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Hydrocarbon Oil 1979 C 5

Volume 172: debated on Tuesday 15 May 1990

The text on this page has been created from Hansard archive content, it may contain typographical errors.

I beg to move amendment No. 33, in page 2, line 16, leave out '£0·1902 and insert £0·18'.

With this it will be convenient to discuss the following amendments: No. 22, in page 2, line 23, leave out '£0·0299' and insert '£0·035'.

No. 39, in page 2, line 23, leave out '£0·0299' and insert '£0·0383'.

Amendments Nos. 22 and 39 are similar, but amendment 22 was tabled by the Opposition and amendment No. 39 by the Liberal party. They are important amendments as they affect our environment and what will happen to the country, and because last year, after a debate, the Government made certain welcome concessions and took steps to ensure that there was a good differential between leaded and unleaded petrol.

The amendment would reduce the price of unleaded petrol by a modest amount. We hope that the Government will see the sense of that and, if they cannot accept the amendment, perhaps the Economic Secretary, who is to reply to the debate, will be able to offer some concessions in future years or in future budgets.

The Economic Secretary is, however, in great trouble. It was not a green Budget. Perhaps it could be said that the additional 2p differential on leaded petrol was a green measure. However, that was due to the 10 per cent. uprating of petrol of all types. Such a differential naturally leads to an increase in the differential between the price of leaded and unleaded petrol. The Treasury could do nothing about green measures in the Budget; it was waiting for the Secretary of State for the Environment to publish his Green Paper on the Government's intentions regarding the environment.

We have been led to expect a carbon tax and other radical proposals in the White Paper that is to be published in the autumn. However, according to the Sunday newspapers, the green tax on petrol proposal has been ruled out and will not be included in the White Paper that is being prepared by the Secretary of State for the Environment. In March he said that a green tax was an essential part of the Government's economic policies. Now, however, it has been ruled out. According to an unattributable briefing by a working party spokesman:
"Nobody in their right mind would expect a substantial increase in energy prices in the run-up to an election."
The Government have their eye on the next election. Therefore, the environment does not matter. What matters to them is that they should hold on to power. They do not mind what happens to the country. They are concerned only about the election. They are not concerned about green policies and the effect of existing policies on the environment, or about protecting the environment, or creating a better one.

9 pm

According to the unattributable briefing, the White Paper will discuss fuel taxation but it will not commit the Government to any moves, even if they are inflation-neutral, and it will be up to the Treasury to decide what petrol duties should be. If it is for the Treasury to decide what those duties should be, the Treasury should have insisted upon being told earlier this year so that the Budget could include measures that represented Treasury thinking on petrol taxation and how it saw its role in improving the environment.

It is important to encourage people to use unleaded petrol. In March 1989, 15 per cent. of all cars used unleaded petrol. In the previous year, the figure was only 2 to 3 per cent. That was a good increase, although not as large as some of us had wanted. By October 1989, the differential between leaded and unleaded petrol was 28 per cent. Unfortunately, the differential has remained at almost the same figure; it is now about 30 per cent. A number of organisations argue that the differential must be greater. An additional tax on leaded petrol is not required, but the Government could forgo a little tax on unleaded petrol. Last year the Treasury paid back £7 billion of the national debt, so it could offer a slightly greater differential on unleaded petrol. [Interruption.] The hon. Member for Lancaster (Dame E. Kellett-Bowman) always intervenes from a sedentary position and I can never hear her.

I was simply making the self-evident observation that the Opposition incur debts and we pay them back.

We have the highest balance of payments deficit in our entire history. Even invisible earnings during the last few months of 1989 went into deficit for the first time ever. It comes ill from the hon. Member for Lancaster to say that the Government pay back the debts that we incur.

I shall give way again to the hon. Lady, if necessary, but she must make more substantial points if she wishes to gain the Committee's attention. Many hon. Members want to contribute to this important debate.

Ever since the French revolution, we have borrowed a good deal. Each Labour Government have borrowed more, and Conservative Governments have paid it back.

The hon. Lady must examine the curves for the national debt in the past 150 years. It is true that it increased during the first and second world wars, but it has decreased under Labour as well as Conservative Governments. [Interruption.] Conservative Members need only examine the graph, and it will become clear. They will see that during the last war—under a coalition led by a Conservative Prime Minister—the levels were high.

Let us talk about unleaded petrol instead.

The problem is that the number of cars using unleaded petrol has remained stuck at about 28 or 30 per cent. for the past six months. We need an incentive for people to change to unleaded petrol. They will not do so now, because the argument has gone off the boil.

Surely the 28 per cent. figure reflects the number of cars that cannot be changed to unleaded petrol. However, the figure is liable to go up regardless of any changes in duty that may occur in the next few months as more and more new cars run on unleaded petrol from the word go.

More cars could change to unleaded petrol than are doing so now.

We must remember that lead in petrol damages the heart, the kidneys and the central nervous system—[Interruption.] The hon. Member for Lancaster is moaning again, but it is true. Lead in petrol causes anaemia and high blood pressure, and can be responsible for abortion and stillbirths. It is an evil that we can do without.

I am sorry that the hon. Member for Tatton (Mr. Hamilton) is not in his place—perhaps he is pursuing a constituency interest—because not so many years ago he argued for the retention of leaded petrol. I hope that no Conservative Member will do that tonight.

Opposition Members are not happy that the Chancellor has increased the price of petrol by 10 per cent. across the board. We had hoped for a differential between leaded and unleaded petrol, but there was none in the Budget.

There are also the problems of the 10 per cent. of disabled people who use the Motability scheme. Those people have their vehicles on a lease basis over a three-year period. Therefore, when the price of petrol increases, they can do less mileage. I do not expect an answer now from the Economic Secretary, but perhaps he can write to me later, as the problem is serious. I remind him that there are several well-known patrons of Motability, who I hope will agree that there is a case for examining the amount of finance available to Motability. Those who participate in the scheme suffer when the price of petrol rises above the rate of inflation.

