ROAD FUEL GAS

HC Deb 05 July 1999 vol 334 cc768-81

36A.—Where a person, while carrying on a trade, incurs expenditure—

1. (a) on the provision of machinery or plant intended to act as a filling point for the supply of road fuel gas, or
2. (b) on the installation of such machinery or plant,

and where such expenditure is wholly and exclusively for the purposes of the trade, a deduction equal to the whole of the expenditure shall be allowed in taxing the trade for the chargeable period.

36B.—Where a person, while carrying on a trade, incurs expenditure on the provision of machinery or plant for the conversion of the engine of a motor car so that the motor car is capable of being propelled, wholly or partly, by road fuel gas, and where such expenditure is wholly and exclusively for the purposes of the trade, a deduction equal to the whole of the expenditure shall be allowed in taxing the trade for the chargeable period.".'.—[Mr. Jack.]

Brought up, and read the First time

Mr. Jack

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Michael Lord)

With this, it will be convenient to discuss the following amendments: No. 27, in clause 8, page 3, line 26, after 'centimetres,', insert 'a vehicle falling within subparagraph (1) of paragraph 1A, or a vehicle falling within subparagraph (1) of paragraph 1B,'. No. 28, in page 3, line 39, at end insert—

'(6) At the end of paragraph 1 of Schedule 1 to the Vehicle Excise and Registration Act 1994 there shall be inserted—

"1A.—(1) Any vehicle which has during the previous 12 months been certified as achieving an emissions figure of 140g CO2/km shall have a general rate of £100.

(2) The Secretary of State shall by regulations establish the methodology by which the emissions figure referred to in sub-paragraph (1) is to be calculated, and any such regulations shall be subject to annulment by either House of Parliament.

(3) Subparagraph (1) shall have effect in relation to any licence taken out for a period beginning on or after 1st January 2000.".'.

No. 29, in page 3, line 39, at end insert—

'(7) At the end of paragraph 1 of Schedule 1 to the Vehicle Excise and Registration Act 1994 there shall be inserted—

"1B.—(1) Any vehicle which has been registered during the previous 12 months and which has been certified as using Liquefied Petroleum Gas as a fuel shall have a general rate of £100.

(2) The Secretary of State shall by regulations establish the methodology by which the process of certification referred to in sub-paragraph (1) is to be carried out, and any such regulations shall be subject to annulment by either House of Parliament.

(3) Subparagraph (1) shall have effect in relation to any licence taken out for a period beginning on or after 1st January 2000.".'.

Mr. Jack

This debate gives us an opportunity to review the logic of the Government's proposals on vehicle excise duty and carefully to examine their credentials on the fiscal encouragement that they may be contemplating—[Interruption.]

Mr. Deputy Speaker

Order. I am sorry to interrupt the right hon. Gentleman, but there is far too much background noise in the House. We are conducting a debate.

Mr. Jack

We have an opportunity also to consider the fiscal encouragement that the Government are giving to the use of fuels for motor vehicles, particularly liquefied petroleum gas, which have several environmental attributes to which I shall refer in a moment.

I thank the Society of Motor Manufacturers and Traders and the Calor Group plc for their assistance in preparing material for the new clause and the amendments. I tabled them because the Government received support for their proposal in the Budget and the subsequent Finance Bill to introduce a new vehicle excise duty regime. They reduced the VED for cars of 1100 cc or less by £50, but increased the VED on all remaining vehicles by a counter-balancing amount so that the measure would effectively be tax-neutral.

Mr. Fabricant

I am sure that my hon. Friend was not fooled, as so many were, into thinking that the Government were being generous in their dispensation. Is he aware that even as small a car as the Fiat Punto does not qualify for the 1100 cc lower vehicle excise duty dispensation?

Mr. Jack

I suppose that I should declare an interest: I have one of those cars, so I am entirely aware of my hon. Friend's point, with which I shall deal.

The 1100 cc cut-off was chosen quite arbitrarily. Magically, one supposedly reaches a tax-neutral position by taking £50 from the VED of the 2.9 million vehicles affected, and adding £50 to the VED for other cars. It is intriguing, therefore, that in year one of the change announced in the Red Book, the Government gained £14 million.

