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Clause 13 — Rates

Part 7 – in the House of Commons at 5:30 pm on 3rd May 2006.

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Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury 5:30 pm, 3rd May 2006

I beg to move amendment No. 25, in clause 13, page 14, line 20 [Vol I], leave out Table A and insert—

CO2 Emissions figure Rate
(1) (2) (3) (4) (5)
Exceeding Not Exceeding Reduced Rate Standard Rate Premium Rate
Householdswith apostcode ina sparselypopulatedrural area Householdswith apostcode ina sparselypopulatedrural area Householdswith apostcode ina sparselypopulatedrural area
g/km g/km £ £ £ £ £ £
100 120 30 15 40 20 50 25
120 150 90 45 100 50 110 55
150 165 115 57.50 125 62.50 135 67.50
165 185 140 70 150 75 160 80
185 180 90 190 95 195 97.50

The First Deputy Chairman:

With this it will be convenient to discuss the following amendments: No. 21, in clause 13, page 15, line 2 [Vol I], leave out Table B and insert—

CO2 Emissions figure Rate
(1) (2) (3) (4) (5)
Exceeding Not Exceeding Reduced Rate Standard Rate Premium Rate
Householdswith apostcode ina sparselypopulatedrural area Householdswith apostcode ina sparselypopulatedrural area Householdswith apostcode ina sparselypopulatedrural area
g/km g/km £ £ £ £ £ £
100 120 30 15 40 20 50 25
120 150 90 45 100 50 110 55
150 165 115 57.50 125 62.50 135 67.50
165 185 140 70 150 75 160 80
185 225 180 90 190 95 195 97.50
225 200 200 210 210 215 215

No. 22, in clause 13, page 15, line 12 [Vol I], at end insert—

'(3A) after paragraph 1B insert—

"1BB For the purposes of paragraph 1B above, 'households with a postcode in a rural area' shall be defined in regulations; and before making such regulations the Chancellor of the Exchequer shall consult the Countryside Agency.".'.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

The proposed changes illustrate the recognition of the fact that people in rural areas are likely to have higher transport costs and less access to public transport than people in urban areas, and should therefore receive a discount on the vehicle excise duty that they pay. The discount proposed in our amendments is 50 per cent. Of course, the changes should be accompanied by wider changes to ensure that the polluter pays, and to extend some of the changes proposed by the Chancellor, but I appreciate that it will not be possible to do that today, even though amendments on that issue have been tabled.

I shall focus on the impact that the amendments would have. People who live in sparsely populated rural areas often have poor access to public transport. The 2003 national travel survey for England showed that half the residents in rural settlements of fewer than 3,000 people lived within a 30-minute walk of a bus stop. That compares with 95 per cent. of the people living in larger urban areas.

Those rural residents are likely to spend more per week on transport than their urban counterparts. The expenditure and food survey for 2002–03 showed that households in rural areas with a population of fewer than 3,000 spent £70.60 a week on transport, compared with £45.50 for those living in urban areas. Half of their expenditure goes on operating costs, a large proportion of which is the cost of fuel. That is because they have to travel to work and they do not have the option to use public transport. Also, they often have to drive their children to school. The operating costs in rural areas are often much higher. For example, fuel in the highlands is 10 per cent. more expensive than elsewhere.

People in rural areas make a similar number of trips to those made in urban areas, but those trips are longer and more likely to be made by car. Many of those people are also likely to live in isolated and deprived areas.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

Will the hon. Lady tell the House what definition of "sparsely populated rural area" she proposes to insert into the Bill?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Of course I will come to that. Our proposals deal with sparsely populated rural areas as defined by the Countryside Agency—although they apply only to England and Wales. However, I hope that we shall be able to consider those criteria in relation to Scotland or, if necessary, table an amendment that would allow such a decision to be devolved to the Scottish Parliament.

My constituency is in the county of Cornwall. Cornwall's gross domestic product is less than 70 per cent. of the European average. Many people there live in isolated areas with very little access to public transport, and are therefore reliant on their cars. Many households in rural areas are isolated and deprived, dependent on a car and more likely to own an older car. I am not simply talking about farmers who rely on their 4x4 vehicles, but about people who are totally dependent on a car to get around.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I want to press the hon. Lady on the point made by Mr. Goodman. In the south-west region, which she and I both represent as Members of Parliament, what percentage of the population officially live in a rural area as opposed to a town or city?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

The definitions in the amendment mean that it would affect hundreds of thousands of people who do not live in settlements of 10,000.