Included among those patrons are the right hon. Member for Wallasey (Mrs. Chalker), the right hon. Member for Sutton Coldfield (Sir N. Fowler), the right hon. Member for Croydon, Central (Mr. Moore), the right hon. Member for Braintree (Mr. Newton), the right hon. Member for Chelsea (Mr. Scott), and finally, at the bottom of the list, the right hon. Member for Finchley (Mrs. Thatcher). With patrons like those, there should be no need for me to plead the case for fair treatment for Motability; However, I am doing so because the matter must be mentioned. I hope that what I have said will be considered by the Treasury—I see the Economic Secretary nodding. The EC Commission is pressing for a 30p differential between leaded petrol and DERV. At present the differential is only 20p and our amendment would widen it a little.

Our usage of diesel accounts for about 5 per cent. of the market, which is much less than most other European countries. I have a graph, although not the actual figures, which shows that if our usage is about 5 per cent., it must be about 10 per cent. in Germany, perhaps 28 per cent. in France and about 12 per cent. in Italy. So we are behind other European countries in the use of diesel. We could do more by increasing the differential because diesel can be a better fuel. It does not contain lead and it is 30 per cent. more economical, thus reducing the level of carbon dioxide emissions. When fitted with a three-way converter, it could be cleaner than anything that a petrol engine could offer. I do not have time to elaborate on those points, but I know that some of my hon. Friends hope to speak about them.

In summary, it is clear that more needs to be done. We had expected some green tinges to the Budget, but in the event it turned out to be grey on those issues. Perhaps the Treasury was caught out by the Secretary of State for the Environment, who was to have done great things but will not now do them. We shall be interested to hear the Economic Secretary's remarks. He will need to make some encouraging noises to prevent us from pushing the amemdment to a Division.

The hon. Member for Wrexham (Dr. Marek) raised the important issue of unleaded petrol. The Government will wish seriously to bear his arguments in mind, but I hope that they will bear equally in mind the plight of unfortunate people such as I who bought a British car and found that it was not capable of being converted to take unleaded petrol.

One is often anxious to do the right thing—for example, to buy a good British car or use unleaded petrol—and bearing in mind the balance of payments problem to which the hon. Member for Wrexham referred, I regard it as my duty to buy British whenever possible.

The increase in the price of petrol as a result of the Budget was substantial. It went up by 10 per cent. for leaded and unleaded, adding 11p to a gallon of leaded and 9p to a gallon of unleaded petrol. The tax differential is now 15·6p per gallon and unleaded petrol now has about 30 per cent. of the market.

As I say, it was a substantial price rise. Most people have not noticed the extent of the increase because, at the same time as we had the increase, all petrol stations seemed to make the dramatic change from gallons to litres, and it is now difficult to work out the difference. I am reminded of what happened when we switched to decimal currency; with the change of system came a substantial rise in prices.

Whether or not the public are aware of what has happened, they would like to know whether the increases are part of a general move by the Government to implement the terms of the Single European Act and to aim to harmonise our taxation system in so far as that is necessary for the completion of the internal market.

In the debate on the motor vehicle market on 26 April, the Government made it clear that they continued to believe that centrally imposed tax approximation was unnecessary and inappropriate. Are the Government aiming at the harmonisation of indirect taxes and excise duties by 1992 in so far as that is necessary to complete the internal market?

The Minister will be aware that that would involve dramatic changes for Britain. It would mean, for example, a reduction of about £3 billion in the taxes on alcohol and cigarettes. That would bring joy to some, but not to those who would have to pay the £3 billion, which would have to be imposed on necessities.

If the Minister cannot avoid those measures, the people of Britain are entitled to know. I am not saying that the Government are right or wrong, but, quite honestly, I have not the slightest idea what the Government's policy is. It is terribly important that people should know. If we are about to move towards approximation with the EEC countries, that will mean rather dramatic changes in the tax we pay. It will mean, for example, much cheaper beer, much cheaper whisky, and significantly cheaper cigarettes, but essentials will go up and petrol will have to go up quite substantially.

Order. I remind the hon. Gentleman that the clause and the amendments deal only with hydrocarbon oils.

9.15 pm

That is why I stress that hydrocarbon oils are only part of the budget. We want to know whether the provisions are part of a move towards approximation.

Finally, if the Government do not consider that approximation is necessary on motor vehicles as well as on petrol, have they taken a legal view on whether the terms of the Single European Act could require them to do so if the Commission takes the view that member states have not approximated the taxes on petrol in so far as is necessary to complete the internal market? The Minister will be well aware of the problem as it has been drawn to the Government's attention many times. Many of us who sat through the late nights considering the Single European Act were worried that, although it stated that we had a veto, the clause states that we are committed to approximating in so far as it is necessary to complete the internal market. If the Commission does not think that we have a veto, what will happen?

I hope that the Minister will say, purely in relation to the clause and amendments dealing with hydrocarbon oils, whether the Government intend to move towards harmonisation in so far as it is necessary to complete the internal market, and whether they have taken a legal opinion as to whether they might be obliged to do so? Whether the answer is yes or no, it will mean a great deal to the British public. I know that there are different views, as there may well be different views in the Committee, but we are entitled to know exactly what the Government's policy is on one of the most dramatic aspects of taxation in our time.

The hon. Member for Southend, East (Mr. Taylor) has raised two points of relevance to the debate. The way in which petrol prices are displayed has a considerable effect on whether the differential appears significant to the motorist. He might have been suggesting that the fact that garages started displaying their prices in litres just when the prices were going up had something to do with Europe. But it was nothing of the kind; it was a direct result of a decision by the Government which led to an adverse report from the Select Committee on Trade and Industry and a prayer tabled against the regulations which had the signature of more than 200 right hon. and hon. Members.

That prayer was never debated because the Government were too embarrassed to allow it to be debated, but it was entirely at the insistence of the Government and nothing to do with Europe that the rule was changed so that garage proprietors are not obliged to show prices in gallons as well as in litres. I consider that the Government made a grave mistake and that they should have responded to the pressures from hon. Members on all sides of the House not to do that. The result was to make it more difficult for motorists to compare prices, particularly when increases are taking place.

