John Healey announces application to renew red diesel derogation

John Healey MP, the Financial Secretary to the Treasury, announced today that the UK has submitted its application to the European Commission to retain a derogation that allows for the use of ‘red diesel’ in private pleasure craft. This derogation allows the UK to charge a reduced rate of fuel duty for ‘red diesel’.

The UK has also submitted two further applications to the European Commission, to continue derogations for fuel used in private air navigation and for waste oil reused as fuel. These derogations allow the UK to charge a lower rate of duty for fuel used in private planes and no duty for waste oils.

John Healey said:

“We have now submitted our application to the Commission to maintain the derogation allowing the use of ‘red diesel’ in private pleasure boats. We believe that removing this derogation would provide no significant revenue or environmental benefits to the UK, would undermine other EU objectives and could pose significant compliance costs for business and fuel users.

“In putting together our applications we have benefited from a great deal of helpful co-operation and advice from UK boating organisations, whom I would like to thank for helping us prepare the strongest possible application. The ball is now in the Commission’s court.

“In the meantime, we will take every opportunity to restate our case to the Commission and to impress upon it the importance of this issue for the UK.”

Gordon Brown, the Chancellor of the Exchequer, announced in the 2006 Budget that the UK would formally apply to the European Commission to renew these derogations. Now that the application has been made, the next step is for the European Commission to respond to our application for renewal, along with those being submitted by other EU Member States.

For the derogations to be retained requires a proposal from the European Commission and unanimous agreement by the EU Council of Ministers.

Notes to editors

1. The Energy Products Directive (EPD) sets the framework for the taxation of energy products and electricity within the EU, including minimum rates and structures. The EPD allows for a number of derogations for various energy products.

2. The UK’s three derogations allow for reduced duty rates of 6.44ppl as opposed to 47.1ppl for rebated gas oil (‘red diesel’) for use in private pleasure craft; of 28.1ppl for aviation gasoline used in private aircraft as opposed to 56.2ppl for leaded petrol; and for waste oil reused as fuel, which has no duty, as opposed to 6.44ppl.

3. The three derogations collectively cost the UK less than £25m a year.

4. The three derogations predate the Energy Products Directive.

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