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Red Diesel

Volume 454: debated on Thursday 7 December 2006

5. What recent progress has been made in negotiations to extend the derogation from EU regulations to enable UK pleasure boats to use red diesel in 2007; and if he will make a statement. (104886)

I know that the derogation that permits the use of red diesel in Britain is highly valued by private boat owners and users. Thirty-four separate derogations from the directive are held by member states. None has yet been approved by the Commission and 14 have been rejected so far. Late yesterday afternoon, it was confirmed to me that the Commission had decided not to renew the UK’s application for a fresh derogation for private boats. I know that will be unwelcome news. As we have argued to the Commission, it could be highly complex and costly to implement the measure, so today I asked officials to meet concerned and affected organisations soon to discuss the implications of the Commission’s decision.

I thank the Minister for that answer, and he is right that the terms of the Commission’s communication to the Council of the European Union are disappointing. Is he telling the House that that communication effectively kills the application for the derogation, as it is, of course, a communication to the Council? What can we do to ensure that the necessary pumps and facilities will be put in place in every marina and pier that will require them before 1 January? I have pursued the Minister on that point for a number of years. The issue could have been dealt with much more quickly and much sooner, if he had had the backbone to deal with it.

We put the strongest possible case to the Commission, and we prepared that case in close co-operation with, and with contributions from, many of the organisations affected. We could have done little more to press the case. I have personally spoken with and written to the Commissioner on the issue, but there is no further stage in the process. First, we need to discuss the implications of the Commission’s decisions. Secondly, we will consult widely on implementing the directive. Thirdly, we will have to legislate, and implement the changes. I made it clear to the Commissioner that it is important to allow the UK a suitable period in which to translate the Commission’s decision into the implementation of the changes required. The Commissioner acknowledged that point, and we will work with the boating associations on that in the coming months.

The derogation relates to pleasure boats, but not working boats. Can my hon. Friend tell me how much tax revenue is forgone each year because of the red diesel tax concession for those engaging in aquatic leisure pursuits?

It is fair to say that my hon. Friend has not been one of the strongest proponents for continuing the derogation. He is right that the derogation applies to private boat owners. Commercial boat owners and commercial interests will continue to benefit from reduced rates of duty on fuel. The revenue that we expect to gain if we are forced to implement the three derogations that we currently hold—and we have applied to the Commission for their renewal—totals about £10 million. The revenue gain is totally out of proportion to the cost of implementation, the complexity that may result for the industry, and the disadvantage to users. That was the core of the case that we put to the Commission, and I am disappointed that it rejected continuing the derogation for private boat owners.

The decision will be met with great dismay in marinas in ports such as Scarborough and Whitby. Does the case not expose the myth of the UK veto on taxation matters? A stealth tax is being imposed on us by the European Commission, against the wishes and the request of the British Government. Who runs Britain?

I know the hon. Gentleman’s constituency well and I recognise the concern that will be felt in Scarborough and Whitby. However, I must point out to him the source of the derogation. The principle that road fuel level duty should be applied to private boat owners was agreed not in 2003 under the energy products directive, but in 1992 under the mineral oil structures directive, by the previous Government.

I am sure that my hon. Friend will know that, as has been stated, the new regulation will be impossible to police, and it will add a further burden to our law enforcement agencies. However, is it not about time that we woke up to the fact that red diesel is outdated? It is just as polluting and bad for our environment as ordinary diesel. Should we not work towards cutting out red diesel? To meet the costs that that would mean for the industry and users, we could come to some tax arrangements that would allow us to phase in that change over the next decade.

My hon. Friend is right that, in some respects, red diesel is more polluting than mainstream fuels. He will have noted that, yesterday, my right hon. Friend the Chancellor announced a special duty rate in the pre-Budget report to encourage rail operators to use biofuels mixed with red diesel to reduce the environmental impact. Red diesel is valuable to many commercial sectors that have been given permission to use it. The consequences of moving away from red diesel would be profound, but in the case of the derogation that we are considering this morning, its environmental impact is negligible, which was part of our case to the Commission for retaining it.