It is still more difficult to make a realistic comparison. Perhaps I am getting old, but I still measure petrol prices in gallons because that is the term that makes sense to me. If people want measure in litres, that is fine for them, but why should not both prices be displayed? If the Government want to persuade motorists that there is a significant differential, why do they reduce the apparent differential by having the prices displayed only in litres?

A garage can voluntarily display the prices in gallons, but the Government have removed the obligation to do so. I suggest that hon. Members should support those garages which inform their customers properly and continue to show their prices in gallons as well as litres. That is certainly my practice and I hope that others will do the same.

There is no need whatsoever to achieve harmonisation of the duty on hydrocarbon oils across the Community to complete the single market. The only threat to the single market would be if different prices were charged in one country for commodities which came from other countries, thereby obtaining some price advantage.

There is reasonable pressure to harmonise in adjoining countries, where travel between the two is easy. Obviously, large differences in the price of petrol would lead to much cross-border driving to fill up with petrol in the neighbouring country—as, for example, between Northern Ireland and the Republic of Ireland. There is not the slightest reason why we should be constrained in rates of duty on petrol or on diesel by the fact that there remain differences with other countries in the European Community. It will not be worth anyone's while to pay a considerable fare to come on a ferry to get petrol cheaper here. Anyway, restrictions should be observed for safety reasons on the carriage of petrol in ferries. Harmonisation is not necessary, and I hope that the Government will remain vigorous in protesting that view in European discussions.

There is much at stake in this little bit of the Bill, because this is the entire Treasury commitment to greenery. When Treasury Ministers appear before the electorate, or go before their maker and are asked, "What have you done as a Treasury Minister to protect the environment?", all they can say is that the Economic Secretary wore a green tie for the debates on the Bill and that they had a differential on unleaded petrol.

I welcome the differential on unleaded petrol, for which I argued before its introduction. It is proving its value, but we expected more from the Budget. Where are the other measures which the Government could have taken—the grading of vehicle excise duty by engine size, a more rigorous approach to company car tax provisions, incentives to fit catalytic converters, measures designed to deal with noxious emissions—

Order. The hon. Gentleman will realise that he is straying from the amendments.

I have made my case, Sir Paul. There were so many other areas into which Treasury Ministers could have gone to demonstrate that they were serious about the environment, that they place a great obligation on the leaded and unleaded petrol differential when it is their sole contribution.

It is not unreasonable, therefore, that some of us have tabled amendments to make the differential greater. Let us at least try to get this right. Clearly, there is a need for further substantial conversion, and a wider differential would help to achieve it. The amendments are designed to make sure that there is a difference of 15p per gallon at the pumps, not in the taxation rate. A complicated calculation has to take place with the figures in the Bill to find out what the figure should be at the pumps.

There is a case for an even larger differential. As the hon. Member for Wrexham (Dr. Marek) pointed out, the differential for diesel in other countries is much greater than it is here. In some Scandinavian countries, the price of diesel at the pumps is only half that of petrol. There are problems about diesel. Work needs to be done to make sure that, in its use, we are environmentally friendly, but it is possible to be so, as the hon. Member for Wrexham pointed out.

I urge the Government to have a wider differential in favour of unleaded petrol and to reject the pleadings of their hon. Friends who in previous years were opposed to any differential. The hon. Member for Tatton (Mr. Hamilton), who took part in the debate last year, said that there should be no differential. I am glad that the Government have gone at least some way along the road. I believe that they should go further.

I am encouraged by the comments of the hon. Member for Wrexham (Dr. Marek) on unleaded petrol. Despite what other members of the Labour party have said, he at least is encouraging the use of cars rather than public transport. Apart from that, I have sympathy with his view on unleaded petrol, having introduced a short Bill on the subject some 18 months ago.

The hon. Gentleman should make his case better. An increase in the differential would mean a larger take-up of unleaded petrol by the car-owning public. We should keep a clear idea of the objectives—to increase the number of motor cars that can use unleaded petrol and to increase the number of cars that are converted. Simply to increase the differential would be an expensive way of achieving those objectives.

Before the previous Budget, when the differential was increased, there was already plenty of evidence, although there was only 3p or 4p difference between the two prices, that people were already converting to unleaded petrol as a result of the promotional activities by the petrol companies and the manufacturers. Unleaded petrol week, which took place at the end of 1988, achieved much. I needed to be convinced then and I need even more to be convinced now that to decrease the amount of duty, which would involve a considerable sum, is the best way of using the money to encourage people to use unleaded petrol. I should much prefer the Government once again to encourage by promotional activities through the car companies and the petrol companies the use of unleaded petrol.

I wholly agree with some of the points made by the hon. Member for Berwick-upon-Tweed (Mr. Beith). There is not enough physical evidence at petrol stations of the price differential. In the case of some companies, such as British Petroleum, it is difficult to tell which pump has the unleaded petrol, because the new logo is green and yellow. That needs to be changed.

I have taken up that point with BP and it has promised to look again at the somewhat indiscriminate use of green because of the misleading impression that it gives.

I am grateful to my hon. Friend. As I said, far more could be done at considerably less cost to the Exchequer to achieve an increase in the amount of unleaded petrol used by methods other than increasing the differential between the two fuels.

The hon. Member for Wrexham (Dr. Marek) talked about three-way catalytic converters, but in relation to diesel fuels, he should have referred to the catalytic trap. Amendment No. 33 does not seem to relate to diesel vehicles with a catalytic trap, but to all vehicles that use diesel. Before we go down that route, there must be far more evidence that there are no risks to health from diesel fumes. I am thinking especially of diesel vehicle emissions that can be carcinogenic. Last year in Germany, for example, where there had been an increase year by year in the number of diesel cars sold, the figure went down for the first time in five or six years as a result of that worry about health. There is equal worry about photochemical smog, especially in cities, as a result of diesel emissions. It is probably a mistake at this stage to use diesel more extensively when there is still much evidence to suggest that there are health effects about which we do not know fully.

