Justine Greening (Shadow Minister, Treasury; Putney, Conservative)

It is a pleasure to serve under your chairmanship, Mr. Hood. I have one brief question on the clause. I understand what the clause seeks to achieve, but I want to ask about the new tax regime for qualifying low CO2 emission cars, which has been introduced from April this year. From that date, cars with CO2 emissions of under 120g/kg are subject to an appropriate percentage of 10 per cent., which will be increased by 3 per cent. if the car has a diesel engine.

What assessment has the Treasury made of the number of cars that are likely to take advantage of that tax regime over the next three years? What amount of tax giveaway will be provided as part of that regime, to encourage those who have company cars, and companies that have company cars as a taxable benefit, to choose qualifying low CO2 emission cars, rather than going for the more traditional company car models that people have chosen in the past? That is the main question that I wanted to ask, to obtain more information about the qualifying low CO2 emission cars, and I would be grateful for any light that the Minister can shed on the Treasury’s expectations of how the scheme will work.

Angela Eagle (Parliamentary Secretary, HM Treasury; Wallasey, Labour)

As the hon. Lady will know, the whole approach to company car taxation since it was reformed in 2002 has been to base it on carbon emissions, which encourages the take-up and development of more fuel-efficient cars in company fleets.

The clause promotes more environmentally efficient business travel and the take-up of cleaner cars because it will reduce the lower threshold from 135g/kg to 130g/kg of emissions. The lower threshold rate relates to an appropriate percentage of 15 per cent., which will have the effect of reducing each of the 21 company car tax bands by 5g/kg. The new rules will apply from 6 April 2010.

In terms of the 120g/kg category at the very low end, about which the hon. Member for Putney asked, we anticipate that over 100 different cars in the next three years would qualify on those emissions bases. This is set within the context of the forthcoming EU regulatory requirements, which will ratchet down the emissions that are allowable under EU law. We believe that manufacturers are already responding to the challenge of populating that area of the company car tax threshold rate, and the hon. Lady should also bear in mind the fact that fleet car sales are about half of all new car sales per year. It is therefore particularly important to send these messages to manufacturers who are aiming at the fleet car market. It is a very influential market—half of all new car sales—and it presents a way of achieving quite a rapid turnover and an improvement in CO2 emissions from new cars on the road.

Justine Greening (Shadow Minister, Treasury; Putney, Conservative)

I wish to ask a brief question for clarity. When the Minister talked about 100 different cars, did she mean 100 different models or 100 different versions within models? I fully accept her point about  signalling to encourage new cars acquired through company car schemes to be more environmentally friendly, and we welcome the fact that the Government have set out, three years in advance, their plans for company car taxation. That will encourage people who perhaps have had company cars for three or four years to make those choices.

Angela Eagle (Parliamentary Secretary, HM Treasury; Wallasey, Labour)

I meant 100 different types of car. Clearly, there are now increasing signals and incentives for manufacturers to populate that part of the car taxation rate—they and companies are rewarded financially. In fact, everyone will gain, if we manage to make emissions savings that way. I hope that with that clarification, the hon. Lady will support clause 44.