Clause 8 - Threshold for reduced general rate
Finance Bill
5:45 pm
Mr James Clappison (Hertsmere, Conservative)
It is tempting to let this pass as it involves a reduction in vehicle excise duty, but I cannot do so without putting the reduction into some sort of context, given the remarks that Ministers have made about similar proposals. The clause would extend the scope of the lower rate of vehicle excise duty from 1,200 cu cm cars to 1,549 cu cm cars. The change will take effect on 1 July but it will be backdated to November 2000. The clause provides for a system of rebates.
I hope that the Minister will accept that the background to that is the pressure under which the Government came last autumn. The change must be set in the context of what took place before then. In the Budget last year the reduced vehicle excise duty rate was extended to cars with engines up to 1,200 cu cm. When last year's Finance Bill was being considered in Committee the Liberal Democrats moved an amendment to extend that reduced rate to cars with engines up to 1,400 cu cm. The Financial Secretary rejected the amendment saying that it was not well targeted, environmentally or otherwise and that as it would apply to almost half the cars on the road it would cost about £290 million more than the extension of the threshold
Given that what is proposed is an extension not just up 1,400 cu cm but to 1,549 cu cm, it would be interesting to know what change in environmental factors between May and November of last year led to a change in Government thinking. At the time of the pre-Budget statement when the Chancellor announced the reduced rate for vehicles up to 1,549 cu cm, the number of additional vehicles brought into the reduced rate had gone from being the vice that it had been in May, when the Financial Secretary addressed the Committee, to being a positive virtue, because on the day of the statement the Chancellor told us:
``All those who have a car from 1200cc to 1500 cc—that is, an extra 5 million cars—will be entitled to £55 off their annual licence fee from today.''
The Chancellor gave his rationale for the policy shift that had taken place as a wish to provide greater choice for rural dwellers:
``many—especially those in rural areas—have put it to me that greater choice would be available to rural motorists and motorists generally if the £55 deduction could be accessible not only for cars under 1200 cc, but for cars up to 1500 cc, including the Focus, Golf, Astra, Escort and Rover 214.''—[Official Report, 8 November 2000; Vol. 356, c. 323.]
I look forward to the Financial Secretary's reaction, and am tempted to speculate on the basis of the Chancellor's statement whether Ministers had hitherto been unaware that it was possible for those who live in the country to purchase and drive the Focus, Golf, Astra, Escort and Rover 214. One imagines that Ministers, even in this Government of city dwellers, may have been aware that those possibilities were open to them. [Interruption] No doubt the Financial Secretary will put me right. I suggest to him that, while country dwellers may not be concerned about their choice of car—and it was country dwellers that the Financial Secretary said he was responding to—and, to be fair, I am sure that they would be grateful to the Chancellor for being considerate about that choice, they are certainly concerned that they have no choice about the cost of the petrol they put inside those cars, and the fact that so much of that cost arises from tax and duty. That, however, is another story.
Can the Minister tell us the rationale for the policy shift that is so dramatic compared to the attitude of the Government last May?