If the Government are to take seriously what the Chancellor has called the "moral duty" to tackle environmental change and make the polluter pay—in the direction of which the Finance Bill and Budget made the smallest possible gesture—it must be recognised that deprived and car-dependent households in sparsely populated and rural areas will be hit hardest by further changes to vehicle excise duty if the "polluter pays" principle is applied.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

I strongly support what my hon. Friend says on this point. In my constituency in the highlands of Scotland, the vast majority of people live in rural communities, a car is essential, few public transport alternatives exist and the price of petrol is much higher than in many other parts of the country. The amendment would enable pollution to be tackled through higher vehicle excise duty, while ensuring at the same time that those for whom a car is a necessity rather than a choice could be insulated from those costs.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

My hon. Friend makes his point well. Those people will be hit hardest by changes to vehicle excise duty if the Government are serious about following through their commitment to the "polluter pays" principle. However, they are also the people on whose behaviour the changes will have the smallest impact, as they have no alternatives to car use. Under the amendment, the attempt to alter behaviour through changes in vehicle excise duty can continue without crippling those people.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

As the hon. Lady apparently has a definition of people in rural and sparsely populated rural areas, can she tell the House how many people would benefit from her amendment?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I certainly can. According to the rural and urban area classification 2004 and census data, we are talking about 398,249 households.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

I am fascinated. Notwithstanding the fact that the Countryside Agency covers only England, not England and Wales, Scotland has two definitions of "rural"—one is the Scottish Executive's, under which 98 per cent. of the land mass and 18.7 per cent. of the people are covered, and the other is the Randall definition relating to sparsity, under which 89 per cent. of the land mass and almost 30 per cent. of the population are covered. Is the hon. Lady really trying to achieve an opt-out for 30 per cent. of the population?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I am talking about households living in sparsely populated rural areas. As I have made clear, we wanted to set out a sparsity criterion in the amendment that could be applied across the UK. The criterion to which we worked was that provided by the Countryside Agency. We would be more than happy to accept an amendment to devolve that—

The First Deputy Chairman:

Order. I know that the hon. Lady is relatively new to the House, but it is important to address the Chair.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I apologise, Mrs. Heal. If the hon. Gentleman wants to table an amendment devolving that responsibility to Scotland, I would be more than happy to accept it later.

Photo of George Young George Young Chair, Standards and Privileges Committee

I am not unsympathetic to the hon. Lady's point, but the tax that she proposes to amend is not on households but on cars. Can she confirm that any car registered in a postcode covered by her amendment would qualify for the reduced rate?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I can confirm that. Cars must be registered to households, not just for vehicle excise duty purposes but for insurance purposes—were there any abuse, the insurance would not be valid.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Following the point that has just been made, the form concerned—whatever it is called now—would give the address of the car's registered keeper, not necessarily that of its owner. The owner is entitled to insure the car, so an urban owner whose distant aunt living in the middle of nowhere is the registered keeper could get around the VED regime proposed by the hon. Lady. How would she avoid that?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Quite simply: by ensuring that when someone paid vehicle excise duty, that person declared that he or she was also the main driver of the car.

Amendment No. 25 would provide a 50 per cent discount for cars registered before 23 March 2006 in households with a postcode that defined them as being in a sparsely populated rural area. Amendment No. 21 would sustain that discount for all cars registered after 23 March, except those that are most polluting. I think it desirable to retain the incentive for people to seek less polluting vehicles when purchasing new vehicles. However, I favour a much greater differential, as recommended by the Energy Saving Trust.

Even for those requiring a new 4x4 for work, there are less polluting alternatives. The Land Rover Freelander 4x4 Td4 Adventurer estate produces carbon dioxide emissions of 205 g per km, and the Subaru Forester 4x4 produces emissions of 220 g per km. Amendment No. 22 suggests that sparsely populated rural areas should be defined in terms that the Countryside Agency has already explored. The Agency may be able to establish criteria that could be applied to the United Kingdom more widely. Alternatively, as I have said before, I should be happy to accept on Report an amendment devolving this definition to Scotland.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

Does the 398,000 figure relate to people living in rural areas, or to people living in sparsely populated rural areas?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

It relates to sparsely populated rural areas as defined by the 2004 census.

Our amendments recognise that people who live in sparsely populated rural areas rely on cars, and that those people will be hardest hit by any change in vehicle excise duty because they are least able to change their behaviour. They would allow the Government to proceed even further with the "polluter pays" principle, which they failed spectacularly to do in the Budget, without having an unfair impact on those vulnerable groups.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

It is a pleasure to see you in the Chair, Mrs. Heal. It is also a pleasure—after listening to some of the Second Reading speeches and some of the speeches that have been made today—to take part in this Finance Bill debate for the first time.

