16:45 Carla Lockhart (DUP)

It is always a pleasure to serve under your chairmanship, Mr Bone. I thank Members for taking the time to attend today’s debate. The broad representation here is indicative of the pan-UK concern that exists around this proposal. I want to make it clear at the outset that the construction industry is supportive of the move towards net zero by 2050.

“To help ourselves achieve net zero and improve UK air quality, we are reducing the entitlement to use red diesel, which currently enjoys a duty discount, from next April.” —[ Official Report , 7 December 2021; Vol. 705, c. 171.]

The reality, of course, is that the proposal will do nothing to achieve net zero or improve air quality, as firms can switch to white diesel only in the absence of greener alternatives. Indeed, the fact that the Government are also removing the rebate from some greener alternatives calls into question the claim that it is even about emissions. One company that has engaged with me since I secured the debate said:

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16:58 Alistair Carmichael (Liberal Democrat)

“Incentivising developers to bring forward alternatives to market sooner than if these tax changes were not made as affected businesses look to alternatives. In the short-term, and as the market for alternatives develops, the Government’s view is that taxing pollution and dangerous greenhouse gas emissions the same, regardless of whether the fuel is burnt on or off road, is fairer than allowing wide distortions to continue.”

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17:10 Dave Doogan (SNP)

However, at the heart of the concern is fairness. As other hon. Members have set out, the notion that operators of this type of vehicle will somehow go out within the next two to three months to purchase alternatives that will not be subject to this tax increase is for the birds. The alternatives are not there—the manufacturers do not have the technology beyond the prototype stage. This is therefore a tax grab, essentially. We need to call it what it is. What the Government should have done, and may have got a bit of respect for, was implement a well-advertised, well-indicated, well-consulted-upon, graduated reduction of the rebate on red diesel, to allow industry and manufacturers to appropriately and realistically adapt their fleets and their products to meet the climate change targets that we all agree on. There is no dispute about those; it is how we get there that, in this instance, is deeply unfair.

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17:24 James Murray (Labour)

“Reducing tax breaks on red diesel will mean that approximately 3.6 billion litres of diesel, equivalent to 9.5 million tonnes of CO2, will now be taxed at the standard diesel rate.” –– [ Official Report, Finance (No.2) Public Bill Committee, 27 April 2021; c. 72.]

greenhouse gas—

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17:29 Helen Whately (Conservative)

I hope it will not come as a surprise to hon. Members that the Government take their world-leading environmental commitments very seriously and are determined to achieve our climate change and environmental targets, including to improve the UK’s air quality. That is why, to help achieve net zero and improve air quality, the Chancellor announced back at Budget 2020 that the Government will reduce the entitlement to use so-called red diesel from April this year.

Red diesel is currently used for a wide variety of purposes, such as powering bulldozers and cranes in the construction industry, as well as in the refrigeration section of lorries, in off-grid heating and in agriculture. It accounts for around 15% of all the diesel used in the UK and, as such, is responsible for the production of nearly 14 million tonnes of carbon dioxide a year—that is nearly 3% of total UK emissions. I am therefore quite surprised to hear such opposition from hon. Members from the Scottish National party, the Liberal Democrats and Labour, as well as from hon. Members from Northern Ireland, considering the importance of tackling climate change and reducing emissions.

Importantly, the Government have also heard from developers of alternative technologies—cleaner alternatives to red diesel—that the low cost of running a diesel engine on red diesel currently acts as a barrier to entry for greener alternatives. This widespread use of red diesel is actually counterproductive in terms of our ambitions to tackle climate change, reduce emissions and reduce pollution overall.

Although the construction sector, and mining and quarrying, which my right hon. Friend the Member for East Yorkshire (Sir Greg Knight) mentioned, argued throughout the consultation process that they should be exempt, their case was simply not compelling against our overall objective to incentivise greener alternatives and greater fuel efficiency and to shift to a position, which can only make sense, where the appropriate level of tax is paid on such a polluting and harmful fuel to reflect the harm that using it causes. However, as I say, we did listen and consult substantially on this proposal; we heard among others from the construction sector and from business representatives in Northern Ireland. We did listen, but we had to make the decision that this is part of an overall direction of travel where we are committed to tackling climate change and the harmful effects of pollution.

For those who said that the change will not make a difference to the environment, or will backfire, as I mentioned it is about incentivising the development of alternatives. Alternatives are already being developed. Specifically to support that, the Government have doubled the funding for energy innovation through the £1 billion net zero innovation portfolio. The Department for Business, Energy and Industrial Strategy recently announced £40 million of funding for the red diesel replacement competition, which is part of that portfolio, to specifically grant funding to projects that will develop and demonstrate lower-carbon, lower-cost alternatives to red diesel for the construction and mining and quarrying sectors.

My apologies—I thought that I had until 5.45 pm. In that case, I will wind up by saying that I thank hon. Members for their contributions and hope that they will recognise the importance of the tax reforms for our ambitions to tackle climate change and reduce pollution.

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