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Biofuel Duty

Volume 406: debated on Thursday 12 June 2003

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If he will make a statement on the level of duty on biofuels. [118668]

In his Budget statement, my right hon. Friend the Chancellor announced that, from 1 January 2005, we would introduce a duty incentive for bioethanol, set at 20p per litre below the rate for sulphur-free petrol. Biodiesel already benefits from a duty incentive of 20p per litre below the rate for ultra-low sulphur diesel.

I am grateful for my hon. Friend's continuing interest in the matter. Has he had an opportunity to read the recently published Sheffield Hallam university report, which concludes that the rate of carbon dioxide reduction is greater than previously thought? Given the clear environmental gains and the new biofuels directive that is coming, will he and his colleagues re-examine the rate of duty in time for the next Budget?

I am indeed aware of a Sheffield Hallam university study. It was designed to give us better evidence to make such judgments in future. For the moment, we judge the duty rates that we have set to be appropriate to reflect both the potential environmental benefits of biofuels and what is affordable and good value for public money to achieve those environmental gains.

Over the years, the Chancellor has consistently advocated in his Budgets the role of the Treasury in promoting good environmental practice and given us lectures on joined-up government. Is there not an inconsistency between the policy of rebates for biofuels that the Minister has just announced and the determination of the Department for Environment, Food and Rural Affairs that the crops cannot be grown on land set aside and otherwise wasted?

Although we are conscious of the potential of the duty rate cuts for farming and non-food crops and support diversification across government in other ways, the incentives for biofuels are not targeted at supporting farmers or subsidising agricultural production. I offer the hon. Gentleman a word of caution: if we introduce these biofuel duty discounts too fast or they are too large, we will increase the incentive to import biofuels, decrease the prospects of our own UK-based production industry growing and increase the risk that farmers in countries other than our own will benefit.

Does my hon. Friend accept that, despite all he has said, changes are taking place with regard to the widening of the European Union and the common agricultural policy, and will he assure me that we will keep the policy in mind so that we can make it possible for people to continue to grow biofuels in a sensible way?

As with all taxation, we monitor the issue very carefully and we are prepared to review the appropriate rate, particularly if new evidence and analyses are presented to us.