I am sorry that I cannot respond directly to the Economic Secretary, who, in a bold, combative and assertive statement, said that the Conservative party might need a reshuffle after the local elections. I was going to tell him that there might just be a reshuffle in the Labour party. I note the shock on the Labour Benches at the very prospect of that being raised, but I was going to tell the Economic Secretary that whatever might happen in that event, I hoped that he and the Financial Secretary—who is here—would be present in the Standing Committee, because I look forward to the usual exchanges.

I shall return to the Government's proposals when we debate clause stand part. The key to the amendments can be found in tables A and B in clause 13. Table A sets out VED increases for vehicles registered before 23 March—the Liberal Democrats seek to amend that table—and table B sets out the increases for vehicles registered after 23 March.

The amendments tabled by the hon. Members for Falmouth and Camborne (Julia Goldsworthy) and for South-East Cornwall (Mr. Breed) should be put in context. Last Thursday, the leader of the Liberal Democrats, Sir Menzies Campbell, suddenly rushed out what he described as a challenge to my right hon. Friend Mr. Cameron to form what he described as a cross-party consensus on the environment.

The timing of the challenge was a little curious, as I understand that my hon. and right hon. Friends were already holding discussions with Chris Huhne, who I see is in his place, about forming exactly that cross-party consensus. We were therefore a bit surprised to receive the challenge, whose content was also curious: the right hon. and learned Member for North-East Fife urged my right hon. Friend the Member for Witney to sign up to replacing the climate change levy with a carbon tax—something to which my right hon. Friend had already signed up several days earlier.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs 5:45 pm, 3rd May 2006

Will the hon. Gentleman clarify whether the Conservative party's carbon tax proposals extend its application across the board, including to households?

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I look forward to doing that in Committee, but I am afraid that I would be ruled out of order today. We are debating vehicle excise duty, to which I turn now.

In respect of VED, the right hon. and learned Member for North-East Fife said:

"There should be a substantial increase in the top rate of Vehicle Excise Duty."

That is nice and plain, and the hon. Member for Eastleigh helpfully chipped in on Sunday, in a report in the News of the World. It is encouraging to see someone getting into that newspaper for sound and substantial policy reasons. The report stated:

"The Lib Dems want to hit gas-guzzling motorists with a whopping £2,000 car tax to help the environment."

It added:

"They've tabled an amendment to a government bill that would see the top rate of car tax rise from £215 to £2,000."

The report quoted the hon. Member for Eastleigh as saying:

"If people choose to buy the most polluting cars they must recognise the environmental cost."

On the same day that their leader made his VED announcement—and at about the same time that I assume that the hon. Member for Eastleigh was talking to the News of the World—the hon. Members for Falmouth and Camborne and for South-East Cornwall tabled amendment No. 25, which we are now considering. Why? The amendment would not impose a whopping great increase in the top rate of VED, but rather a whopping great decrease of some 50 per cent. in some areas.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

The hon. Gentleman may not be overly familiar with Finance Bill procedures, but if he were, he would know that only a Minister of the Crown is entitled to have selected for debate an amendment that would raise revenue. Last year, my party tabled an amendment in respect of self-invested personal pensions—SIPPs. It could not be debated, but it was nevertheless the only Opposition amendment to be accepted completely by the Government. Before the hon. Gentleman gets too disparaging, I suggest to him that we might achieve the same success with our proposal to raise the higher rate of VED to £2,000.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I shall have a good deal to say about that amendment in a moment, but I thought that Liberal Democrat Members were the ones unfamiliar with Finance Bill procedure. I do not see the point of tabling an amendment that cannot be voted on, nor of tabling an amendment that directly contradicts another one.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

My hon. Friend Chris Huhne referred to the SIPPs amendment that we tabled to last year's Finance Bill. It had more impact than the sum total of all the amendments tabled by the Conservatives then.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

The hon. Lady claims that an amendment that could not be voted on made a substantial contribution to last year's Bill, but—

Photo of David Taylor David Taylor Labour, North West Leicestershire

On a point of order, Mrs. Heal. Can you advise us whether this metaphysical discussion of the Liberal Democrat party's strategy—or absence thereof—is advancing the debate on the amendments before the Committee?