Clause 3 is probably the most disappointing in the Bill. Above all, it exemplifies a missed opportunity. It deals with the changes in duty on leaded and unleaded petrol and on diesel, but sadly it is, as has been said previously, the green fig leaf to a Budget which could have been very green. We all accept that the Chancellor was constrained by his predecessor, the right hon. Member for Blaby (Mr. Lawson), and by his mistakes. No doubt he was also constrained by "her next door", by the high interest rates, by the rate of inflation which is the record for the G7 countries, by the monumental trade deficit which has built up under the current Administration and by the other economic circumstances. Having said all that, with a little more ambition and imagination, the Budget could have been creative through clause 3, and other green issues could have been raised. It is a missed opportunity.

There is nothing in the Budget on reducing VAT to encourage recycled material. There are no tax incentives to ensure the use of items that otherwise would not be used. Sadly, there is nothing in the Bill to encourage insulation.

Order. I remind the hon. Gentleman that this clause and the amendment are concerned solely with hydrocarbon oils.

Indeed, but the clause contains no reference to the sizes of engines that use those oils, petrols and diesel fuels. Other countries have introduced a rigorous regime of pricing according to engine size, but unfortunately such a regime has not been introduced here.

9.30 pm

The Government have tried to get green credit by simply increasing the duty on all fuels by 10 per cent. Almost by accident there has been a very slight increase in the price differential. That has occurred not by design, but simply because all the fuels increased in price by exactly the same proportion. That is not enough.

It has almost been taken as read in this debate, but I must repeat it again, that lead in petrol can kill. The case is overwhelming that lead in petrol causes accumulations that affect foetal development, birth weights and the size of the circumferences of children's heads. It produces all those difficulties. A high level of lead in blood is now, beyond a shadow of a doubt, a serious problem which must be tackled.

I commend what the Government have already done to tackle that problem. However, we must continue that battle to ensure that more motorists use unleadeded or diesel. The percentage of drivers using unleaded has stagnated at around 30 per cent. Unleaded needs a further boost and the amendment would encourage that.

The hon. Member for Southend, East (Mr. Taylor) referred to European harmonisation. Harmonisation is a million miles away and I hope that the hon. Gentleman is not too happy about harmonisation on this issue. The price of leaded fuel in some European countries is far higher than it is here. If it was a little higher here and if unleaded was a little cheaper, far more people would use unleaded. Leaded petrol in Denmark is £2·77 a gallon. In Ireland it is £2·68 and in Italy it is £2·97. Only three countries out of 12 in Europe have cheaper leaded petrol than the United Kingdom.

We have seen what other countries have done with regard to the differential. We have seen the continuing effect of that. I hope that we have a Division on this amendment because it is important that people outside this place understand that the Labour party—we hope that we shall be joined by the smaller Opposition parties—is still determined to carry on the good work that has started. I hope that they understand that that work has not ended and that it should continue until the vast majority of motorists use unleaded fuel.

Like my colleagues, I do not apologise for drawing attention to the fact that lead is very dangerous. Some 80 per cent. of lead in the atmosphere comes from petrol. We should remind ourselves regularly just what lead does to us. As my hon. Friend the Member for Wrexham (Dr. Marek) said, it damages the central nervous system. It causes anaemia and it is particularly damaging to children who are vulnerable to its effects because their brains and nervous systems are still developing. Children absorb lead far more quickly than adults.

Does my hon. Friend agree that the very close proximity of inner-city schools and playgrounds to the busiest roads is at the heart of the problem of lead affecting small children?

Yes, there is well-documented, tragic evidence to that effect. At the moment there is an argument about at what level the intake of lead begins to harm people, and especially children. Evidence is growing that a threshold level at which harm starts to be caused does not exist and that the effect is a continuum. Low levels of lead can cause harm. We believe that any level is harmful. That is why one of our amendments would reduce the tax on diesel, which is lead-free and, as far as we know, much less harmful—

No, I shall not give way to the hon. Gentleman because he has made his points and I should like my hon. Friend the Member for Carlisle (Mr. Martlew) to have his chance.

Diesel is more economical and reduces the level of carbon dioxide emissions. Therefore, we contend that the differential between leaded petrol and diesel should be increased as should that between leaded and unleaded petrol.

The pricing differential between leaded and unleaded petrol has been fairly successful. I do not think that any hon. Member would argue with the fact that it is has encouraged motorists to change to unleaded petrol. Nevertheless, as my hon. Friend the Member for Nottingham, North (Mr. Allen) said, we seem to have reached stagnation point. In March 1989, unleaded petrol sales accounted for about 15 per cent. of the market; by October 1989, they accounted for 28 per cent., but since then there is no doubt that the campaign has stalled. It is estimated that by March this year the percentage of petrol sales accounted for by unleaded fuel had climbed to about 30 per cent. However, it is also estimated that another 20 per cent. of motorists could switch to unleaded petrol without engine conversion. It is true that 6 million cars use unleaded petrol, but that leaves 9 million cars that do not. Despite all the hype there is still an awfully long way to go.

I agree that the Budget was grey rather than green. The Chancellor should at least have acknowledged the urgency of the environmental issues that are facing everybody in this country, if not in the world. I know that you, Sir Paul would rule me out of order if I were to discuss some of the issues to improve the environment for which we are calling, so I shall not do so.

If accepted, our amendments would take us some way along the road to reducing the amount of lead in the air. As I am sure that that would be welcomed by everybody outside the House—and certainly by all Opposition Members, if not by all Conservative Members—I urge the Minister to accept our amendments.

The Chancellor's decision on unleaded petrol was symbolic of the whole Budget. It was a missed opportunity. His decision did not extract inflation from the economy and did not extract poison from the atmosphere. The Budget left us with an economy that will be ruined for future generations, just as many of our children's minds will be ruined because the Chancellor did not take the opportunity of increasing the differential between leaded and unleaded petrol.

The right hon. Member for Blaby (Mr. Lawson) has been blamed for many things, but at least we could say that he had a green tinge about him. He certainly has a green tinge these days but perhaps those of us who are not getting his salary should be the ones with a green tinge.

