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CLAUSE
1: HYDROCARBON OIL (RATES OF DUTY)
SUMMARY
1.
This clause reduces the rates of duty on ultra-low sulphur petrol,
ultra-low sulphur diesel and gas used as road fuel. In addition, the
clause provides for a temporary reduction in the rate of duty on unleaded
petrol until 14 June 2001. The changes took effect from 6 pm on 7
March 2001.
DETAILS OF THE CLAUSE
2.
Subsection (1)(a) amends section 6(1A)(a) of the Hydrocarbon
Oil Duties Act 1979 to reduce the duty payable on a litre of ultra-low
sulphur petrol to £0.4582.
3.
Subsection (1)(b) amends section 6(1A)(c) of the Hydrocarbon
Oil Duties Act 1979 to reduce the duty payable on a litre of ultra-low
sulphur diesel to £0.4582.
4.
Subsection (2) substitutes, for the period from 6 pm on 7 March
until 14 June 2001, new paragraphs (ba) and (bb) for paragraph (b)
of section 6(1A) of the Hydrocarbon Oil Duties Act 1979. The new paragraph
(ba) provides for the temporary application of a discrete rate of
duty on unleaded petrol which is not ultra-low sulphur petrol. Until
midnight on 14 June 2001 the duty payable on unleaded petrol, which
is not ultra-low sulphur petrol, will be reduced to £0.5268 per litre.
The rate of duty payable on light oil which does not fall within section
6(1A)(a) and (ba), will be maintained at the existing level of £0.5468
per litre. The distinction made between unleaded petrol which is
not ultra low sulphur petrol and other light oil will cease after
14 June 2001 whereupon section 6(1A)(b) of the Hydrocarbon Oil Duties
Act 1979 will take effect as it did before so that the rate of duty
applicable to light oil, including unleaded petrol which is not ultra
low sulphur petrol, will be £0.5468 per litre.
5.
Subsection (3) amends section 8(3) of the Hydrocarbon Oil Duties
Act 1979 to reduce the duty payable on a kilogramme of road fuel gas
to £0.0900.
6.
Subsection (4) provides for the new rates to come into force
at 6 pm on 7 March 2001.
BACKGROUND
7.
In November 1999 the Chancellor announced that the appropriate level
of fuel duties would be decided on a Budget by Budget basis, taking
into account the Government’s economic, social and environmental commitments.
8.
Fuel duties have played an important role in helping the UK meet its
Kyoto target for reductions in greenhouse gas emissions. However,
given the strength of world oil prices, and other measures put in
place to tackle climate change, all road fuel duties have been frozen
in cash terms, as announced in his Pre-Budget Report. This will lower
fuel duties on petrol and diesel by around 1 pence per litre in real
terms.
9.
Duty differentials have an important role to play in encouraging the
use of more environmentally friendly fuels. The 2 pence per litre
reduction in duty on ultra-low sulphur petrol (ULSP) builds on the
introduction of a 1 pence per litre incentive on 1 October 2000. A
market shift to ULSP will help reduce emissions of air pollutants
such as carbon monoxide and nitrogen oxides and so improve local air
quality. As a result of this duty cut it is expected that ULSP will
be available to all petrol retailers by June - four years before it
becomes the EU standard.
10.
To ensure no market distortion in the final transition to 100 per
cent ULSP, a temporary cut in duty for ordinary unleaded has also
been introduced. This will ensure all distributors and retailers will
be able to pass on a 2 pence per litre duty cut to their customers.
When this temporary concession ends on June 14 it is expected that
ULSP will form virtually 100 per cent of the petrol supplied to the
UK market.
11.
The 3 pence per litre reduction in the duty on ultra-low sulphur diesel
(ULSD) will maintain the balance between the duty rates on the most
commonly used forms of petrol and diesel. This balance reflects the
different but equally important benefits of the two fuels: lower air
pollutant emissions from petrol and less CO2 per kilometre
travelled from diesel.
12.
Having considered responses to the ‘Green Fuels Challenge’, the Government
decided it was important to maintain the differential between conventional
fuels and road fuel gases. The duty reduction of 6 pence per kilogramme
is roughly equivalent to a 3 pence per litre cut for liquefied petroleum
gas (LPG) and 4 pence per litre for compressed natural gas (CNG).
Furthermore, to provide the stability needed for the emerging road
fuel gas market, the Government announced that duty on road fuel gases
will not be increased in real terms until 2004 at the earliest.
13.
Road fuel gases offer useful reductions in emissions of local air
pollutants and reduction in noise levels; particularly important in
urban areas.
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