RATE OF VEHICLE EXCISE DUTY (No. 2)

New Clause 39 – in the House of Commons at 11:45 pm on 15th July 1991.

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'In determining the rate of vehicle excise duty for the year 1991–92 and subsequent years for any class of vehicle the Chancellor of the Exchequer shall have regard to the principle that all classes of vehicle shall cover their track costs by broadly the same factor and that any variation for any particular class of vehicle may only be justified because of a comparative benefit with respect to other classes of vehicles to the environment.'.—[Dr. Marek]

Brought up, and read the First time.

Photo of Dr John Marek Dr John Marek , Wrexham

I beg to move, That the clause be read a Second time.

I shall be brief as it has gone midnight and we have many more amendments to get through. I could speak at length on the new clause—[HON. MEMBERS: "The hon. Gentleman has done that before."] Yes, but I shall confine my remarks to table 9, entitled, "Road taxation revenue and road costs in 1990–91: by vehicle class" from the pamphlet, "The allocation of road track costs 1990–91, United Kingdom", which was issued by the Department of Transport in April 1990. That is the only table to which I shall refer in my remarks.

The new clause is simple. It asks the Chancellor of the Exchequer, before he makes his Budget judgments on vehicle excise duty and costs for road users, to level out the taxes-to-costs ratio. Any differences should be accounted for by the environmental benefits that certain vehicles bring to the roads. The reason for that is simple. Table 9 shows that for cars, light vans and taxis the taxes-to-costs ratio is 3£2:1, whereas for goods vehicles over 3·5 tonnes the ratio is only 1·3:1.

We certainly need roads and heavy goods vehicles because we must transport goods, and most goods are transported by road. We must also be mindful that we do not disadvantage our industry through taxation policy compared with industry elsewhere in Europe. I am aware that transport in Germany is always that bit cheaper than it is in this country. In some ways I should like the Minister to worry not just about what goes on in the United Kingdom, but about what goes on within Europe to ensure that our industry is not disadvantaged by transport costs.

The difference between the ratios is large. Owners of large vans and motors will pay fuel tax and vehicle excise duty, and they will more than cover their costs on the road by a factor of 3·2:1, whereas some HGVs only just cover their road track costs. Table 9 shows that all goods vehicles over 3·5 tonnes just cover their costs by 1·3:1.

Let me put this in figures so that it is absolutely clear. There are 22,622,000 cars, light vans and taxis. The cost of the damage that they do to roads comes to £3,075 million. There are only 471,000 heavy goods vehicles, yet the damage that they do to roads comes to £1,510 million. Although the number of HGVs is much smaller, they do half the damage that is done by all the cars, light vans and taxis. If the House considers that, and that the HGVs' taxes-to-costs ratio is only 1·3:1 compared with 3·2:1 for cars, light vans and taxis, it will agree that something is wrong.

When we had a discussion on an associated subject in Committee, the Minister said that she would consider the matter carefully in the ensuing year. That is important. I hope that the Minister will reaffirm that commitment. I also hope that she will consider the issue in terms of the environment. If the transport of goods is unnecessary, it is obviously environmentally friendly not to undertake such a journey. It is environmentally friendly to move goods by rail or water whenever that is possible. However, I appreciate that most goods are transported by road. Little thought has been given to this issue by the Government.

Photo of Peter Bottomley Peter Bottomley , Eltham

I speak with three and a half years' experience of dealing with such matters. A great deal of thought has been given to the issue. The Transport and General Workers Union would be upset if HGVs, which many of its members drive, were subject to three times their current tax. It would be reasonable to take the surplus raised from private motorists for use on pensioners, hospitals and education. However, to try to load the costs on industry when the rest of the European Community is not even taking the track costs from its HGVs suggests that the remarks of the hon. Member for Wrexham (Dr. Marek) should be directed at the EC rather than at my hon. Friend the Minister.

