Sustainable Aviation Fuel Bill

Gareth Bacon Excerpts

2nd reading
Wednesday 11th June 2025 Commons Chamber

[Gareth Bacon (Orpington) (Con)]

Let me begin by setting out an unambiguous truth: aviation is vital to the British economy. It is a cornerstone of our national infrastructure, our competitiveness and our connectivity.

When it comes to the impact of aviation on our economy, the figures speak for themselves. Aviation contributes £52 billion to UK GDP, supporting over 960,000 jobs across the country. That includes 341,000 people working directly in aviation—from air traffic controllers to aerospace engineers—350,000 jobs in the supply chain, and another 269,000 supported through consumer spending. Aviation also delivers nearly £8.7 billion in tax revenues, and aerospace manufacturing adds a further £9 billion directly to GDP, plus over £10 billion more when including its supply chains. Some 197 million passengers and 2 million tonnes of freight move through our airports each year. The economic case is therefore unanswerable. In short, we must all support this thriving industry with clear benefits to the country.

The Conservative party has always recognised the strategic importance of aviation, but, unlike the current Government, we understand the damage that can be done with poor policy choices—I regret to say that we have seen plenty of that from the Labour Government over the past year. Alongside their national insurance jobs tax, which is putting pressure on businesses and threatens to leave working people £3,500 a year worse off, Labour’s decision to hike air passenger duty threatens the vitality of this thriving industry. The Office for Budget Responsibility confirms that rises planned by the Chancellor of the Exchequer will raise an extra £555 million in taxes over five years, pushing up the costs for businesses and passengers alike.

In a speech that will have a lot of common ground with the Secretary of State’s speech, I regret to say that Labour’s handling of its professed desire to expand aviation raises more questions than answers. The decision to approve a second terminal at Luton airport, which we support, will be judicially reviewed. The proposal for a second runway at Gatwick has been kicked down the road for surprising reasons, to say the least, and the supposed support for a third runway at Heathrow is no more credible. The Chancellor has promised that the latter proposal will be operational by 2035, with spades in the ground in this Parliament, but that ambition looks very far-fetched, and there are substantial logistical and financial barriers to its construction. So far, the Government have provided no solutions on those points, so we will watch developments in the next few weeks with considerable interest.

It is against that backdrop that we come to the Bill before us. When we entered opposition, we made it clear that we would not oppose the Government just for the sake of it. We made it clear that where the Government’s choices would benefit the country or the economy, we would welcome them. That is why we will not seek to divide the House on this legislation on Second Reading. This Bill is a logical follow-on from the statutory instrument passed in September last year that established the SAF mandate, the first stage of which came into effect in January. Having mandated that airlines will be required to use a specified percentage of SAF—2% this year, rising to 10% in 2030 and 22% in 2040—it is logical to take steps to ensure adequate levels of locally produced fuel.

While the mandate requires the consumption of SAF, it is a new technology, and its production carries a high risk for investors. Encouraging the development of the plants required to produce this fuel is the purpose of this Bill and, to a very large degree, it is a continuation of the policy of the previous Government. In 2023, it was the last Government who committed to an industry-funded revenue certainty mechanism to support UK-based SAF production. In early 2024 we published the detail, with plans for a guaranteed strike price model to give price certainty to SAF producers. I hear the Minister say, “You didn’t do it!” He is completely correct, because unfortunately there was something called a general election that followed shortly after.

As the Secretary of State has outlined, under this model, producers will be topped up when the market price falls below a guaranteed strike price; when the market price rises above, they will pay it back. The system mirrors the successful contracts for difference model in offshore wind, and the economic benefits could be considerable. A cost-benefit analysis produced by the Department for Transport before the general election suggested that the SAF industry could add more than £1.8 billion to the economy and create more than 10,000 jobs in the country, but, more fundamentally, SAF is a product of what we know to work. As the Secretary of State said in her speech, it can be blended with conventional Jet A-1, used in existing aircraft and refuelled at existing airports. The capability exists. The challenge is not scientific; it is economic. That is why the concept of a revenue certainty mechanism was one of the six pillars in the previous Government’s jet zero strategy, and, as the Secretary of State outlined, the introduction of a revenue certainty mechanism has wide support in the aviation industry.

Let me be clear: while we will not oppose the legislation this evening, we will carefully scrutinise it as it progresses through the House. In that spirit, I will put some questions to the Minister, which I hope he will address in his summing up. The first is about passengers. In the press release announcing the Bill, the Government said that the revenue certainty mechanism would keep ticket price changes minimal:

“Keeping fluctuations to £1.50 a year on average.”

The Secretary of State said the same in her speech. Perhaps in his speech the Minister could outline what this figure is based on. Do the Government stand by it? Is it a commitment, or a rough estimate?

The second question is about what type of SAF the Government favour and how it will be produced. While the SAF mandate permits the production and use of hydroprocessed esters and fatty acids SAF in the early years of the mandate, and also contains a small but increasing requirement for power-to-liquid SAF in later years, the bulk of the SAF to be developed and used under the terms of the mandate is second generation SAF, which is to be made from municipal waste, non-edible crops and woody biomass. The UK is a small island, with insufficient spare land to enjoy self-sufficient food security or to grow new forests at scale. Does the Minister think we will be self-sufficient? If not, what proportion of the ingredients necessary for making second generation SAF does the Minister think we will need to import?

Relatedly, the HEFA cap comes into force incrementally from 2027, despite there currently being no domestic production of second generation SAF in the UK and low levels of second generation SAF produced globally, removing the opportunity to source mandated volumes through imports. This risks making the costs of hitting SAF mandate targets very high indeed, because suppliers will soon be forced to buy out of their mandate obligations—a significant cost that will be passed on to the airlines and, ultimately, to passengers without delivering any decarbonisation benefit at all. Will the Government consider revising the timelines for phasing out HEFA SAF to bring them more in line with the timescales for domestic second generation SAF production, in order to minimise the costs for passengers?

The next area of interest is planning. The plants in which the Government are seeking to encourage investment will be large, and—as the Minister no doubt knows—large developments tend to attract a lot of local opposition, often leading to planning inquiries, judicial reviews, vast expense and years of delay before any construction work begins. If this does not change, the revenue certainty mechanism may not be sufficient to attract investors, so what will the Government do to minimise delays in the planning process?

I turn now to timescales. When will the first contracts be awarded under the RCM? Will there be a timetable for reaching full mandate compliance? As my right hon. Friend the Member for Goole and Pocklington (David Davis)—who is no longer in his place—touched on, the issue of the strike price is critical to the success of the proposal. What criteria will be used to set the strike price? Will the methodology be published, and will there be regular reviews? Finally, will the Government commit to regular reporting to Parliament on industry take-up, production capacity and cost trajectory, to ensure that they remain accountable for the Bill over time?

The importance of this Bill is clear. Backing UK production of sustainable aviation fuel is necessary if we are to meet our net zero goals without undermining the competitiveness of the aviation sector. However, let me be clear: as the Bill moves through the House, we will continue to look closely at the detail and press for changes where necessary, where improvements can be made to ensure that the scheme delivers on its promise.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Chair of the Transport Committee.