Finance Bill

Simon Hughes Excerpts

Monday 2nd July 2012 Commons Chamber

[Sheila Gilmore]

I do not want to dissociate those things—they are linked in lots of ways. Initially, we were told that there were constraints on the Budget, including not postponing the increase in fuel duty. What happens in a few months’ time? The measure is a deferral—we are not forgetting about it for ever—but what financial complexities will that create?

It is heartening that the Government’s motivation seems to be their recognition that people are suffering from a general reduction in their standard of living. As many commentators have pointed out, many working families are experiencing real reductions in disposable incomes such that they have not experienced for many years. That is part of the serious position in which people find themselves. It is good that the Government have understood that and want to act on it, but I would like them to act on some of the other issues that Opposition Members have constantly raised. I want them to understand that people are suffering not just from fuel prices, but from a number of other measures. The Opposition’s five-point plan would have reduced VAT and enabled investment in job creation. Perhaps it is not too late even now for the Government to U-turn on that.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I am happy to speak in the debate on new clause 1, which was moved by the Economic Secretary on behalf of the Government; on new clauses 9 and 11, which are in the name of the Labour Opposition team; and on new clause 8, which is in my name.

I support new clause 1. I am not against responsive government—indeed, there is a duty to be responsive in government. I therefore welcome the fact that the Chancellor announced that the Government had heard the concerns of ordinary people, families and businesses that cost of living pressures continue to be difficult on them. The cost of fuel at the pumps affects people in rural areas, but it also affects people in suburban and urban areas, and people running both small businesses and larger firms. For some people, there is an inescapable obligation to drive—they drive for their families and businesses, and in emergencies. Therefore, the price at the pump is a hugely important part of their weekly budget.

People made the case, and the Government, including Treasury Ministers from both parties, first agreed to delay the increase scheduled for earlier in the year until August, and last week announced a further delay until the end of the year. That is welcome. It is fair to say that the announcement came slightly out of the blue and yellow last week—it took a few people by surprise—but it clearly has not been met with opposition from those on the Opposition Benches, because a grand total of six Labour Members, including the Whip, have been present in the Chamber for this debate. There is clearly no great furore at this concession to the needs of the consumers.

[Sheila Gilmore]

Will the right hon. Gentleman give way?

[Simon Hughes]

No, I will not give way. The hon. Lady spoke for a very long time, as she often does, and I will not concede. This is a short debate—it goes on only until 7 o’clock—and I want to allow other colleagues to speak.

I want to make a specific plea on biodiesel. I should declare my interest: as some colleagues know, I sometimes drive a London taxi, which has often been powered by biodiesel bought from Uptown Oil, a firm in my constituency that collects used cooking oil from local firms—a chain of good environmental practice ends up in my cab and other vehicles in south London.

I have had discussions with the Economic Secretary and the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), and I asked colleagues—my hon. Friends the Members for Bristol West (Stephen Williams) and for Redcar (Ian Swales)—to argue the case in Committee last week. We have so far not persuaded the Government to change policy, but I wanted to put the case as to why the industry needs continuing Government attention and to ask that they do not turn their back on the industry, even if they are not willing to concede to my requests now.

[Charlie Elphicke (Dover) (Con)]

I remember a case reported in the papers some while ago. A gentleman in Wales was arrested by customs officials for not paying duty on the cooking oil in his car. He was traced by the smell. Can the right hon. Gentleman confirm that cooking oil fuel no longer smells, and that customs officials should not arrest people found with it in their cars?

[Simon Hughes]

I confirm both.

Biofuel is produced from waste vegetable oil and collected locally. This has been going on for a century or more—the first diesel engine ran on peanut oil. Colleagues may not know this, but the idea was that biodiesel vehicles would be used by farmers, who could use their crops effectively. The Department for Environment, Food and Rural Affairs is clear that the huge numbers of blockages caused by pouring oil down drains are not a good thing—it is better to put it somewhere else, which costs money for companies and local authorities.

Biodiesel also means that such waste does not go into landfill sites, which produce 40% of our methane emissions and 3% of our country’s greenhouse gas emissions. The product therefore helps us to meet our renewable energy targets. We produced something like 35 million litres of biodiesel from used cooking oil sourced in the UK for road transport two years ago, which meant a carbon saving of 82 million kilograms of CO₂.

There are about 30 to 40 producers—not just Uptown Oil in my constituency, but companies all over the UK. They are generally small firms, employing about five to 20 employees. They are confronted by a severely difficult economic situation. We could lose them, which would mean a loss of employment, a loss of revenue to the Government because they pay their taxes, and a loss of the source of the product, which would be a very bad thing.

In April 2012, following a decision by the previous Government, the differential fuel duty on biodiesel was taken away—it was put in place to support the industry—as the system of support across the EU changed to a new one. The derogation was originally meant to end in 2010, but it was extended by two years by the previous Government, because the implementation of the renewable energy directive was delayed—perfectly legally. There was therefore an attempt to ensure that the industry in the UK had continuing support on the basis that when such support ended—it was planned to end in spring 2012 —the new renewable transport fuel obligation certificate system would bring in the revenue.

Sadly, that was delayed—it was due to be implemented in December 2010, but in the end, it was implemented in December 2011. The new system has therefore had only a few months to bed in. The problem—bluntly—is that the price of the certificates is nothing like what the industry expected. Let me give a couple of quotes from people on the front line. This is from a firm in Feltham:

“I have found biodiesel road sales fall through the floor since the removal of the tax differential. 80% of my biodiesel sales now are for use as heating oil at a considerably reduced margin and overall volume of sales. I have had to lay-off my production manager and am working 7 days a week just to try to keep the business going.”

Edible Oil Direct Ltd of Rye, East Sussex says:

“We had to keep our prices at the pre budget price. Our On-Road customers who most makeup ‘saves money’ as opposed to the ‘green impact’ stated that if the price was increased in line with mineral they will switch back to mineral.”

Convert2Green of Middlewich, Cheshire says:

“"On average Convert2Green…received last year 20p tax differential and 17p Renewable Transport Fuel Certificate…revenue per certificate i.e. 37 pence per litre. With this, the company made an operating profit of £290k. Currently, the best offer we have for RTFCs up to April 2012 is 7 pence per litre and from April 2012 onwards 10 pence per certificate. At two certificates per litre”—

the new system—

“we estimate we will get 9 pence per certificate or 18 pence per litre on average. This is a reduction of 19 pence per litre. We sell approximately 3.75 million litres of road fuel per annum. Our profit reduction is £712,500 per annum or £59k per month. This takes us into significant loss. We will have to consider our future.”

Finally, the firm from which I bought my biodiesel, Uptown Oil, just over the bridge in Southwark, says:

“So far it has had a disastrous effect on our sales of Biodiesel for road use....Down 75%. Before the change we were receiving…around 17 pence…and 20p from the government. Now we receive 7p x 2 RTFC so 14 pence. So having increased our price we are worse off by 13 pence a litre. If we were to increase our price by 13 pence our fuel would be marginally more expensive than fossil fuel and sales would virtually cease.”

Those figures speak for themselves.