Contribution
My Lords, I thank noble Lords for this debate. Amendments 8 and 9, tabled by the noble Lord, Lord Grayling, seek to address how funds from the levy are used. I am happy to reassure the noble Lord from the Dispatch Box that money raised through the levy will be used only to support eligible SAF plants in the United Kingdom, and that that is already set out in the Bill.
Clause 6 restricts the costs incurred by the counterparty under the revenue certainty contracts and in carrying out its functions under the Bill. Under this clause, the levy funds will be used only to meet the cost of the revenue certainty mechanism scheme. It is important that the counterparty is able to recover its costs, which include the cost of administering the contracts, the levy and the payment of surpluses.
Amendment 10 intends to ensure that there is a specific mandatory point at which the supplier becomes liable to pay the levy. The Government agree with the intention of the amendment but believe that it is unnecessary because Clause 6(7) already provides that a person becomes liable to pay the levy at the same point when they become liable to an obligation under the SAF mandate.
On how individual levy contributions are calculated, it is important that the Bill provides sufficient flexibility to ensure that final levy design decisions deliver our design principles, including simplicity, solvency, affordability and fairness. The Government are currently reviewing responses to their recent consultation on the detailed design of the levy and engaging with stakeholders to deliver these objectives. I remind noble Lords that the regulations made under Clause 6(1), to set out how the levy will work, will be subject to scrutiny under the affirmative procedure, which will give Parliament the opportunity to continue to consider the approach.
Amendments 17 and 18, tabled by the noble Lord, Lord Grayling, seek to prevent the levy being imposed until a domestic sustainable aviation fuel producer is approaching readiness to receive payments under the Act. I reassure the noble Lord that the purpose of the levy, as set out in Clause 6, is to meet the costs of payments made by the counterparty to SAF producers and to cover the counterparty’s administrative costs. The costs of payments under RCM contracts will be insured only once eligible SAF is being produced and sold by producers who have entered into RCM contracts, which is the outcome sought by these amendments.
The Government are currently reviewing responses to their recent consultation on levy design. Some stakeholders have expressed a desire to build up a reserve fund prior to the first producer payments, which could help smooth out the costs of the scheme and help manage risks of underforecasting required payments. As the Government consider their response to the consultation, it is important that the Bill retains a degree of flexibility around levy design, which will be set out via secondary legislation and will be subject to parliamentary scrutiny.
Amendment 11, tabled by the noble Lord, Lord Moylan, intends to introduce a standardised rate for the levy. We are currently reviewing responses to our recent consultation on the detailed design of the levy and continue to engage with stakeholders to help inform the drafting of levy regulations. Within the consultation, we sought views on the publication of a forecast levy rate, expressed in pence per litre, which could help provide greater transparency for the supply chain.
The Bill as drafted does not specify a particular mechanism and allows the Secretary of State to consider a range of options for calculating the levy paid by individual companies. It is important that the Bill retains a degree of flexibility around levy design, which will be set out via secondary legislation and will be subject to parliamentary scrutiny. Therefore, I do not consider the amendment to be necessary.
To reassure noble Lords, the Government are live to the potential impacts of different levy designs and recognise industry’s desire for certainty and transparency, while ensuring fairness and affordability for the consumer. We recognise that the levy must be dynamic and responsive to the changing market, while ensuring that the counterparty has funds to make payments under the scheme. But, to be clear, this levy will not be used to generate unnecessary funds and will raise sufficient money to cover only the counterparty’s costs under the revenue certainty scheme.
Although final decisions will be informed by the consultation, we are exploring options that deliver this and many of the proposals, and options set out in that consultation could help provide greater certainty and transparency. As I have said, the levy regulations will be subject to the affirmative procedure, which will allow further parliamentary scrutiny. I hope noble Lords will note the steps the Government have taken in the levy design and that they therefore will not press their amendments.