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CLAUSE 4: RATES OF DUTY AND REBATE ON HYDROCARBON OIL SUMMARY
1. This clause increases the rates of duty on hydrocarbon oil by the rate of inflation. The changes took effect from 6 pm on 21 March 2000. DETAILS OF THE CLAUSE 2. Subsection (1)(a) amends section 6(1A)(a) of the Hydrocarbon Oil Duties Act 1979 to increase the duty payable on a litre of leaded petrol to £0.5468. This duty rate also applies to other light oils, with the exception of unleaded petrol, higher octane unleaded petrol, ultra low sulphur petrol, aviation gasoline, light oil furnace fuel and certain petrol substitutes. 3. Subsection (1)(b) amends section 6(1A)(b) of the 1979 Act to increase the duty payable on a litre of ultra low sulphur diesel to £0.4882. 4. Subsection (1)(c) amends section 6(1A)(c) of the 1979 Act to increase the duty payable on a litre of conventional diesel to £0.5182. This rate also applies to unrebated heavy oils, other than ultra low sulphur diesel, and to certain diesel substitutes. 5. Subsection 2(a) amends section 11(1)(a) of the 1979 Act to increase the duty payable on a litre of fuel oil to £0.0274. 6. Subsection 2(b) amends section 11(1)(b) of the 1979 Act to increase the duty payable on a litre of gas oil or ultra low sulphur gas oil to £0.0313. 7. Subsection (3)(a) amends section 13A(1A)(a) of the 1979 Act to increase the rebate for higher octane unleaded petrol (also known as super unleaded, or lead replacement petrol) to £0.0379 per litre. Effectively this increases the duty payable on a litre of higher octane unleaded petrol to £0.5089.
8. Subsection (3)(b) amends section 13A(1A)(b) of the Hydrocarbon Oil Duties Act 1979 to increase the rebate for unleaded petrol to £0.0586 per litre. Effectively this increases the duty payable on a litre of unleaded petrol to £0.4882. 9. Subsection (4) amends section 14(1) of the Hydrocarbon Oil Duties Act 1979 to increase the rebate on a litre of light oil used as furnace fuel to £0.0274 less than the duty payable on a litre of unrebated light oil. 10. Subsection (5) provides for the new rates to come into force at 6 pm on 21 March 2000. BACKGROUND 11. The Chancellor announced in his pre-Budget report that he would decide the appropriate level of fuel duties on a Budget by Budget basis, taking account of the Government’s economic and social objectives as well as the UK’s environmental commitments. Since the time of the pre-Budget report the price of a barrel of crude oil has risen from $23 to over $30 and this has also been taken into account in the setting of the rates. 12. The duty rates have been increased by the rate of inflation - the lowest duty increase on road fuels for over a decade. The road fuel escalator was a major success in helping the UK to meet its Kyoto commitments. It is estimated that the increases between 1996 and 1999 will have saved 1 to 2.5 million tonnes of carbon by 2010. 13. The incentive of 3 pence per litre for ultra low sulphur diesel has ensured that this cleaner fuel now accounts for 100 per cent of the UK diesel market and this incentive has been maintained. 14. The duty on road fuel gases, which have a considerable environmental benefit over other road fuels, was reduced by 29 per cent last year. This duty reduction has resulted in an increase of 10,000 in the number of dual fuel (petrol and LPG) light vehicles, and this number continues to grow. To further encourage the distribution, availability and use of this cleaner fuel the duty rate on road fuel gases has been frozen in this Budget.
15. A rate of duty for leaded petrol has been maintained because although leaded fuel was banned with effect from 1 January 2000 small quantities may still be delivered for use in those cars, mostly classic cars, which must use leaded petrol. This rate is also used as the base rate for the rebates allowed for unleaded petrol, higher octane unleaded petrol and aviation gasoline. 16. The rate of duty for aviation gasoline is one half of the leaded petrol rate, and so has increased to £0.2734. 17. The duty rates on fuel oil, light oil furnace fuel and gas oil have also been increased by the rate of inflation. 18. These changes will continue to discourage unnecessary journeys and to encourage more fuel efficient cars and use of cleaner fuels. Transport related emissions have fallen by 50 per cent over the last decade, and the Government has played an important part in encouraging these changes by setting duty differentials in favour of cleaner fuels. 19. The estimated revenue effect of these changes in 2000/01 is negligible against an indexed base. The impact on RPI is estimated to be +0.11 percentage points.
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