The First Deputy Chairman:

I should be much happier if hon. Members participating in the debate returned to the specifics of the amendments before the House.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I shall return to the specifics of the amendments, (Mrs. Heal) even if I disappoint some Labour Members by doing so.

We have been told why the Liberal Democrats tabled the amendments that we can discuss fully and vote on: households in sparsely populated rural areas have special transport and social needs. People in rural areas who farm or work on the land, it is argued, often need larger vehicles that emit more carbon. That is true, and during the coming days and weeks we look forward to hearing Liberal Democrat Members, who represent urban areas and who have, like the hon. Member for Eastleigh, I am sure, been fully signed up to amendment No. 25 by the hon. Member for Falmouth and Camborne and her colleague, the hon. Member for South-East Cornwall, explain to their urban constituents why they should pay higher VED on the most polluting vehicles registered before 23 March 2006 while people in rural areas pay lower VED on exactly the same vehicles.

We also look forward to the hon. Member for Eastleigh explaining that when he told the News of the World that

"If people choose to buy the most polluting cars they must recognise the environmental cost", he meant to say that if people choose to buy the most polluting cars they must recognise the environmental cost "sometimes".

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

Perhaps the hon. Gentleman does not realise that the rural discount applies only to the bands below top band G of vehicle excise duty. That fully meets his point.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I am aware of that, but I must not be drawn back into metaphysical speculation about an amendment that I cannot describe. Were I able to do so, I would be able to answer the point, but you would rule me out of order Mrs. Heal, so as I do not want to provoke your wrath I shall press on.

Regardless of the Liberal Democrats' internal discussions, one conclusion is certain. Before seeking to provide special treatment in the Finance Bill for households in sparsely populated rural areas, one needs to be able to provide a robust definition of such households and areas that will hold good in all circumstances—a definition that will stand up to legislative scrutiny.

That requirement brings us neatly to Liberal Democrat amendment No. 22, which was also tabled by the hon. Members for Falmouth and Camborne and for South-East Cornwall. Does the amendment offer such a robust definition? In our view it does not; it simply dumps the problem in the lap of Ministers and would compel them to define, in unamendable regulations to be tabled at a future and unspecified date, households with a postcode in rural areas. Presumably that would take place after the Bill has become law, which raises the question: what would happen to the amendments if they were accepted and the Bill was enacted and became enforceable in the meantime?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

A clear definition is set out by the Countryside Agency, with reference to the distance of certain areas from a population centre. It would not be complicated to apply that definition to England and Wales and to find a way to apply similar criteria to Scotland. The amendments could thus be tabled on Report.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

If so, the Liberal Democrats might have found a clearer way to spell out a full definition in their amendments. Furthermore, Members and other people with an interest in the measures may find other definitions of "sparsely populated rural area", which could be introduced in the Standing Committee. There could be some controversy—at the very least—in the hon. Lady sticking so precisely to one definition. However, that is merely an introduction to the deep problems posed by amendments Nos. 25 and 21, to which I shall turn shortly.

With reference to the consultation proposed in amendment No. 22, why is the Countryside Agency the only body named? What about other Government bodies with an interest in rural areas or the environment, such as the Environment Agency or the Air Quality Forum? What about non-governmental bodies with an interest in rural affairs, the environment and vehicle excise duty? Transport 2000, Friends of the Earth and Greenpeace have made comments on the Government's VED proposals, to which I shall refer in the clause stand part debate. If amendments Nos. 25 and 21 were successful and the Liberal Democrats obtained the changes to VED that they seek, how would those changes be implemented in the time gap between the passing of the Finance Bill—if it is passed—and the subsequent laying of regulations before Parliament?

Other questions follow. Is it right that a multimillionaire driving a polluting vehicle and living in a mansion should pay a reduced rate of VED on that vehicle if he registered it before 23 March? [Hon. Members: "David Cameron."] That was not the gentleman I had in mind, but I am grateful to Labour Members for drawing the matter to my attention. I do not believe that he is a "multimillionaire". Would it be right for such a mythical and imaginary person living in a sparsely populated rural area and owning a polluting vehicle to pay a reduced rate and then move out of that area? Is it really fair that someone who does not live in a sparsely populated rural area and who owns a green vehicle does not pay a reduced rate and then moves into that area?

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

Under the proposals, it is clear that if such a person were to own a green vehicle, they would pay zero duty whether they lived in a sparsely populated rural area or not.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I am glad to have that clarification from the person who is clearly leading for the Liberal Democrats in this debate. If the hon. Gentleman looks at the amendment paper, he will see that the amendment to table A, which deals with people who have registered cars before 23 March, applies to a cut in the rate for all vehicles, including the most polluting. I shall come to that point in a moment.