I am sorry that the Economic Secretary will have to reply to this debate, and not the Chancellor. When he served at the Ministry of Agriculture, Fisheries and Food, the hon. Gentleman had a very good environmental reputation. Indeed, if he had still been a Minister in that Department, I doubt whether we would have this problem with mad cow disease. I notice that the hon. Gentleman is wearing a green tie. Perhaps that is a coded message to us that he does not believe what he is going to say, but that he has to say it anyway.

Lead is dangerous—there is no argument from either side about that. I do not accept the argument of the hon. Member for Wyre (Mr. Mans) that price differential does makes no difference to the public's buying power. That was the implication of his remarks. At one time he praised petrol companies for their efforts and then he criticised them for trying to disguise which petrol was leaded and which unleaded. That sounded a peculiar argument to me.

The Government increased taxation on unleaded petrol by 10 per cent. That was anti-environmental and anti-green because they actually increased the cost of unleaded petrol by 10 per cent. If they had wanted to get the same amount of revenue, they could have increased the differentials. That would not have made a major difference in the total cost, but would have encouraged people to go for unleaded petrol. We should be aiming for a system in which those who do not use unleaded petrol, use diesel and all of us have catalytic converters on our cars to help the environment. But the provision has done nothing towards that.

If the Government had not wanted to put up the price of unleaded petrol, they could have put up the road tax —that was an option. Many Opposition Members are suspicious of the Government's reasons for refusing to put up road tax. We believe that they are getting ready to do away with it, and will put its cost on the price of petrol, both leaded and unleaded, in the not too distant future. They are not honest about that because they are deeply concerned about what rural voters will think about the abolition of the road tax. That is why the Government decided to increase the tax on unleaded petrol by 10 per cent.

Some of my hon. Friends have been too kind to the Government. They said that it is a grey Budget. They were right; it is the colour of the Chancellor's hair. Through their action, the Government are being anti-environment and anti those of us who are consumers and decide that we want to buy environmentally friendly products.

The only way the Budget has helped the environment is by closing some factories and reducing pollution in that way. I noticed that the job losses in the constituency of my hon. Friend the Member for Wrexham (Dr. Marek) were blamed on the downturn in the car industry. If there was a greater differential between the price of leaded and unleaded petrol, it might encourage some of us who have cars that cannot be converted to change to new cars. That would give the economy an impetus. But, of course, that is exactly what the Chancellor does not want us to do. We cannot have any growth, whether green or otherwise.

The Government have let down the people of this country. They have let the cat out of the bag. They pay only lip service to the environment, and when it comes down to the pounds, shillings and pence, they do not give a damn.

I thank the hon. Member for Carlisle (Mr. Martlew) for his kind remarks. I do not know what causes mad cow disease but I hope—indeed I am sure—that it is not leaded petrol.

Amendment No. 33 calls for the rate of excise duty on heavy oil to be reduced. It would also increase the tax differential between DERV and leaded petrol. DERV already has a duty advantage over petrol, but increasing the differential will have only a limited effect because most DERV is used for road freight lorries. It might encourage more people to switch to using diesel rather than petrol cars, but unfortunately United Kingdom manufacturers lag behind their competitors in the number and range of diesel cars they offer. I think that the hon. Member for Wrexham (Dr. Marek) would acknowledge that. For example, Ford, Peugeot Talbot and Rover have a limited production of diesel cars in the United Kingdom, but we have no long-term tradition of such production here, by contrast with some continental manufacturers, such as Mercedes-Benz, Volkswagen and Citroen.

Increases in the cost of DERV affect virtually every United Kingdom business by raising costs. Last year we did not increase DERV duty at all. This year my right hon. Friend the Chancellor felt it necessary to make some increases, although they are a little higher than required to keep the duty in line with inflation. This is offset in some measure by freezing vehicle excise duty on buses, coaches, taxis and many lorries for this year. Although the duty on United Kingdom DERV is higher than that in some EEC countries—I readily concede that it is—many of our Community partners such as Belgium, Denmark, France, Ireland, Italy and the Netherlands apply a higher—some of them a much higher—rate of VAT to DERV than we do. And some countries such as Spain, Portugal and France do not allow their businesses to deduct all of that VAT.

I assure my hon. Friend the Member for Southend, East (Mr. Taylor) that we have made it clear on several occasions that we do not consider a tax approximation necessary for the completion of the single market. As he knows, the proposals require unanimity in the Council of Ministers, so our position is safeguarded.

9.45 pm

The hon. Member for Berwick-upon-Tweed (Mr. Beith) said that the price of DERV was too high and contrasted it with the price in some Scandinavian countries, but, as I have said, several countries with low DERV duties apply higher VAT rates than we do and do not allow businesses to deduct all the VAT that they then incur on their purchases of DERV.

Amendments Nos. 22 and 39 call for the Government to do more of what we are doing already for unleaded petrol, by increasing the differential between leaded and unleaded petrol to 4·03p per litre, including VAT, or—I share the view of the hon. Member for Berwick-upon-Tweed about gallons—to 18·30p per gallon. I welcome that as a sign of support for our strategy over the past three Finance Acts, in which we have steadily increased the differential. As the Committee knows, we introduced the duty differential between leaded and unleaded petrol way back in 1987 to encourage the wider use of unleaded petrol. We did so because of the widespread concern about levels of lead in the atmosphere and in the blood, particularly in that of children. I know that the hon. Member for Halifax (Mrs. Mahon), and many other hon. Members are anxious about that.

The hon. Member for Wrexham said that the consumption of unleaded petrol had not yet risen to 30 per cent., but it has risen to more than 30 per cent. now. I was not a member of the Finance Bill Committee last year, but I think I am right to say that the hon. Member threw down a challenge to the Government in that Committee that the take-up of unleaded should rise to more than 30 per cent. by this time in 1990. We have met that target and we hope and expect that the take-up of this form of petrol will increase to 40 per cent. by the end of the year. That has been helped by the fact that the proportion of filling stations that now sell unleaded petrol has increased from 50 to well over 90 per cent. in the year since the matter was debated in the Committee. There are still some filling stations, I think in rural areas, that do not sell unleaded petrol, but they are almost the only ones remaining.