Photo of Dr John Marek Dr John Marek , Wrexham

Perhaps the hon. Gentleman has just entered the Chamber, but I have already mentioned the EC. The Minister must lobby in Europe to ensure that our industry is not disadvantaged. The record will show that I have now said that for the second time, and I have already said that I do not want to delay the House.

The disparity is too large and not enough is being done to look after the environment and to introduce green policies in transport taxation. If the hon. Member for Eltham (Mr. Bottomley) had regard for such matters when he was at the Department of Transport, his efforts were obviously unsuccessful. I do not want to be deprecatory, but it is evident that he may have worried so much about such policies that he is now on the Back Benches—again I do not intend to be deprecatory.

A problem exists, and I hope that the Government will consider it urgently.

Photo of Mr Michael Jopling Mr Michael Jopling , Westmorland and Lonsdale

I have listened with considerable interest to the hon. Member for Wrexham (Dr. Marek), but, with respect, his speech was grossly deficient in one aspect. He did not mention the vehicle excise duty on motor cycles.

Photo of Dr John Marek Dr John Marek , Wrexham

The next set of amendments address that issue.

Photo of Mr Michael Jopling Mr Michael Jopling , Westmorland and Lonsdale

I am aware of that, but it is as well to raise the matter.

I must declare an interest as I am the president of the Auto-Cycle Union, which is the governing body of motor cycle sport.

The Budget caused considerable resentment among the motor cycling community, of which, as the House may know, I am a member. That statement did not refer to the fact that the vehicle excise duty on motor cycles had been increased by a far greater extent than that on motor cars. That should have been declared in the statement. If the Treasury and Chancellor should ever feel inclined to impose such a disproportionate increase in excise duty in the future, that should be made clear to the House during the course of the Budget statement. This year that duty increased considerably and I have not heard any adequate explanation as to why that was necessary.

The hon. Member for Wrexham referred to damage to roads. That is an important factor of which the House should be aware. Motor cycles cause practically no damage to roads. Given the number of people that they transport, they cause proportionately less damage to roads than any other mode of transport. Their effect on the environment with regard to congestion, the parking space that they take up, the space that they occupy in general, and the fuel that they use in proportion to the number of people that they transport make them an environmentally friendly form of transport.

I am interested in the new clause and shall listen carefully to what my hon. Friend the Minister of State says. However, in framing the Budget and the Finance Bill, proper regard has not been paid to the motor cycle community's claims. On the whole, it has been dealt a pretty dirty deal during the course of these amendments.

Photo of Peter Bottomley Peter Bottomley , Eltham 12:15 am, 15th July 1991

I do not want to take the new clause too seriously because I do not think that the hon. Member for Wrexham (Dr. Marek) takes it too seriously. It is important to realise that it means either that the taxation on heavy goods vehicles should be tripled or that the vehicle excise duties for cars should be cut to one third of its present rate. Neither of those propositions can be seriously floated past the hon. Member for Derby, South (Mrs. Beckett).

I hope that we shall continue to see a degradation in the value of the vehicle excise duty for cars—the figure should not change—and that the extra cost will be put on the marginal use of cars. That is the only sensible way to look at motor taxation. We should raise the marginal cost of using a private car both in terms of cost and time, rather than going for the road pricing theory, which is a space for every car for which someone must pay with a fistful of fivers. We should also continue to try to reduce the cost of the damage that heavy goods vehicles cause to the roads by introducing better suspension systems and by trying to ensure that lorries are kept outside residential and shopping areas.

Even before I intervened the hon. Member for Wrexham spoke about the track cost in the rest of the European Community. I emphasised that in my intervention because it needs emphasising more and more. Only when other European countries begin to realise the damage that those vehicles cause will we see fair competition between hauliers. British hauliers will do better in that competition because we have better co-operation between drivers and management and, unlike most other hauliers in Europe, our management is used to competition.

