the Burnley plant, and it is simply inexplicable that the management over in the United States has decided to pull out of the market when it is about to take off. In the United Kingdom, 9,100 vehicles run on gas, or a mixture of petrol and gas, and the management at Lucas in Burnley forecasts that the market could be as high as 200,000 vehicles in six years.

There is a colossal market out there, but how can we kick-start it? The Government have reduced fuel duty to achieve a differential between clean fuels and petrol, which is good. They have introduced the £500 reduction in vehicle excise duty for vehicles converted to run on clean fuels, which is good. They have also set up the cleaner vehicles task force, which is up and running and doing a good job. That is splendid, but what should they do beyond that?

First, we need to set the road fuel duty for natural gas at the European Union minimum, like France, and like Germany. Secondly, we must provide grants to public service vehicle operators to convert to gas. There should be a 100 per cent. allowance for fleet operators who do the business and convert dirty, polluting vehicles to run on clean natural gas.

Thirdly, only 50 or 55 local authorities out of more than 300 in the United Kingdom run vehicles on compressed natural gas. I should like my colleagues in the Department of the Environment, Transport and the Regions to urge local authorities nationwide to do the business, and convert their rubbish vehicles and other depot-based vehicles to run on this clean, environmentally friendly fuel.

12.13 am
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson)

I congratulate my hon. Friend the Member for Burnley (Mr. Pike) on securing this debate on an issue that he has raised with ministerial colleagues from my Department, from the Department of Trade and Industry, and from the Treasury. The importance that the Government attach to the issue he has raised is reflected in the presence on the Front Bench of the Minister for Science, Energy and Industry.

My hon. Friend the Member for Burnley is not alone in highlighting this issue, which is clearly of particular and grave concern to his constituency and to his constituents. My hon. Friends the Members for Pendle (Mr. Prentice) and for Chorley (Mr. Hoyle) have also raised this issue in recent weeks.

Air pollution has become a matter of increasing public concern and political importance in recent years. The Government are committed to improving the quality of the air we breathe, and we have set ourselves demanding objectives on air pollution. Road transport is responsible for a significant proportion of air pollution—around 50 per cent. of nitrogen oxides come from that source. Any attempt to improve air quality needs to address the problems that road transport causes.

Environmental considerations are at the heart of the integrated transport White Paper, which was published last week. My hon. Friend the Member for Burnley made the point that we are discussing how we can create a more environmentally friendly mode, not only through vehicles but through fuel. Alternative fuels, such as compressed natural gas, have an important role to play in helping us to meet those objectives. Provided that the latest conversions are used, CNG can offer substantial reductions in emissions of pollutants such as carbon monoxide, sulphur dioxide, nitrogen oxides and particulate matter, compared with vehicles running on diesel.

CNG vehicles also emit less carbon dioxide, which is the main gas produced by road transport that is implicated in climate change. They also emit less visible smoke and odour than diesels, which is an important factor in urban areas. Vehicles running on CNG are also significantly quieter than their diesel counterparts. Compared with petrol engines, CNG can offer some emissions benefits for pollutants such as benzene.

We are committed to a policy of encouraging the use of fuels, such as CNG, through a package of measures, including fiscal incentives. In his last Budget, the Chancellor announced that the extra cost of enabling company cars to run on road fuel gases will be disregarded in calculating the income tax charge on company cars. He also froze the duty on road fuel gases for the second year in a row, and, to provide some certainty to the market, we are committed to retaining the differential in duty rates between gas fuels and diesel that existed at the time of the Budget last year.

There is now a significant difference in the duty on CNG and liquefied petroleum gas and the duty on conventional fuels. In fact, the duty on CNG is about one third that on diesel. That provides a significant fiscal incentive to switch from diesel to gas.

Other cost savings are associated with road fuel gases: for instance, lower maintenance costs. The Government car service showed that there is a strong economic case for fleet operators to use gas fuels. It announced last year that the economic grounds for using road fuel gases, plus the environmental benefits, were strong enough to persuade it to convert its entire car fleet to run on CNG or LPG over the next five to six years.

Mr. Pike

That is the key point. The quickest way of encouraging the market for CNG, and ultimately the gas bottles that are of consequence to Lucas, is to get fleets to convert. The measures to which my hon. Friend is referring are extremely important.

Ms Jackson

I strongly agree with my hon. Friend.

The price premium on larger gas-powered vehicles, such as buses and lorries, is more significant than for cars. That is partly because not enough vehicles are currently purchased to introduce significant economies of scale.

In order to develop the market for alternative fuels further and to encourage people to buy gas-powered vehicles that are more expensive than their conventionally fuelled counterparts, my Department is providing £6 million of funding for the powershift programme run by the Energy Saving Trust.

The aim of the three-year programme is to create a sustainable market for alternatively powered vehicles. It does that by setting up demonstration projects, by assisting different companies and local authorities interested in purchasing alternatively fuelled vehicles to form partnerships, thus increasing economies of scale, and by providing grants for up to 50 per cent. of the additional cost of purchasing an alternatively fuelled vehicle.