I tabled amendments on the VED, because in the press release issued at the time of the Budget, the Government said: New cars registered from Autumn 2000 will be subject to a VED system based principally upon their rate of carbon dioxide emission, to encourage the take-up of more fuel-efficient vehicles. I found it odd that they were jumping the gun on the outcome of their consultation document "Consultation on reform of Vehicle Excise Duty to ensure a cleaner environment", which was issued in November, although I do not disagree with such an objective.

In paragraph 2.3 of that document, the Government say: The UK also has a domestic aim of cutting emissions of carbon dioxide, the main greenhouse gas, by 20 per cent. by 2010 relative to 1990. So, a clear environmental objective was stated right at the start of the consultation exercise.

In paragraph 2.4, the Government go on to point out that Recently, a voluntary agreement has, however, been concluded between the European Commission and car manufacturers to reduce average emissions from new cars to 140 grammes of CO₂ per kilometre by the 2008, a cut of about 25 per cent. on the current average". From the two statements, one would have thought that, at that juncture, the Government would have wanted to do all that they possibly could to encourage the take-up of fuels that will reduce carbon dioxide, and thereby encourage those who are to meet the remarkable voluntary agreement by 2008. As I shall demonstrate, my amendments give the Government an opportunity to encourage such developments over the next 12 months. They are entirely consistent with the Government's objectives in their consultation exercise.

Amendment No. 29, which applies the introduction of the proposals to liquified petroleum gas, prays in aid the comment at the end of paragraph 2.5 of the consultation document. It draws our attention to the problems of fine particulates PM 10s, which have a demonstrated link with respiratory and cardiovascular disease, and to oxides of nitrogen, which can damage the lungs and play a part in summer smog episodes. Those emissions currently result from the use of petrol engines, which, as I shall demonstrate, are well tackled by the use of liquified petroleum gas. The amount of encouragement through the VED arrangements for the uptake of vehicles powered by such fuels is zero. It is the lack of consistency that persuaded me in the first place to table the new clause and the amendments.

It is important to consider the detail because we then find that, of the 10 cars with the lowest carbon dioxide emissions, only five have an engine size of less than 1100 cc; the rest are diesel-engine vehicles. Secondly, the best performing vehicles have carbon dioxide emissions of between 129 and 139 g per kilometre. Current technology is already incorporated in some cars; they will meet the 2008 figure. Under the present VED arrangements, there is nothing fiscally to encourage the uptake of such vehicles.

Cars with engine sizes of less than 1100 cc have carbon dioxide levels ranging from 129 g to a massive 172 g per kilometre. It is odd that the arbitrary use of 1100 cc means that the Government are encouraging vehicles with carbon dioxide emissions that are not at the top end of environmental friendliness; they are at the bottom end—if I can put the matter in terms of good and bad. An examination of the logic of the current VED proposals shows that they seem to encourage the wrong kind of cars. My amendments give the Government the opportunity to correct that damage.

Although I have prayed in aid of my arguments the 2008 agreement of 140 g of carbon dioxide per kilometre, the amendments may encourage the Government to consider the fact that other cars are already in existence that perform markedly better than the 172 g that I quoted but whose engine size is above 1100 cc. The Ford Ka at 155 g, or the Nissan Micra at 151 g are two good examples of vehicles that might be encouraged. I shall not read out the exhaustive list of cars that meet the 140 g output—the subject of my amendments—but it includes the Peugeot 106 diesel, the Volkswagen 1.9 diesel mark 3, the Audi A3 diesel and the Ford Focus 1.8 diesel. Many other diesel cars, because of their relative fuel efficiency, already meet the 140 g output of carbon dioxide per kilometre. Sadly, however, they do not benefit from the Government's arguments on VED on cars with engines of 1100 cc or below.

We should consider alternative fuels. I shall apply the same logic as I have already used, but to cars powered by liquefied petroleum gas. The reference to engine capacity is purely arbitrary; it does not take proper note of the logic of trying to encourage more environmentally friendly cars. Liquefied petroleum gas is good on carbon dioxide; it deals effectively with benzine emissions, which can cause particular health risks. It deals well with particulates and PM 10s, with sulphur dioxide, oxides of nitrogen and ozone emissions. I will not list all the medical benefits, but heart disease and respiratory problems will certainly be affected by a reduction in those emissions.