The hon. Members for Nottingham, North (Mr. Allen) and for Halifax will be pleased to know that the quantity of lead emitted into the atmosphere has been reduced by over 70 tonnes a month. That reduction has been widely welcomed by environmental groups. For example, Miss Jane Dunmore, who may be known to the hon. Member for Halifax and who is the campaign director of CLEAR, the Campaign for Lead-Free Air has said:
"since the reduction in the amount of lead in petrol sold in Britain, the proportion of lead in the atmosphere has dropped by 50 per cent. Levels of lead in people's blood and in the air have dropped in the last two years."

Does the Minister agree that the figures that he gave are averages? In cities such as my city of Leeds there is a great contrast between inner-city areas where there are schools situated along the main roads and on the arterial accesses to the city. In those inner-city areas the lead levels are four to five times the levels in the areas beyond the ring roads. That is the real danger. If we base our arguments on average figures we could become very complacent about the problem.

I agree with the hon. Gentleman The Government are not complacent or we would not be coming forward with the clause and nor would we have made such progress in the past few years. The hon. Gentleman is worried about lead in the air in his constituency. That is understandable and he is justified in being anxious. It is for that reason that we have set targets each year. Last year we were set a target of 30 per cent. by the hon. Member for Wrexham. We reached that target and, as I have said, we expect to reach 40 per cent. by the end of 1990.

The Minister says that he has set himself a target of 40 per cent. unleaded petrol usage for next year and has prayed in aid Miss Jane Dunmore of the Campaign for Lead-Free Air. I suggest that he reads the rest of what she said. She said:

"Some small savings in fuel and hence in pollution may result but the new waiver in favour of unleaded petrol is probably too slight to speed up greatly the pace of change."

I do not think that anyone could quarrel about the pace of change, because the Government have reached a 30 per cent. target in three years. We are fourth in the European league table and, as I have said, we expect to improve from 30 to 40 per cent. by the end of this year. Nobody who looks at the figures for the last three years could say that the Government have not taken the matter extremely seriously. We shall continue to do so. We compare well with many other countries in the European Community. Only the West Germans, the Danes and the Dutch have a large market share of unleaded petrol, but those countries started well ahead of us in setting tax differentials between leaded and unleaded petrol.

Since last year's Budget, it has paid motorists to use unleaded petrol and many motorists who were able to switch to it have done so. But adjusting the price is not all that we have done to increase the take-up of unleaded petrol. Our measures last year made it more available and we also gave it a boost with a £1 million advertising campaign. My hon. Friend the Member for Wyre (Mr. Mans) mentioned that and also stressed the fact that many oil companies, notably Esso, BP and Shell, have helped by running massive advertising campaigns and promotions to encourage people to make the switch to unleaded. Car manufacturers have also played a role and I congratulate them and the oil companies for their part in the success that I have outlined to the Committee.

I can tell my hon. Friend the Member for Southend, East that, from October this year, all new cars must be able to run on unleaded petrol. We do not believe that further increases in the duty differential would increase significantly the use of unleaded petrol. That would reduce the cost of unleaded petrol for those who have already made the switch and erode the real value of leaded petrol duty. There is a limit to the effect that a differential can have. As my hon. Friend said, about one quarter of all cars cannot run on unleaded petrol. In addition, many consumers are price-insensitive and there is nothing that the Government can do about that. Some drivers wrongly believe that leaded petrol gives better performance than unleaded petrol. However, tests by manufacturers and consumers associations show that this is not so.

Our having made the fiscal benefit available, it is now up to those who have not yet made the switch to do so. [Interruption.] I am pleased to welcome to the debate my hon. Friend the Minister for Roads and Traffic, who knows a great deal about this subject.

The differential that we are proposing is the right one to encourage more motorists to switch to unleaded petrol. The incentive is there and the Government would suffer a dead weight loss of tax if the differential were too great.

Therefore, I recommend that the Committee resists the Opposition's amendments. However, I give the assurance that in next year's Budget we shall look again at the differential, just as we have done during the past three years, and it is inconceivable that we would not take into account some of the arguments that have been put forward today and the desire of many people, irrespective of party, to see that we maintain the differential between leaded and unleaded petrol and increase the number of cars running on unleaded petrol.

We have had a useful debate and I thank my hon. Friends the Members for Carlisle (Mr. Martlew), for Halifax (Mrs. Mahon), and for Nottingham, North (Mr. Allen) for their contributions. The Minister has made a reasonable response. He has honestly and forthrightly said that the Government hope to achieve a 40 per cent. take-up by the end of December. We shall remember that. I hope that that is well exceeded, as I am sure do hon. Members on both sides of the Committee.

However, we still think that the Government should have done something about unleaded petrol in this year's Budget. They have not done so because of the muddle between the Department of the Environment, the proposed White Paper which was supposed to tell us exactly what the Government's green policies will be and the Treasury being unable to act. However, it now transpires that the Treasury could have acted, since many proposals will not now be included in the White Paper because of the run-up to the next general election.

I recommend my right hon. and hon. Friends to press amendment No. 22 to a Division, but I beg to ask leave to withdraw amendment No. 33.

Amendment, by leave, withdrawn.

Amendment proposed: No. 22, in clause 3, page 2, line 23, leave out £0·0299' and insert £0·035'.— [Dr. Marek.]

Question put, That the amendment be made:—

The Committee divided: Ayes 180, Noes 233.

