The Chancellor's pre-Budget statement confirmed that the Treasury has decided that the environmental benefits of LPG did not warrant the current level of fuel duty incentive. Duty on LPG will gradually rise during the next three years to a level “more consistent with its perceived benefits”.

It was also announced that the duty differential on natural gas would be retained for the next 3 years reflecting the Government's view that it continued to provide significant environmental benefits.

It was also confirmed that the Government would introduce a duty differential for sulphur-free fuels of 0.5 pence per litre over ultra-low sulphur fuels from September 2004, and that the Government would examine ways of focusing the fuel duty regime on input as well as product-based taxation to incentivise more environmentally- and economically-efficient bio-fuels manufacturing.