In fairness, the Government are backing their own policy of encouraging the uptake of liquefied petroleum gas. I am advised that the Deputy Prime Minister drives a car that is powered by that fuel—as are most of the Government's car and despatch agency vehicles. Sadly, however, by the end of 1998, just under 8,000 vehicles were powered by that fuel source.

I can think of two reasons why such an obviously environmentally friendly fuel has not enjoyed a greater uptake, and they are addressed by my amendments, which deal with the tax relief arguments.

There is no well-established infrastructure for the refuelling of cars with liquified petroleum gas.

Mr. Tim Loughton (East Worthing and Shoreham)

In past Budgets, the present Government gave specific tax incentives for the conversion of buses and lorries to use road fuel gases. Those incentives were not nearly sufficient because, throughout the country, fewer than 100 lorries and 100 buses benefited from them. The problem is not limited to cars.

Mr. Jack

My hon. Friend makes a telling and helpful point. In my view, if there was some fiscal encouragement to install the necessary infrastructure, more cars would be converted to use liquified petroleum gas.

The second of my amendments would encourage the conversion of fleet vehicles to run on liquified petroleum gas. That fuel beats petrol and diesel on all of the polluting emissions that I mentioned except carbon dioxide. It is a very environmentally friendly and health-conscious fuel.

Sadly, the Government appear to have missed a significant opportunity to start the process of encouraging the uptake of such fuel, and the development of the motor vehicle technology that would help to achieve the Kyoto targets by reducing damaging emissions earlier than agreed. For some reason—in my opinion, only to catch a cheap headline—the Government arbitrarily drew the line at 1100 cc. As a result, they have an inconsistent and illogical approach to their objective of encouraging cars that are more environmentally friendly. In the case of liquified petroleum gas, they have completely missed the opportunity to encourage earlier uptake among cars powered by that fuel.

There is compelling evidence that the increased use of liquified petroleum gas would save more than £10 billion in health care and damage to the environment—especially by reducing particulate levels—by improving air quality. There would be many accompanying savings.

My proposal is self-financing. Often, when we advanced perfectly respectable ideas to improve the Finance Bill, we were shot down in proverbial flames because they would cost money. However, I am now suggesting something that will save well in excess of its costs, which the Calor Group has calculated as a net figure of £607,000—the tax costs of encouraging the installation of the infrastructure for LPG. One company, Shell, has expressed willingness to install the infrastructure, but there is scepticism in the industry about how quickly that development will be made. The modest proposals that I am putting before the House tonight would effectively save far more money in preventing damage to the person and the environment than they would cost in tax terms. If the Government were to agree to my proposals this evening, it would be a worthwhile step on the way to achieving their objectives earlier than expected.

Mr. Fabricant

I support the new clause so ably moved by my right hon. Friend the Member for Fylde (Mr. Jack). It gives the lie to the Labour Government's claims that the Budget is environmentally friendly. The fact that the arbitrary cut-off figure of 1100 cc generated a net income, in its first year alone, in excess of ¤40 million simply shows that it is yet another stealth tax, and is even more deceitful than the average stealth tax because it was introduced in the guise of being environmentally friendly.

12 midnight

The new clause and amendments tabled by my right hon. Friend meet the Kyoto accord and follow on from the principles of the Rio de Janeiro summit, which was established by a former leader of the Conservative party and Prime Minister, Lady Thatcher, who is now in another place. She established the conference in Rio de Janeiro and was instrumental in setting the targets that other Governments seek to follow. The vehicle excise duties set up in the Budget do nothing for achieving these targets.

As my right hon. Friend has already asked, why have the Government, instead of saying that there should be a cut-off point of 1100 cc, not specified a cut-off point that is related to the emission of particulates or carbon dioxide? Why, for example, have they not encouraged, as has the republic—that is the right way to put it—of California, the introduction of catalytic converters to Californian standards, which can reduce the emission of carbon dioxide to less than 110 g per kilometre. There is—[Interruption.] The Secretary of State for Scotland says from a sedentary position that it is typical that I do not mention British—[Interruption.] I give way to the right hon. Gentleman. I did not understand or hear what he said.

The Secretary of State for Scotland (Dr. John Reid)

I said that California has excluded almost all British cars. Is he suggesting that we do that here?