Division No. 209]

[10 pm

AYES

Abbott, Ms DianeBuchan, Norman
Allen, GrahamBuckley, George J.
Anderson, DonaldCallaghan, Jim
Archer, Rt Hon PeterCampbell, Menzies (Fife NE)
Armstrong, HilaryCampbell, Ron (Blyth Valley)
Ashdown, Rt Hon PaddyCampbell-Savours, D. N.
Banks, Tony (Newham NW)Carlile, Alex (Mont'g)
Barnes, Harry (Derbyshire NE)Clark, Dr David (S Shields)
Barnes, Mrs Rosie (Greenwich)Clarke, Tom (Monklands W)
Barron, KevinClay, Bob
Battle, JohnClelland, David
Beckett, MargaretCohen, Harry
Beith, A. J.Cook, Frank (Stockton N)
Benn, Rt Hon TonyCook, Robin (Livingston)
Bermingham, GeraldCorbyn, Jeremy
Blunkett, DavidCryer, Bob
Boateng, PaulCummings, John
Boyes, RolandCunliffe, Lawrence
Bradley, KeithCunningham, Dr John
Brown, Gordon (D'mline E)Dalyell, Tam
Brown, Nicholas (Newcastle E)Darling, Alistair
Brown, Ron (Edinburgh Leith)Davies, Ron (Caerphilly)

Davis, Terry (B'ham Hodge H'l)Maxton, John
Dewar, DonaldMeacher, Michael
Dixon, DonMeale, Alan
Dobson, FrankMichael, Alun
Doran, FrankMichie, Bill (Sheffield Heeley)
Dunnachie, JimmyMitchell, Austin (G't Grimsby)
Dunwoody, Hon Mrs GwynethMolyneaux, Rt Hon James
Eadie, AlexanderMoonie, Dr Lewis
Eastham, KenMorgan, Rhodri
Evans, John (St Helens N)Morley, Elliot
Ewing, Harry (Falkirk E)Morris, Rt Hon A. (W'shawe)
Fearn, RonaldMorris, Rt Hon J. (Aberavon)
Field, Frank (Birkenhead)Mowlam, Marjorie
Fisher, MarkMullin, Chris
Flannery, MartinOakes, Rt Hon Gordon
Foot, Rt Hon MichaelO'Brien, William
Forsythe, Clifford (Antrim S)O'Neill, Martin
Foster, DerekParry, Robert
Fraser, JohnPatchett, Terry
Fyfe, MariaPike, Peter L.
Galloway, GeorgePowell, Ray (Ogmore)
Garrett, John (Norwich South)Prescott, John
George, BrucePrimarolo, Dawn
Gould, BryanQuin, Ms Joyce
Graham, ThomasRadice, Giles
Griffiths, Nigel (Edinburgh S)Redmond, Martin
Griffiths, Win (Bridgend)Rees, Rt Hon Merlyn
Grocott, BruceReid, Dr John
Harman, Ms HarrietRichardson, Jo
Hattersley, Rt Hon RoyRobertson, George
Haynes, FrankRogers, Allan
Heal, Mrs SylviaRooker, Jeff
Henderson, DougRoss, Ernie (Dundee W)
Hogg, N. (C'nauld & Kilsyth)Ruddock, Joan
Home Robertson, JohnSalmond, Alex
Hood, JimmySedgemore, Brian
Howells, GeraintSheerman, Barry
Howells, Dr. Kim (Pontypridd)Sheldon, Rt Hon Robert
Hughes, John (Coventry NE)Short, Clare
Hughes, Robert (Aberdeen N)Skinner, Dennis
Hughes, Roy (Newport E)Smith, Andrew (Oxford E)
Ingram, AdamSmith, C. (Isl'ton & F'bury)
Janner, GrevilleSmith, Rt Hon J. (Monk'ds E)
Jones, Barry (Alyn & Deeside)Smith, J. P. (Vale of Glam)
Jones, Ieuan (Ynys Môn)Soley, Clive
Jones, Martyn (Clwyd S W)Spearing, Nigel
Kaufman, Rt Hon GeraldSteel, Rt Hon Sir David
Kennedy, CharlesSteinberg, Gerry
Leighton, RonStrang, Gavin
Lestor, Joan (Eccles)Straw, Jack
Lewis, TerryTaylor, Mrs Ann (Dewsbury)
Litherland, RobertTaylor, Matthew (Truro)
Livingstone, KenThompson, Jack (Wansbeck)
Livsey, RichardTurner, Dennis
Lloyd, Tony (Stratford)Wallace, James
Loyden, EddieWalley, Joan
McAllion, JohnWardell, Gareth (Gower)
McAvoy, ThomasWelsh, Andrew (Angus E)
McKay, Allen (Barnsley West)Wigley, Dafydd
McKelvey, WilliamWilliams, Rt Hon Alan
McLeish, HenryWilliams, Alan W. (Carm'then)
Maclennan, RobertWilson, Brian
McWilliam, JohnWinnick, David
Madden, MaxWorthington, Tony
Mahon, Mrs AliceWray, Jimmy
Marek, Dr JohnYoung, David (Bolton SE)
Marshall, David (Shettleston)
Marshall, Jim (Leicester S)

Tellers for the Ayes:

Martin, Michael J. (Springburn)

Mrs. Llin Golding and Mr. Robert N. Wareing.

Martlew, Eric

NOES

Aitken, JonathanAspinwall, Jack
Alexander, RichardAtkins, Robert
Alison, Rt Hon MichaelAtkinson, David
Amess, DavidBaker, Rt Hon K. (Mole Valley)
Amos, AlanBaker, Nicholas (Dorset N)
Arbuthnot, JamesBaldry, Tony
Arnold, Jacques (Gravesham)Banks, Robert (Harrogate)
Arnold, Tom (Hazel Grove)Batiste, Spencer