Another measure to offset some of the additional costs associated with gas-powered vehicles is the vehicle excise duty incentive which will be available from 1 January next year. Buses and lorries meeting stringent emission standards will be entitled to a reduction in VED of up to £500. Vehicles running on gas should qualify for that incentive. Bus operators operating routes eligible for fuel duty rebate who run their vehicles on gas are already entitled to reclaim all the duty that they pay on the fuel from the Government.

The gas fuel industry should be further stimulated by measures designed specifically to reduce emissions from vehicles in urban areas. The alternative traffic in towns project, launched by my right hon. Friend the Deputy Prime Minister in April, is designed to produce concerted action by cities across Europe to give preferential access in certain areas to vehicles with zero or low emissions.

Under the process of local air quality management, local authorities must put in place action plans to deal with poor air quality. It is likely that many of the actions needed to improve air quality in urban areas, where air quality tends to be poorest, will focus on transport, and some local authorities may look to introduce low emission zones, where only vehicles producing very low emissions will be allowed to enter certain areas of towns or cities.

We have also been active in raising the profile of alternative fuels as much as possible. Ministers have launched a variety of gas-powered vehicles, including those purchased under the powershift programme. For instance, last year I launched the conversion of Adur district council's refuse collection fleet to CNG. I have not visited every local authority, but I assure my hon. Friend the Member for Pendle that I and my Department are closely engaged in that activity. My Department also played a major role in organising a high-profile exhibition of alternatively powered vehicles in Chester in April this year. More than 20 alternatively fuelled vehicles were on display, showing just how far the market has already come.

Therefore, substantial progress has been made in encouraging the introduction of alternative fuels. The Natural Gas Vehicle Association estimates that 50 local authorities and a number of private sector fleet operators have one or more vehicles that run on natural gas.

However, we are aware that there remain a number of barriers to the further uptake of these vehicles. Some of these are inherent properties of the fuel—for instance, the tank required to store CNG is large and heavy enough to reduce bus capacity by one passenger, or a lorry's payload by around a tonne. However, there are also other problems, and the cleaner vehicles task force has set up a working group to consider the role for alternative fuels and what barriers stand in the way of their fulfilling that role. One of the most obvious barriers is the lack of refuelling infrastructure for both CNG and, to a slightly lesser extent, LPG. That is an area which we must look to the industry to resolve.

As I have mentioned, CNG can offer significant environmental advantages, particularly over diesel and in terms of emissions on nitrogen oxides and particulate matter.

We have already taken a number of actions to promote the use of alternative fuels—including freezing the duty on road fuel gases, raising the profile of gas power through ministerial launches and the powershift programme, as well as exhibitions and contribution towards material such as the Natural Gas Vehicle Association's annual report. Officials in my and other Departments have had a number of discussions about the merits of conversion to alternative fuels, including in niche markets, such as buses and taxis.

Officials have discussed with the Public Carriage Office the possibility of persuading more taxi drivers to consider the use of gas fuels, and have also discussed the issue with bus operators. The House will be aware that my right hon. Friend the Deputy Prime Minister has a gas-powered car, as do my hon. Friend the Minister for London and Construction, and my noble Friend the Minister for Roads.

Through this package of measures, plus initiatives taken by local authorities, business and others, the number of gas-powered vehicles on the road has increased substantially. The Natural Gas Vehicle Association estimates that the number of natural gas vehicles on the road has doubled since 1995, while the LP Gas Association believes that around 200 new LPG vehicles are appearing on the road every month. Many of the vehicles running on both fuels are operated as part of fleets by both the private sector and local authorities.

Despite those measures, I know that my hon. Friend the Member for Burnley is disappointed that the Lucas Aerospace factory in Burnley has recently announced that it will be closing the unit of the factory that had been converted to produce gas bottles for gas-powered vehicles because of a decline in the demand for this equipment.

I understand—my hon. Friend referred on more than one occasion to his activities—that my hon. Friend the Minister for Science, Energy and Industry has been pursuing a number of avenues to see if there is any scope for providing regional assistance to the factory. My hon. Friend the Minister wrote to my hon. Friend the Member for Burnley on 22 July, saying that he and officials have explored all avenues of selective and regional assistance for the plant, but none has proven suitable". I appreciate that that was not the news that the my hon. Friend wished to hear. However, the Government are taking many steps to encourage the wider use of gas fuels, and I hope that industry will respond to that.

Our primary aim in this area is to improve air quality, and to target climate change. We have received a number of representations—they were made in the Chamber tonight—saying that the duty on road fuel gases should be reduced to the European Union minimum. However, we have a duty to pursue our policies on air quality and climate change in as cost-effective a manner as possible. Government policy is aimed at encouraging the use of low emission vehicles, rather than being prescriptive about the type of technology used.

The incentives to persuade people to switch to road fuel gases—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-five minutes past Twelve midnight.