HL Deb 09 June 2004 vol 662 cc263-5

3.12 p.m.

Lord Berkeley asked Her Majesty's Government:

Whether they propose to alter the rate of road freight fuel duty to take account of increases in carbon dioxide emissions from road freight and increases in oil prices.

Lord Davies of Oldham

My Lords, decisions on fuel duty take into consideration all relevant environmental, social and economic factors. The Chancellor welcomed OPEC's decision to raise production and the fact that some countries will move production up immediately. That is why, as both the Chancellor and the Prime Minister have said, we will not put the stability of the economy and public finances at risk by taking short-term decisions, but will review progress in August.

Lord Berkeley

My Lords, I am very grateful to my noble friend for that illuminating reply. Is he aware that since 1990 CO2 emissions from road vehicles have risen by 59 per cent? Bearing in mind other comments from my right honourable friend the Prime Minister in the Parliamentary Monitor, where he said, Climate change is probably, in the long term, the single most important issue we face as a global community", will the Government set an example by resisting pressure to reduce duty as a way of encouraging a reduction in consumption?

Lord Davies of Oldham

My Lords, the Government are committed to meeting the Kyoto targets and are using duty differentials to encourage the use of cleaner fuels. That has been part of the policy of duty provision over the past seven years. I hear what my noble friend says about recommending that the Chancellor should increase the duty, but other voices in the House may think differently.

Lord Ezra

My Lords, in the light of the uncertainties of the oil situation, will the Minister indicate whether the Government have in mind an overall strategy for reducing the consumption of petroleum-based fuels in the road transport sector with regularly published, monitored progress reports?

Lord Davies of Oldham

My Lords, these issues are monitored carefully. The noble Lord will recognise that the Government have been concerned to reduce the duty and, therefore, to increase the differential on clean fuels. Of course, we have had areas of real success in these terms. The movement to low sulphur, and as we now confidently predict, to sulphur-free fuels, has been encouraged by the duty provisions in recent Budgets and progress has been made in that area. The noble Lord is right to draw attention to the fact that we cannot hit pollution targets unless we significantly address the issue of transport.

Baroness Noakes

My Lords, does the Minister not understand that individuals and, importantly, businesses need certainty on fuel costs? Is it not about time that the Government got off the fence and said whether or not they will implement fuel duty increases in September?

Lord Davies of Oldham

My Lords, I am not sure which world the noble Baroness inhabits. If she thinks that we can be certain about fuel costs in view of the present position of OPEC and the problems in Saudi Arabia, she is giving to us prophetic capacities that none of us would claim. What is clear is that we need the situation to settle down. We need to be able to analyse what is likely to be the position of the oil price rise, which, after all, is a critical factor for the economy. An oil price rise will affect the whole economy. Fuel for transport affects only transport areas.

Baroness Carnegy of Lour

My Lords, my understanding of what my noble friend asked is whether the Government will get off the fence and say whether they will add to the existing price rise that is planned for September. That is what she wanted to know. She did not want to know whether the noble Lord believed that businesses were unable to read the tealeaves in relation to the future price.

Lord Davies of Oldham

My Lords, the Chancellor's decision is contingent upon the shift in world oil prices, which we all recognise have moved up substantially over the past two weeks, thereby creating a great deal of concern in the transport industry, which is reflected in the questions addressed today. Nevertheless, it would be injudicious on the Chancellor's part if he responded to what may be a temporary situation with a decision that had long-term implications for the transport industry. It is right that we see what is happening to OPEC and oil prices over a period of several months.

Viscount Simon

My Lords, it has been estimated that by the middle of this century, 70 per cent of carbon dioxide emissions will come from aircraft. Are Her Majesty's Government investigating the possibility of taxing aviation fuel?

Lord Davies of Oldham

My Lords, my noble friend will know that the taxation of aviation fuel is very complex indeed. There are over 2,000 bilateral agreements between countries which consolidate the present position. We have indicated that in the light of the necessity of hitting our Kyoto targets and dealing with emissions we would want the European Community to consider changing the stance that it adopts at present. That is not a decision that can be taken unilaterally by the United Kingdom Government. It requires international agreement.

The Duke of Montrose

My Lords, can the Minister tell the House whether the figures for carbon dioxide emissions from road fuel include the enormous lorries that come over from the Continent, tour around the country and leave again without buying a single litre of fuel in this country?

Lord Davies of Oldham

My Lords, they certainly include such lorries. It has already been indicated by Ministers that we intend to look very carefully at the issue of unfair competition when hauliers buy fuel in other countries at a lower price and compete with British hauliers on British roads.

Earl Ferrers

My Lords, can the Minister give an assurance that the Government will not tax aviation fuel? If they did, even more disruption and cost increases would be caused.

Lord Davies of Oldham

My Lords, I indicated the complexity of the issue, and therefore I cannot give a categoric response to the noble Earl. However, he will recognise that in controlling climate change and dealing with the problems of pollution affecting all of us, aviation fuel makes its contribution to the problem. That is why we think that the aviation industry needs to be examined on the general principle that the polluter pays. I am merely indicating that this is not a decision which this Government can take unilaterally.

Lord Newby

My Lords, does the Minister accept that the differential in duty between here and some of our near European competitor economies shows why, if we are to get a sensible approach to reducing air pollution, we need to have a broad level of agreement within the EU? Furthermore, for the UK to exert maximum influence to enable us to do this, do we not need to be at the centre of the EU rather than threatening to withdraw from it?

Lord Davies of Oldham

My Lords, that is a fairly general point derived from this question, but in broad terms it is of course right. If we create a single market and are unable to influence the decisions which can affect that single market against our interests, we are the losers by that. It is quite clear that we need to be at the centre of Europe, because our approach to fuel policy is a significant improvement on that of a number of our European neighbours.

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