Mr. Fabricant

The right hon. Gentleman raises an interesting point. If the Government, instead of carping, understood a little about emissions—not from their mouths, but real emissions—and a little about industry, and introduced standards that would reduce the emissions of carbon dioxide, British cars would not be excluded. They are excluded because they do not meet Californian emission standards, and they should. We should aspire to those standards in the United Kingdom and not mock them. The Government mock them because they do not understand.

When my right hon. Friend the Member for Fylde was talking about 140 g per kilometre, I could see the eyes of Labour Members glazing over. They did not understand. They are innumerate. They understand only pound signs, stealth tax and the spin to try to make out that the measures that they are taking, which are primarily to raise tax, are designed to produce a cleaner environment, They are trying to misguide the population. They will not produce a cleaner environment by such means.

We have a chicken-and-egg situation with regard to liquefied petroleum gas, which is a very clean way of generating power for motor vehicles. However, my right hon. Friend the Member for Fylde will be the first to concede that using LPG reduces the power output of a vehicle by about 20 per cent. The real reason why there are so few cars using LPG is that despite the best endeavours of companies such as Shell, there are only 14 outlets in the United Kingdom selling it.

Mr. Jack

Is my hon. Friend aware that the question of loss of power output has been more than addressed? That has been ably demonstrated by the fact that one of the leading cars in the Vauxhall Vectra racing category happens to be powered by LPG.

Mr. Fabricant

I am interested to hear that. I believe that the Volvo, which is the only commercially available car that has a device to enable it to use non-leaded fuels and LPG, loses 20 per cent. of its power when switched to LPG.

Mr. Lindsay Hoyle (Chorley)

The hon. Gentleman may not be aware that a very good British car—the Vauxhall Vectra—has such a switch.

Mr. Fabricant

I am pleased to hear that. Like the hon. Gentleman, who is a powerful advocate for British industry, and particularly British Aerospace, I would like to see the British car industry doing well and exporting to California. May I say how shocked I was that the right hon. Gentleman the Secretary of State—I might say my right hon. Friend—should think for one moment that I would not wish to see British cars exported to California.

If the Government were truly interested in the emission of particulates, carbon dioxide and other pollutants, they would focus on the emissions, rather than setting arbitrary sizes of car engine.

Mr. Richard Page (South-West Hertfordshire)

I hope that my hon. Friend will develop the argument and explain to the House why the Government have banned the production and licensing of gas-powered electricity stations, as opposed to letting them continue with coal power, which produces far more emissions and environmental damage.

Mr. Fabricant

My hon. Friend is right. Although carbon dioxide is extremely dangerous and damaging to the environment—we have all heard of the greenhouse effect—he knows that the power stations fuelled by oil and by coal produce sulphur dioxide, which is an even greater pollutant. One can use as many cleaners as one likes in the emission chimneys; the emission of sulphur dioxide is still damaging, and is in breach of the Kyoto and the Rio de Janeiro targets.

Let us not be confused or beguiled by the Government's weasel words. The Government are not interested in ensuring that our environment remains safe for the generations that will follow. If they were, they would tax emissions. Instead, they tax the size of the engine. They tax it to the tune of £40 million in net gain this year—as I said, yet another stealth tax.

By how much will that increase in years to come? The world will get warmer and warmer, and become more and more polluted. We will have a car industry that still cannot sell into California, as the Secretary of State for Scotland said from the Treasury Bench, because in California people are truly concerned about their environment, so they are concerned with output and emissions.

I should have liked the Government to give real tax incentives for experimentation in the use of liquid hydrogen, which has not yet been developed in this country. Liquid hydrogen is one of the cleanest forms of fuel for the internal combustion engine. The sole emission of liquid hydrogen is steam.

Mr. Page

Is it not explosive?

Mr. Fabricant

Liquid hydrogen is less explosive than petrol.

Before we all get carried away with diesel, may I point out to my right hon. Friend the Member for Fylde that it is in many ways dirtier than non-leaded petrol. Whereas non-leaded petrol can produce long-term pollution of the environment, diesel with its particulates is particularly known for causing asthma, especially in schools located near main roads.

I ask the Government to consider the amendments tabled by my right hon. Friend. I wait with interest to hear how the Government justify their claim that the original measure was an environmentally friendly move. Even if they deny that it would raise £40 million for the Revenue, will they not come clean and say at least that it was yet another example of Labour spin?