Bellingham, HenryGregory, Conal
Bendall, VivianGriffiths, Peter (Portsmouth N)
Bennett, Nicholas (Pembroke)Ground, Patrick
Benyon, W.Gummer, Rt Hon John Selwyn
Bevan, David GilroyHague, William
Biffen, Rt Hon JohnHamilton, Neil (Tatton)
Blaker, Rt Hon Sir PeterHanley, Jeremy
Body, Sir RichardHargreaves, Ken (Hyndburn)
Bonsor, Sir NicholasHarris, David
Boscawen, Hon RobertHaselhurst, Alan
Boswell, TimHawkins, Christopher
Bottomley, Mrs VirginiaHayhoe, Rt Hon Sir Barney
Bowden, Gerald (Dulwich)Hayward, Robert
Bowis, JohnHeathcoat-Amory, David
Boyson, Rt Hon Dr Sir RhodesHeseltine, Rt Hon Michael
Braine, Rt Hon Sir BernardHicks, Mrs Maureen (Wolv' NE)
Brandon-Bravo, MartinHicks, Robert (Cornwall SE)
Brazier, JulianHill, James
Bright, GrahamHowe, Rt Hon Sir Geoffrey
Brown, Michael (Brigg & Cl't's)Howell, Ralph (North Norfolk)
Bruce, Ian (Dorset South)Hughes, Robert G. (Harrow W)
Buchanan-Smith, Rt Hon AlickHunt, Sir John (Ravensbourne)
Buck, Sir AntonyHunter, Andrew
Budgen, NicholasIrvine, Michael
Burns, SimonIrving, Sir Charles
Burt, AlistairJack, Michael
Butcher, JohnJanman, Tim
Butler, ChrisJessel, Toby
Carlisle, John, (Luton N)Jones, Gwilym (Cardiff N)
Carlisle, Kenneth (Lincoln)Jones, Robert B (Herts W)
Carrington, MatthewKellett-Bowman, Dame Elaine
Carttiss, MichaelKey, Robert
Chalker, Rt Hon Mrs LyndaKilfedder, James
Chapman, SydneyKing, Roger (B'ham N'thfield)
Chope, ChristopherKirkhope, Timothy
Clark, Dr Michael (Rochford)Knapman, Roger
Clark, Sir W. (Croydon S)Knight, Greg (Derby North)
Clarke, Rt Hon K. (Rushcliffe)Knight, Dame Jill (Edgbaston)
Colvin, MichaelKnowles, Michael
Coombs, Anthony (Wyre F'rest)Knox, David
Coombs, Simon (Swindon)Lamont, Rt Hon Norman
Couchman, JamesLang, Ian
Currie, Mrs EdwinaLatham, Michael
Davies, Q. (Stamf'd & Spald'g)Lee, John (Pendle)
Davis, David (Boothferry)Lennox-Boyd, Hon Mark
Day, StephenLightbown, David
Dickens, GeoffreyLilley, Peter
Dicks, TerryLloyd, Peter (Fareham)
Douglas-Hamilton, Lord JamesLord, Michael
Dover, DenLuce, Rt Hon Richard
Dunn, BobLyell, Rt Hon Sir Nicholas
Durant, TonyMacfarlane, Sir Neil
Dykes, HughMacGregor, Rt Hon John
Eggar, TimMaclean, David
Evans, David (Welwyn Hatf'd)McLoughlin, Patrick
Evennett, DavidMcNair-Wilson, Sir Patrick
Fairbairn, Sir NicholasMalins, Humfrey
Fallon, MichaelMans, Keith
Favell, TonyMaples, John
Field, Barry (Isle of Wight)Marland, Paul
Fishburn, John DudleyMarlow, Tony
Forman, NigelMarshall, Michael (Arundel)
Forsyth, Michael (Stirling)Martin, David (Portsmouth S)
Forth, EricMates, Michael
Fowler, Rt Hon Sir NormanMaude, Hon Francis
Fox, Sir MarcusMayhew, Rt Hon Sir Patrick
Franks, CecilMeyer, Sir Anthony
Freeman, RogerMiscampbell, Norman
French, DouglasMontgomery, Sir Fergus
Fry, PeterMorris, M (N'hampton S)
Gardiner, GeorgeNicholson, David (Taunton)
Garel-Jones, TristanOnslow, Rt Hon Cranley
Gill, ChristopherPawsey, James
Glyn, Dr Sir AlanPeacock, Mrs Elizabeth
Goodlad, AlastairRiddick, Graham
Goodson-Wickes, Dr CharlesRidsdale, Sir Julian
Gorman, Mrs TeresaRoberts, Wyn (Conwy)
Gow, IanRost, Peter
Grant, Sir Anthony (CambsSW)Rowe, Andrew
Greenway, Harry (Ealing N)Ryder, Richard

Sainsbury, Hon TimTemple-Morris, Peter
Scott, Rt Hon NicholasThompson, D. (Calder Valley)
Shaw, David (Dover)Thompson, Patrick (Norwich N)
Shaw, Sir Giles (Pudsey)Thornton, Malcolm
Shaw, Sir Michael (Scarb')Thurnham, Peter
Shelton, Sir WilliamTracey, Richard
Shepherd, Richard (Aldridge)Trotter, Neville
Skeet, Sir TrevorTwinn, Dr Ian
Smith, Tim (Beaconsfield)Vaughan, Sir Gerard
Soames, Hon NicholasWaddington, Rt Hon David
Speed, KeithWalker, Bill (T'side North)
Speller, TonyWaller, Gary
Spicer, Sir Jim (Dorset W)Wardle, Charles (Bexhill)
Spicer, Michael (S Worcs)Watts, John
Squire, RobinWells, Bowen
Stanbrook, IvorWhitney, Ray
Stanley, Rt Hon Sir JohnWiddecombe, Ann
Steen, AnthonyWilkinson, John
Stern, MichaelWilshire, David
Stevens, LewisWolfson, Mark
Stewart, Allan (Eastwood)Wood, Timothy
Stewart, Andy (Sherwood)Woodcock, Dr. Mike
Stewart, Rt Hon Ian (Herts N)Yeo, Tim
Stokes, Sir JohnYoung, Sir George (Acton)
Stradling Thomas, Sir JohnYounger, Rt Hon George
Sumberg, David
Taylor, Ian (Esher)

Tellers for the Noes:

Taylor, John M (Solihull)

Mr. Tom Sackville and Mr. Irvine Patrick.

Taylor, Teddy (S'end E)
Tebbit, Rt Hon Norman

Question accordingly negatived.

Clause 3 ordered to stand part of the Bill.

To report progress and ask leave to sit again.— [Mr. Fallon.]

Committee report progress; to sit again tomorrow.