I hope that the new clause is not pressed. The hon. Member for Wrexham probably regrets having spoken on it.

Photo of Mrs Gillian Shephard Mrs Gillian Shephard Minister of State (HM Treasury)

Clearly, in constructing a policy for motor taxation a balance needs to be struck between environmental considerations, revenue received and practicalities. In that respect, although I know of the enthusiasm and expertise of the hon. Member for Wrexham (Dr. Marek) on the comparative tax paid by certain types of heavy goods vehicles, his proposals involve practical problems which he has not addressed.

For example, to bring the tax-cost ratio of HGVs up to that of cars and light vans would involve, on average, sevenfold increases in their vehicle excise duty. That means that some lorries would pay £21,000 VED a year, which might not be welcomed by British industry. Alternatively, to bring cars down to the same ratio as lorries would require us to cut their overall tax burden by £6·6 billion. As VED brings in only about £2·5 billion, abolishing it altogether would bring the ratio down to 2·4:I rather than 1·26:1 that the hon. Gentleman seeks.

However, motoring taxation, fuel duty and vehicle excise duty are mainly about raising revenue, which amounts to nearly £14 billion, though it is clearly sensible to adopt a policy so that all classes of vehicle should at least cover their share of the public expenditure costs of the road network. All vehicles now do so as a result of the changes in VED and fuel duty that we have made over the years. I know that my hon. Friend the Minister for Roads and Traffic wrote to the hon. Member for Wrexham after the debate in Committee to explain how those duties were calculated.

I welcomed the contribution of my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling), who is a distinguished motor cycle enthusiast. In his Budget speech, my right hon. Friend the Chancellor of the Exchequer did not have time to mention all the measures, but details of the VED increase for motor cycles were mentioned in the "Financial Statement and Budget Report", and in the Department of Transport press notice. Motor cycle riders pay less tax on fuel and a lower VED than car drivers.

Environmental issues have been mentioned. We can sometimes use taxation to bring positive environmental benefits. In earlier debates we mentioned the differential between leaded and unleaded petrol which has boosted unleaded petrol's share of the market to more than 40 per cent. We also switched the balance of taxation for both private vehicles and lorries from fixed to variable costs, thus ensuring that those who pollute most, pay most. In 1980, the Armitage inquiry recommended that the excess for each sub-class of heavy goods vehicles should reflect their relative impact on the environment. It is difficult to achieve that perfectly, and we never do as well as the hon. Member for Wrexham would like, but VED paid by those using heavier rigids has, in general, increased by more than that for articulated lorries.

My right hon. Friend the Chancellor and my right hon. and learned Friend the Secretary of State for Transport pay serious attention to the needs of the environment because we all benefit from that. We have achieved much through our taxation policy, but we have been able to do so only while still having regard to fiscal policy overall, because our policy leaves my right hon. Friend the Chancellor with the flexibility to respond to new situations and concerns.

The Government's aim is to achieve a fair system of taxation that takes account of all factors, not just the environment. That can best be achieved by leaving the present and future Chancellors flexibility to respond to new situations and concerns, not by restricting their room for manoeuvre.

Photo of Dr John Marek Dr John Marek , Wrexham

The new clause simply proposed that the Chancellor of the Exchequer should have regard to the principle, and then enunciated the principle. The hon. Member for Eltham (Mr. Bottomley) is a man of extremes. He said that the policy had to be on the extreme left or the extreme right, but there are all sorts of possibilities in between. One can have regard to the principle, but it is sometimes hard to adopt the principle and implement it immediately. I am under no illusions about that.

We have had a useful debate. I am glad that the Minister said that the Government have regard to the environment, and the vehicle excise duty on some classes of heavy goods vehicles has risen a little more. I hope that the Treasury will ensure that the Department of Transport turns its attention to that before the next Budget because it does not look as though there will be a general election before next May or June, and there will be another Budget under the present Administration. In those circumstances, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.