Mr. Loughton

I support my right hon. Friend the Member for Fylde (Mr. Jack) and new clause 10.

At the outset, I should declare an interest. A few months ago, together with the hon. Member for Peterborough (Mrs. Brinton), I was given a spin round Brands Hatch in the aforementioned Vauxhall Vectra at 116 mph. When we got out, my make-up was rather less smudged than hers. The car certainly revealed no loss of power compared with petrol-driven racing cars. It is the only liquified petroleum gas-driven racing car in the world and I gather that it is currently second in the league tables. There is certainly no difference in that respect.

Mr. Fabricant

Is not a larger engine required and is not fuel consumption therefore greater?

Mr. Loughton

No.

My hon. Friend the Member for Lichfield (Mr. Fabricant) was right when he said that this is a chicken-and-egg problem. I do not want to go into the environmental and health benefits of road fuel gases, as my right hon. Friend the Member for Fylde has done, but the problem is that there are only about 135 points of service for road fuel gases even though this country has about 19,000 service stations. There are difficulties with access.

There is an LPG service station in my constituency, but there are no others for miles around. The key to the success of LPG—and, indeed, of compressed natural gas—is infrastructure and making tax concessions to create that infrastructure. Installing an LPG pump at the average service station costs in excess of £30,000; installing the infrastructure to enable compressed natural gas to be pumped costs much more. The key to the installation of such pumps is businesses realising that there is a market for the product and the key to that market is company car fleets.

About one car in 10 in this country is a company car, but 50 per cent. of all new cars are company cars. We need to give tax incentives for company car fleet operators to convert their cars to road fuel gas or to buy road fuel gas-driven cars in the first place. At the same time, we need to give tax incentives to the manufacturers of those cars so that they will produce them at rates that are competitive with those of the diesel and fossil fuel-driven cars about which we have heard so much.

One of the few measures that we welcomed in the Budget was the 29 per cent. reduction in taxation on road fuel gases. We found out about it only in the small print and it was a great shame that the Government did not sound off about it rather more. That good measure followed another good measure that was introduced by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) in a Budget about five years ago. He reduced the duty on road fuel gases by 25 per cent.

Not enough has been done despite those two, proportionately large moves being made. The duty on road fuel gases in this country is still higher than in any other European Union country. Certain European countries, such as Belgium, do not tax road fuel gases or LPG at all. We need to make a bold move on taxation—not only on fuel duty, but to enable people to install the pumps and the infrastructure necessary to make such products available.

Getting sales of unleaded petrol off the ground was a great success of the previous Government. They succeeded only because they made a bold move—slashing the duty on unleaded fuel—and because such fuel was readily available in service stations. A new pump head had to be put on the same sort of tank and, in many cases, people had to put an extra widget on to the engine—a 30-minute job. However, the job is far more substantial on road fuel gas-fired vehicles, which is why tax allowances are required to speed things up.

The industry would tell the House that it needs at least a five-year stability plan to show that the Government, whoever they are, are committed to promoting tax incentives and much wider use of road fuel gas-fired cars.

Mr. Edward Davey

I generally agree with what the hon. Gentleman and his hon. Friends are trying to do. Does he agree that other clean fuel technologies, such as fuel cell technologies, should also be promoted by the tax incentives he proposes?

12.15 am

Mr. Loughton

I entirely agree, but those technologies are still some way off. In fact, 100 per cent. tax allowances are available in some circumstances, including for equipment for scientific research to develop technologies. We need immediate action to promote the use of road fuel gases over the next few years. The Kyoto targets are not many years off, and by the time that new technology comes in, it will be too late to achieve them.

By promoting the use of road fuel gases, we would increase the residual value of cars. Dual fuel-driven cars are a current option, but conversion is much more expensive. If drivers are guaranteed to be close to a pump using road fuel gases, the costs will be brought down, and there are also economies of scale. Grants are available from the Energy Saving Trust for conversion, but such cars would be cheaper if the fuel were more readily available.

There are also implications for noise pollution. Companies such as the John Lewis Partnership and Safeway have converted or bought vehicles that operate on LPG because they are quieter as well as more environmentally friendly, which enables deliveries to shops in residential areas at anti-social times. They can reach the shops more quickly, avoiding adding to the traffic congestion that costs British industry so much.

