CE11 9 March 1999 CHANCELLOR HONOURS COMMITMENT ON FUEL DUTIES TO PROTECT THE ENVIRONMENT The Government continues to deliver on its promises to protect the environment, with a tax policy firmly focused on reducing emissions of greenhouse gases and improving local air quality - an area where the UK has taken an international lead. From 6pm tonight the tax (duty plus VAT) on petrol and diesel will increase in line with the Government's commitment to raise road fuel duty rates by an annual average of at least 6 per cent a year above inflation. - The tax on leaded and unleaded petrol will go up by 4.25p and 3.79p a litre respectively. - Ordinary diesel will go up by 6.14p a litre reflecting the higher carbon content, but ultra low sulphur diesel (ULSD) will go up only by 4.96p increasing the differential with conventional diesel, reflecting the lower emissions of particulates that it produces. This is a further incentive to encourage all users of diesel to switch to this significantly cleaner fuel. - The duty on higher octane unleaded petrol will go up by 3.57p a litre. However, from 1 October 1999, the duty will be reduced to 2p above the rate for unleaded petrol, reflecting the use of this grade as the basis for Lead Replacement Petrol. - The duty on road fuel gases, which offer environmental benefits over petrol and diesel is cut to 15 p per kilogram. DETAILS The Chancellor is continuing his policy of changing the structure of taxes on road fuels over time to improve the quality of air in urban areas. 1 January 2000 will see a virtual ban on leaded petrol as new EU wide fuel quality standards come into operation. But, as half a per cent of total petrol sales will still be allowed for classic cars etc. the leaded rate of duty will be kept. The duty rates are as follows; New rate (pence) Leaded petrol per litre 52.88 per gallon 240.40 Unleaded petrol per litre 47.21 per gallon 214.62 Higher Octane Unleaded Petrol per litre 52.33 per gallon 237.90 Ordinary diesel per litre 50.21 per gallon 228.26 Ultra Low Sulphur Diesel per litre 47.21 per gallon 214.62 Gas oil per litre 3.03 per gallon 13.77 Fuel oil per litre 2.65 per gallon 12.05 AVGAS per litre 26.44 per gallon 120.20 Road fuel gas per kg. 15.0 NOTES FOR EDITORS 1. The continuing commitment to a 6 per cent increase for road fuels is part of the Government's policy to reduce emissions of greenhouse gases and recognises the environmental and other costs attached to road use. The escalator, if maintained at the present level, will save between 2 and 5 million tonnes of carbon annually by 2010. 2. Ordinary diesel has a greater energy and carbon content relative to petrol. The higher duty increase for diesel is partially to offset this advantage and also reflects the fact that using diesel is worse than petrol for urban air quality. Burning diesel produces more particulates (small particles of black smoke and other pollutants) and nitrous oxide emissions than petrol. 3. The duty rate on 97 octane superunleaded petrol has been increased by 3.57p a litre. However, the duty rate will be cut to 2p above the rate of unleaded petrol because, from 1 January 2000, this grade of fuel will no longer contain benzene, a known carcinogen. But the fuel will be used in older, more polluting cars and it would not be right to cut the rate to the same as unleaded. The duty cut will take effect from 1 October 1999 to facilitate the introduction of Lead Replacement Petrol (LRP). The ban on leaded petrol will mean that LRP will become available for those cars that need the octane or valve seat protection of leaded petrol. LRP will be treated as higher octane (super) unleaded petrol for duty purposes. 4. We have agreed with our EU partners fuel standards for petrol and diesel that must be met by the year 2000: this includes a virtual ban on leaded petrol. Sulphur levels in ordinary petrol have been cut back. Tighter fuel standards have also been set for 2005. ULSD standards are even stricter than those agreed for 2005. 5. The preferential duty rate for ULSD was introduced on 15 August 1997 at 1p less per litre than ordinary diesel. This was increased to 2p in the last Budget and has now been increased to 3p. ULSD produces lower levels of particulates than ordinary diesel and the Government is pleased that this policy has resulted in the rapidly increasing UK production of this quality of diesel. ULSD consumption was running at 43 per cent by February 1999, and is expected to reach 100 per cent by the end of 1999. 6. The duty rates for gas oil (red diesel) and fuel oil will increase by at least 6 per cent in real terms in this Budget and over the next two years. There will be a larger percentage increase on fuel oil to bring the rate closer to that on gas oil. There is no justification on environmental or health grounds for the differential in duty rates between these fuels and it is intended to equalise the rates by 2001. 7. In further recognition of the environmental merits of gas as a road fuel, the duty rate has been cut by 29 per cent to provide more incentive to convert to this fuel. 8. The combined revenue effect of these measures on an indexed basis is +#45m in 1999/2000, +#115m in 2000/2001 and +#130m in 20001/2002. The impact of these changes on RPI is estimated to be 0.24 per cent. 9. Details for businesses are published in Budget Notice 6/99, which is available from Customs & Excise Business Advice Centres and from the Customs & Excise Internet site. Press enquiries only to HM Customs and Excise, Public Relations Office, New King's Beam House, 22 Upper Ground, London, SE1 9PJ. Telephone: 0171 865 5471/5472 Others should contact their local Excise and Inland Customs Business Advice Centre, listed under Customs and Excise in the telephone book. Customs and Excise Internet address: http://www.hmce.gov.uk This news release can also be found at : http://www.hm-treasury.gov.uk. Other Treasury material can also be found at this address. # = pounds sterling