Orders of the Day — Car Tax (Abolition) Bill

Part of the debate – in the House of Commons at 8:18 pm on 25th November 1992.

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Photo of Richard Burden Richard Burden , Birmingham, Northfield 8:18 pm, 25th November 1992

I am grateful to you, Mr. Deputy Speaker, and I shall not dwell much longer on the issue. Work is being done at local authority level to regenerate manufacturing industry, and it is being co-ordinated through organisations such as MILAN—the Motor Industry Local Authority Network. I believe that such organisations deserve support from central Government.

Such a strategy also has to be adopted at European level. Work is going on in the European Parliament—spearheaded by the socialist group. Reports produced by a working party headed by Carole Tongue MEP are aimed at producing the kind of European strategy which the motor industry needs. I hope that our Government do not adopt a hands-off approach but will become involved and will contribute.

The right hon. Member for Berwick-upon-Tweed (Mr. Beith) talked about possible ways in which revenue lost as a result of the abolition of the car tax could be recouped, and mention was made of company car taxation. It is fair to say that the overall level of company car taxation in Britain today has still not completely managed to grasp the level of perks, where perks exist. Yet the approach to such taxation in recent years has singularly failed to tackle genuine perks; the people who use company cars as a tool of their trade have been the hardest hit.

The simple reason for that is the way in which the tax has been progressively jacked up on the mere possession of a company car. That is where the biggest tax burden has fallen. Tax on the use of such cars has not increased especially, so that a company director who gets all his private mileage paid for suffers some taxation, but he does reasonably well on his real gains, because he is taxed only at the same level as a sales rep or someone similar who has to pay for every private mile that he does.

If we are to tackle the issue of company car taxation and perks, it is important that our efforts should be targeted on the perks and not on people who happen to have a company car yet who contribute to every private mile that they drive. It would be fair to sort out the company car taxation system to take account of that. The debate is about much more than fairness; it is about effectiveness, efficiency and the regeneration of manufacturing industry.

I shall close as I started. The abolition of the lax is welcome, but it does not go even half far enough. We need a major fundamental change in Government policy to provide the kind of long-term support, the strategy and the intervention that manufacturing industry in the midlands and elsewhere so desperately needs.