Clause 2 - Cars: determination of consideration for fuel supplied for private use
Finance Bill
10:45 am
John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)
I welcome the welcome that both Opposition spokesmen have given to the principle of the clause and their endorsement of it as a sensible policy that moves things in the right direction.
I welcome the hon. Member for Bristol, West to the Committee. It is clear from his biography that he brings to it significant professional experience of tax affairs, which he gained before being elected to Parliament. I look forward to hearing his contributions to our debates. I say to him that we are careful to monitor the impact of changes we introduce, particularly when they reform the basis of the taxation system, and that for substantial changes we usually put in place a significant process of evaluation.
I think that the hon. Gentleman and other Committee members will appreciate that the long-term impact of the sort of changes that have been touched on this morning might take some time to become clear. However, the Inland Revenue's initial evaluation of the company car tax reforms that was published alongside the Budget in 2004 shows that, as far as we can trace and quantify, the tax has had two significant effects, both of which are environmentally beneficial. It has led to a reduction both in the amount of business mileage that is driven and in the carbon dioxide emissions of the company car fleet. Both were key purposes of the reforms. We will monitor the impact of the reform as part and parcel of our evaluation of such tax changes.
In response to the hon. Member for Cities of London and Westminster I say again, clearly and emphatically, that the measure is not designed as a revenue raiser. He asked which vehicles will produce a tax saving for their drivers or for the businesses that have them as part of their fleet. That will depend on the precise details of the design of the scheme, which we are currently discussing with the industry. If he looks at the structure and design of the scheme that we have put in place for VED—or, indeed, for the company car tax—he will see that it is scaled in a way that gives incentives and signals to encourage people to drive more fuel efficient and less polluting cars. We want the same design for this scheme.
I fear that I would stray beyond the terms of clause 2 were I to get into an exposition of road pricing, but perhaps I can answer the hon. Gentleman's question in the following way. Clause 2 is a further reform that is consistent with and moves in a similar direction to the reforms we made to vehicle excise duty in 2001, company car tax in 2002, and the direct tax fuel scale charge in 2003. Our aim in the detailed design of this scheme and the reforms that we have already put in place is consistency in this part of the tax system—consistency in terms of the signals given to businesses and company car drivers, the incentives that have an impact on behaviour where we can put those in place, and the way in which businesses administer the schemes that we establish.
Clause 2 ordered to stand part of the Bill.