The new clause would give more of a kick-start to the greater use of road fuel gases than merely reducing duty. It is no use reducing the duty on fuel if people cannot get the stuff. Manufacturers and operators of petrol stations will not make a capital commitment unless they are convinced that there will be some payback over, say, five years. New clause 10 sends a firm message to the industry that change will not cost much in the short term, but will have an enormous payback in the medium term, not only in revenue, but in savings from the promotion of the health of the nation.

Mr. St. Aubyn

I support the new clause tabled by my right hon. Friend the Member for Fylde (Mr. Jack). I apologise for not having been here to hear him move it, but I watched his progress carefully on a television monitor.

During the Committee stage, I, too, proposed the encouragement of the use of liquid petroleum gas. One of the key movers of that project, the British Oxygen Company, is based in my constituency. Everyone involved in the project welcomed the reduction in duty rather quietly announced after the Budget, but was concerned that it was not enough. We need more petrol stations providing road fuel gas outlets. In Committee, we heard startling statistics about how far one might drive by filling up with LPG. Of course, it depends on how big the car's tank is, but we need many more LPG outlets if the idea is to take off.

A car converted to LPG requires expensive charges for substantial checks that it is roadworthy. Cars carrying the new fuel must be safe, and the cost of the fuel tank is another hurdle in the way of wider use. The basic cost of tanks is perhaps between £500 and £1,000, but safety checks add greatly to the cost, wiping out the benefit of Government grants. I urge the Minister to give that some thought when she responds to the debate.

If this conversion is to happen it will require further research. I regret the fact that the hon. Member for Peterborough (Mrs. Brinton) is not present. During the Committee, her thoughts were rather skimpy, to say the least, and tonight, they are not to be had at all. That is regrettable, because the heart of the research into LPG engines is at Perkins Engines in Peterborough. That company was the subject of a serious takeover bid, and it is well known that its new owners are reviewing whether this research project should go ahead.

The comments of Ministers about the LPG project, and about what they are prepared to do to encourage the infrastructure without which the project will not succeed, could have a serious effect on the viability of the research programme and on the willingness of the new owners, Caterpillar, to invest in the project. That would affect employees in Peterborough, and it would have a knock-on effect on employees at BOC in my constituency, and all that it has invested in the project so far. BOC has converted its vehicles to run on LPG, and many other firms are looking into that.

A firm in Cranleigh in the southern end of my constituency takes cars around the country for those who wish to travel by air. It is the air equivalent of motorail. If someone is flying up to Edinburgh, instead of putting his car on the back end of a train, he leaves it at Gatwick airport, where it is put with others on the back of a trailer and driven up to Edinburgh overnight. His car is ready for him when he arrives at his hotel in the morning. For the modern business traveller who uses his car as a mobile office, this is a tremendous saving, because he arrives without the hassle of having to drive all that way.

Mr. Page

I suggest that my hon. Friend recommends to his constituents that they take a hire car in Scotland. That would probably be a lot cheaper.

Mr. Deputy Speaker

Order. I suggest that we come back to the matter in hand.

Mr. St. Aubyn

That firm ensures that the environmental impact is much reduced, because it takes all those cars up north in one go. The impact is reduced even further because it has chosen to invest in LPG vehicles. That works because it can manage to make the journey, as there are enough fuel stations where LPG is available. It enables the mobile office to move with the business executive, which is not possible with a hire car. To extend that service, many more fuel points are required around the country. That is why we shall listen carefully to the Economic Secretary's response.

Ms Hewitt

I am delighted to hear from the right hon. Member for Fylde (Mr. Jack), and from the other hon. Members who spoke with such enthusiasm about cleaner cars and cleaner fuels. We share their enthusiasm, and the Government are taking practical and consistent action to encourage cleaner cars and cleaner fuels. I shall say a little about that action before I explain why the new clause is unnecessary and the amendments are impracticable.

As several hon. Members have said, in the Budget in March, my right hon. Friend the Chancellor cut the duty on road fuel gases by 29 per cent. As a result, the duty differential is now the largest in Europe, and the duty on road fuel gas is only a fifth of that on diesel. We have committed ourselves to maintaining that differential for the lifetime of this Parliament, which will help to give confidence and stability to those who invest in the infrastructure of road fuel gas filling stations, and to those who are buying or converting to gas-powered vehicles.

