§ 12. Mr. David Cameron (Witney)What representations she has received about tax treatment of biodiesel and other biofuels; and if she will make a statement. [81216]
§ The Minister for the Environment (Mr. Michael Meacher)The Government have received representations from industry, farmers and members of the public, both at meetings and in correspondence, requesting duty cuts for liquid biofuels. As with all tax matters, decisions on tax incentives rest with the Chancellor of the Exchequer.
§ Mr. CameronI wish the right hon. Gentleman well in his conversations with the Chancellor of the Exchequer. Is it not a fact that with farm incomes low and with the widespread concern about the waste of set-aside, biofuels—biodiesel—represent an excellent opportunity for farmers and for the environment? Is not the tax treatment of such fuels in other European countries, slightly more generous than in our country? Would the Minister please take that up with the Chancellor, preferably before next week?
§ Mr. MeacherI am keen to support agricultural diversification. Liquid biofuels have tremendous potential. The Government have set up the Government-industry forum on non-food uses of crops to investigate that potential. The Government have already taken action to promote the production of biofuels. As a result of the green fuels challenge, a new duty rate for biodiesel was set at 20p per litre below the rate for ultra-low sulphur diesel. I am well aware of the argument that that rate needs to be lower. As I said, I hear the argument and the matter is one for the Chancellor. On the comparison with Europe, the 20p reduction is almost the average for the European Union; it is slightly below that level. I recognise that if the industry is to be viable and not only develop used vegetable oil, which is already coming forward, the argument must be very carefully looked at.
§ Mr. Peter Pike (Burnley)Will my right hon. Friend give an assurance that he will continue to consider this matter in a very positive way? It must be recognised that, as we need to make changes in agricultural production to meet those in the common agricultural policy, the development of biofuels is an environmentally positive way of proceeding that deals with several situations at the same time. We should encourage agriculture and the National Farmers Union to work in that direction.
§ Mr. MeacherI entirely agree with my hon. Friend—this is a win-win situation in many respects. We are discussing a form of agricultural diversification that will certainly create more agricultural jobs and will produce 781 an alternative transport fuel that is much more environmentally sensitive. The issue—this has to be the issue—is that it has to be cost-effective. If further duty cuts are made, they will of course involve a reduction in revenue for the Exchequer. The opportunity costs of making those reductions as opposed to others are the essential issue that the Government have to bear in mind.
§ Mr. David Heath (Somerton and Frome)Does the right hon. Gentleman understand the frustration that is currently felt in the industry about the lack of leadership from the Government on this matter? People cannot plant crops unless they are sure that there is a processing plant to take the crops, and they cannot develop processing plants unless they know that there is a market for the fuel. Can he not see that much greater leadership needs to be shown, not only by his Department but by the Treasury?
§ Mr. MeacherIt is not only a question of showing political leadership, as this is not a matter of political will. I was trying to tell the House that a cost is involved and that the process has to be cost-effective. Those are the calculations that the Treasury rightly has to make in considering the best way of using taxpayers' money, whether to promote an alternative form of agriculture, a new transport fuel or a reduction in greenhouse gases. I think that it can make a contribution in all those respects, but the hon. Gentleman needs to contain his frustration. The arguments are fully understood by the Government and I suggest that he wait to see what the Chancellor says in his pre-Budget report.