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Road Fuel Gas: Duty

Volume 590: debated on Wednesday 17 June 1998

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2.44 p.m.

Whether they will reduce fuel duty on natural gas as a road fuel.

My Lords, there are no plans to reduce the duty rate for gas used as road fuel. This includes liquified petroleum gas and compressed natural gas. The freezing of the rate since November 1996 represents a reduction in real terms which, taken in conjunction with increases in duties on other road fuels, recognises the environmental benefits associated with road fuel gases. The widened duty differential with conventional fuels offers a clear incentive for high mileage fleets, vans and buses to convert to cleaner gas power and will help offset the cost to motorists of vehicle conversion.

My Lords, I thank the Minister for that reply and declare an interest as president of the Natural Gas Vehicle Association. Does he not agree that unless the duty is reduced to the EU minimum, as Germany has undertaken, on natural gas as a road fuel, it is unlikely that a large number of vehicles will convert to natural gas, with all the environmental benefits that that would bring?

My Lords, it is certainly true that a number of European countries, notably the Netherlands, have lower fuel duties for natural gas. Perhaps the noble Lord would take back to his association the suggestion that if it wants to sell more compressed natural gas, one necessary prerequisite would be to increase the network of pumps available to sell it.

My Lords, can the noble Lord indicate whether the Government have carried out any studies to show what would be the reduction in undesirable emissions if there were further encouragement of the use of natural gas in vehicles? If they have not carried out such studies, will they please do so?

My Lords, the Government do not doubt that there would be a decrease in pollutant emissions if there were increased use of natural gas. Indeed, they have been in talks with the Natural Gas Vehicle Association and have had access to studies which have been produced by experts in the field. There is no doubt that there would be a reduction. The question is: what is the most direct and cost-effective way forward? I would suggest to the noble Lord that he should consider whether or not the reduction of vehicle excise duties for lorries and buses, as announced in the July 1997 Budget, is not a more direct route to reducing pollutant emissions.

My Lords, why on earth should a reduction in excise duties for all vehicles encourage the increased use of fuel of one specialist type? That seems to be totally illogical.

My Lords, I am sorry that my answer was elliptical. What I meant was a rebate of vehicle excise duties for those converting to natural gas and liquified propane gas.

My Lords, as the Government quite rightly wish to reduce the amount of air pollution caused by road vehicles, and as the noble Lord acknowledges that greater use of natural gas would do that, how is it that he maintains that it would not be convenient or in the public interest to reduce the duty on vehicles using natural gas?

My Lords, I did not maintain that it would not be in the public interest. I said that we are reducing the duty in real terms by not increasing it in cash terms and that the differential between gas and other fuels is increasing as the duty for other fuels increases. I was arguing that a more targeted response in terms of vehicle excise duty is more effective. If I may add to the point made by the noble Earl, Lord Onslow, in addition to the rebate for gas powered vehicles, there is a complete remission of vehicle excise duty for those vehicles such as ambulances, fire vehicles and so on which are particularly suited to gas because they refuel at depots rather than on the open road.

My Lords, is the Minister aware that even if the duty on liquid petroleum gas was at the minimum level permitted by the European Union, the saving on running costs because of that remission of duty would still not be sufficient to pay for the very high initial capital cost required for conversion to LPG for each vehicle? Do the Government have in mind other incentives to try to persuade people to make the change, bearing in mind the great improvement, particularly in metropolitan atmospheres, that could result if the owners of fleet vehicles were persuaded to change?

My Lords, I have already indicated the two ways in which the Government encourage the use of gas for road vehicles; namely, through the vehicle excise duty and the freezing of fuel duty. If the noble Lord has any other suggestions we shall be glad to listen to them.

My Lords, is the Minister aware that there is another way of encouraging the use of these and other experimental fuels? The Government could convert their own large fleet, much of which is in metropolitan London, to the new fuels. Do they have any plans to do that?

My Lords, last week or the week before I answered extensively a Question on this subject. The Government car service is not a very large fleet. There is a policy of converting to dual use, both gas and petrol, as the vehicles are replaced over the next four years.

My Lords, in order to send the right signals, if the Minister decided to reduce the duty rate to the EU minimum, can he say how much duty the Government would forgo?

My Lords, I should have an answer to that question, but I do not. I shall write to the noble Earl.