Let me also mention—as others have not yet done so—the Energy Saving Trust's powershift programme. The programme provides grants to help cover the additional purchasing costs of gas-powered vehicles, and to help those who wish to convert their vehicles to gas or change their vehicles. In some instances, it can meet up to 75 per cent. of conversion costs. We have also taken steps to encourage the use of road fuel gas by company car fleets. Since 6 April 1998, the extra cost of enabling company cars to run on road fuel gas has been disregarded in the calculation of the company car benefit taxable on employees.

It is clear that there are already substantial incentives for people to buy or convert to gas-fuelled vehicles. As the right hon. Member for Fylde pointed out, the problem has not been encouraging people to use gas; it has been the lack of an infrastructure providing filling stations at which they can buy it.

Mr. Loughton

The Minister specifically mentioned a tax change in the Budget in 1998 relating to the capital cost of company cars. That, of course, was down to an amendment to the Finance Bill tabled by Conservative Members. Can the Minister tell us how many cars have converted to road fuel gas since that date?

Ms Hewitt

It is still quite a small number. As I was about to say, and as several hon. Members have already said, the problem is that the country does not yet possess an infrastructure providing filling stations where drivers can easily buy road fuel gas. But—as hon. Members have said today, and as was said in Committee—both Shell UK and BP have made the welcome announcement that they will implement major investment programmes to ensure that there is a network of LPG sites on forecourts throughout the United Kingdom. Shell UK has announced a—10 million investment programme designed to make LPG available to 80 per cent. of motorists by 2001, while BP aims to have 300 of its forecourts dispensing LPG within the next five years, and 75 sites on line by the millennium.

Mr. St. Aubyn

In Committee, I asked the Minister what proportion of Shell's total forecourt investment the £10 million represented in the coming year. She did not have the figures then; does she have them now?

Ms Hewitt

That is really a matter for Shell rather than for me, but I shall try to write to the hon. Gentleman.

The welcome investment in infrastructure to which I have referred is happening without the proposed special capital allowances. Although I share the objective of the right hon. Member for Fylde, I consider it unnecessary to introduce such allowances. In my view, this is a deadweight proposal; but we will continue to monitor the take-up of road fuel gas, and will keep the case for additional incentives under review.

I should mention in passing that special capital allowances for gas-powered vehicles and gas refuelling points would doubtless have to be notified to the European Commission as a state aid, and would probably also have to be notified to the code of conduct group on business taxation. That may well interest several Conservative Members.

I hope that, for those reasons, the right hon. Member for Fylde will feel able to withdraw his motion. If he does not, I will ask my hon. Friends to oppose it.

Let me now turn to the amendments. As the right hon. Gentleman and, I hope, others will know, in the autumn of 2000 we shall introduce a system of graduated vehicle excise duty for new vehicles based primarily on their carbon dioxide emissions. That will do what several hon. Members have urged us to do this evening: it will create a VED system that directly relates VED paid on new cars to their fuel efficiency and their level of emissions. It will give manufacturers and motorists alike a real incentive to take environmental issues into account when deciding on the type of vehicles that they make or buy. We are working closely with manufacturers to ensure that they have the systems in place to supply our licensing authorities with the emissions data on which we shall base the new system, but that cannot physically be done before autumn 2000.

12.30 am

I can just imagine what the motor manufacturing industry would say if we were to accept the amendment and to demand that it puts in place brand new information systems, to be up and running and linked to the VED system by 1 January 2000.

Mr. Jack

Does the Minister not agree that information is already available about the carbon dioxide outputs of the vehicles that I listed? The information is there now and presents no barrier whatever to the achievement of the proposal in my two amendments.

Ms Hewitt

The right hon. Gentleman is missing the point. New cars have been tested for carbon dioxide emissions since 1997, but the information has not been collated in a form that can be used to calculate VED rates. As I have said, manufacturers, the Driver and Vehicle Licensing Agency and computer suppliers are working together to put the systems in place, but they will not be in place and ready to operate before autumn 2000. For the vast majority of cars—those registered before 1997—no carbon dioxide information is readily available.

The right hon. Gentleman and other hon. Members referred to the initial step that we took in the Finance Bill following last year's pledge by the Chancellor. We introduced a reduced rate of £100 VED for existing cars with engines up to 1100 cc. We did that not at a revenue gain, but at a revenue cost of £85 million, as the Red Book makes clear.

