Orders of the Day — Car Tax (Abolition) Bill

Part of the debate – in the House of Commons at 8:35 pm on 25th November 1992.

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Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester 8:35 pm, 25th November 1992

A litre.

My hon. Friend the Member for Surrey, North-West (Sir M. Grylls) gave a warm welcome to the Bill. He referred to the revival of the car industry which has undoubtedly taken place, the importance and size of inward investment and the importance, to which I also referred, of the component sector. He said that the car tax must never return and he, like others, poured some scorn on the existence of the tax.

No tax is welcome. However, it is fair to point out that the car tax has been a fairly cost-effective tax to raise. it cost £700,000 a year to administer and involved the full-time employment of four staff and 20 man years. Considering the yield, in years gone by and even in this year, that is relatively cost-effective.

The right hon. Member for Berwick-upon-Tweed referred to the implications of recouping and said that it might be better to put the cost in part or in whole on company car taxation. That point was also made by other hon. Members. That is, of course, a judgment for my right hon. Friend, but what the right hon. Gentleman has said will be noted.

I warmly concur with the sentiments of the right hon. Member for Berwick-upon-Tweed that Britain's future in Europe is essential if we are to maintain and attract inward Japanese investment. There must be no question of that, given the flows of investment, and there really must be division across party lines on the importance of that investment. Despite what the hon. Member for Bradford, South (Mr. Cryer) said about design of manufacture, there must be no doubt that this is a welcome haven for world-wide investment. I mentioned north Wales, but there are other examples, particularly in the north of the country. The extent to which investment has revitalised those areas is very exciting for the future. It has been a great success story, and we should welcome and applaud that investment and succour it for the future.

My hon. Friend the Member for Portsmouth, North (Mr. Griffiths) would like the cost of cars to be on a more similar basis throughout the EC. The Government are currently reviewing car prices throughout the Community and are keen to encourage the industry to co-operate with current European Community initiatives to produce greater price transparency. Abolition of the tax means that we will have almost the lowest rates of tax on cars in the European Community. The rates range from those in Denmark, which has a VAT rate of 25 per cent., plus an additional sales tax of 105 per cent. on the first 34,400 krona, and 180 per cent. tax on the balance, down to those in Germany, which has a 14 per cent. rate of VAT and no additional car tax.

With the minimum rates of VAT that are being introduced, we will see a standardisation of the minimum rates, but at the moment there is considerable variation in those basic rates and in the supplementary additional sales taxes, but we are looking at that matter.

Dealing as expeditiously as I can with the remaining important points, the hon. Members for Thurrock (Mr. Mackinlay) and for Birmingham, Northfield (Mr. Burden) felt that the measure would not boost industry. The hon. Member for Northfield, who has Rover Longbridge in his constituency, felt, as did others, that the measure alone would not suffice and that a broader regeneration and inspiration of manufacturing industry were necessary.

The last thing that industry needs at this time is a public expenditure programme which will increase its burden of taxation and borrowing. Any Chancellor has to make a major judgment about the size of public expenditure. My right hon. Friend the Chancellor has come forward with a major package to restore confidence in the housing market, to promote exports, and, in particular, to target the car manufacturing industry.