Of course, engine size is not the same as carbon dioxide emissions. It is not a perfect equivalent for environmental damage and pollution. None the less, it is the best available proxy for fuel efficiency that we have and can obtain from the information that is held by the licensing authorities. The measure has given a tax cut to drivers of nearly 2 million smaller cars.

Amendment No. 29 would extend the reduced rate to vehicles that are certified as using LPG as a fuel. I have referred to the incentives that the Government have already introduced to encourage such cars, but, as the right hon. Member for Fylde knows, many of the vehicles that use LPG can run on both gas and petrol. Indeed, according to DVLA records, only some 960 currently registered vehicles run solely on road fuel gas. About 10 times that number—some 9,300 bi-fuel vehicles—can run on either gas or fuel. As the amendment stands, bi-fuel vehicles that are capable of running on gas, but may not for most of the time, would none the less qualify for the reduced rate. Clearly, that would not make sense.

I hope that the right hon. Member for Fylde will support the Government's practical steps to encourage the conversion to road fuel gas and the purchase of smaller and cleaner cars, and agree to withdraw his new clause. If not, I must urge my hon. Friends to vote against it.

Mr. Jack

Although I appreciate the Minister putting on record some of the Government's efforts in the sector, much of what she said in rejecting perhaps technically flawed amendments was not consistent, although she used the word "consistent" at the beginning of her remarks. I understand that there is a legal requirement, if not in United Kingdom law, certainly at European level, to capture and to retain carbon dioxide data on car emissions. Therefore, that information is available and we have the voluntary agreement, which I mentioned and which is mentioned in the Government's consultation document on graduated VED.

It would not be difficult for a motor manufacturer—I mentioned a number of those—to furnish the Government with that information, which such manufacturers are, I understand, legally required to do.

I pray in aid a footnote to a briefing from the Society of Motor Manufacturers and Traders, which states: It was not a legal requirement to collect carbon dioxide data from new passenger cars before 1997". Admittedly, therefore, it might be difficult to visit my argument upon pre-1997 cars. However, clearly, the hon. Lady's argument falls like a pack of cards when applied to cars manufactured after 1997, as that information is available, and using it would be entirely consistent with the Government's own policy.

I was worried by the hon. Lady's argument—which she based entirely on carbon dioxide emissions—that the Government favour a VED that would encourage environmental improvement, as she not only said that she supports liquified petroleum gas, but prayed in aid a slightly weaker hand when describing its merits.

When the Government make their proposals, the fleet will comprise cars of many different ages. It will be interesting to see how the Government cope with pre-1997 cars, on which data may not be available. I therefore fear that the second strand of the hon. Lady's argument, on consistency, may be difficult for the Government to maintain. Nevertheless, we shall have to await the outcome of the consultation exercise to discover how they will deal with that.

I hope that, when the consultation exercise is concluded, the Government might find some way of rewarding people whose cars are either dual fuel or run solely on LPG, as such cars offer enormous benefits. I am sorry that the hon. Lady had not consulted the Department of Health on the matter. I am sure that, given a chance, the Chief Secretary to the Treasury—who is now in the Chamber, and is a former Health Minister—would have whispered in her ear not sweet nothings, but hard information on how wider introduction of LPG could reduce the number of those who have to go to hospital because of heart or respiratory conditions.

The hon. Lady also prayed in aid the work of certain fuel companies in creating an LPG infrastructure. There is some scepticism about just how widespread that network will be—I quoted figures of 400 forecourts; 200 depots, over a four-year period; and the conversion to LPG of 6,000 company cars. On the net tax effect of my proposals, I quoted £607,000. However, if such proposals were implemented, billions of pounds could be saved in the health budget. It is sad that the Government are not prepared to perform a very straightforward cost-benefit analysis when considering the amendments.

I am grateful for the support for the amendments that I have received from my hon. Friends, some of whom spoke on the matter with great knowledge. However, I acknowledge that the amendments may have technical deficiencies, and that the Government themselves may not have the data necessary to apply the proposals. This debate has been useful, perhaps not only in teasing out the Treasury's thin thinking on the matter, but in encouraging it to do more work on it.

I therefore beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.