Amendment No. 25 seeks to reduce VED rates for the most polluting vehicles registered before 23 March this year, while amendment No. 21 seeks to leave unchanged VED rates for the most polluting vehicles registered after 23 March. There is a case for leaving unchanged the VED rates levelled on the most polluting vehicles that have already been registered by people who live in sparsely populated rural areas, but I find it very hard to see a convincing case for cutting those rates, which is what the Liberal Democrats are proposing.

There is also a case for leaving unchanged VED rates levelled on the most polluting vehicles registered after 23 March, just as there is a case for raising VED rates levelled on those vehicles, as Rob Marris sought to do—if I can turn metaphysical for about 10 seconds—in amendments that were not selected for debate. However, there is surely no case whatever for seeking simultaneously to leave unchanged VED rates on the most polluting vehicles in some rural areas while seeking to raise VED rates on those vehicles in these areas. The Committee will agree that one cannot do both at once. I do not want to be ruled out of order, so all I will say is that hon. Members only have to read the amendments tabled for the debate to see that one political party has sought to do both at once and, needless to say, it is the Liberal Democrats.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Is it therefore my understanding that the hon. Gentleman and his party would make no changes to the VED tables as laid out by the Government in the Finance Bill and that he and his party think that we have a satisfactory state of affairs to take forward?

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I shall come to all that in the clause stand debate. If the hon. Lady is not happy with my answer, I will be happy to give way to her.

As I said, we cannot discuss in detail a tax rise proposed in an amendment that was not selected for debate, so I will not seek to explore further the mystery of how the Liberal Democrats propose simultaneously to raise a tax while leaving it completely unchanged. I will, however, assure the Committee that the Conservative party will do all that it can tomorrow, as people vote in the local elections, and in the months to come to raise this mystery and the incoherence of these amendments on the doorstep and at every opportunity with voters whenever the issues of green taxes or the environment are raised. I am afraid that it is the same old story. It is one thing for one group of people outside and another thing when it comes to tabling amendments to the Finance Bill. The Liberal Democrats have a choice. They can be a serious potential party of government or they can be fringe operation whose muddled, ill-thought-through and opportunistic contortions provide hours of harmless entertainment for all the rest of us.

On the basis of these amendments, they have chosen to be purveyors of entertainment. I urge the Committee to reject the amendments.

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross 6:00 pm, 3rd May 2006

I rise to support the Liberal Democrat amendments, but first I want to set out the nature of the problem that my constituents face. Any of my constituents—there are quite a few of them—who are watching this afternoon's proceedings on the parliamentary channel will have been somewhat bemused by both the tone of the remarks and the risible nature of the conduct of Mr. Goodman, in particular. For them, the amount that they have to pay for motoring is a very real issue, as are the extra costs that they bear not simply through VED—as will happen under the Bill—but through the excess that they pay on fuel costs.

Let me set out the problem in an area that I confidently expect that nobody will dispute is genuinely sparse. I refer to Caithness, Sutherland and Easter Ross. Some parts of Sutherland have a population density that is somewhat less than that of the Sahara desert. The area is 3,400 square miles and there is no public transport whatsoever available for very large parts of it. The vast majority of people who live there are crofters and small farmers who make a living by operating the croft—as there are so many Members present who have no experience of Scotland, I will remind them what that is. It is a smallholding with two or three acres of in-by land and access to common grazing. It is not something that anybody is going to make a vast amount of money on. Those people will croft part-time and they will work part-time—perhaps going to sea; perhaps doing something else.

The likelihood is that those people—the majority of whom will be on modest or low incomes—will have only one vehicle. That one vehicle will double as the family transport and the farm workhorse. That is the vehicle that they will have to use. They need a vehicle of a certain size to be able to operate the farm and they have to use it for other things that they have to do, such as taking the kids to school. First, people in that area have no choice. There is no public transport, unlike in many of the constituencies represented here this afternoon, where public transport is available. Secondly, and most importantly, there is no congestion of any kind. Of course, all those who are interested in climate change will understand that congestion multiplies the effect of emissions fairly considerably.

Photo of Robert Smith Robert Smith Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Energy and Climate Change)

My hon. Friend also needs to make the point that public transport would probably be an environmentally inefficient way of providing transport in such a sparsely populated area. It is probably more efficient for people to use their transport when they need it, rather than to rely on the marginal running of buses that would often be empty.

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

My hon. Friend makes that point extremely well. A bus with one person in it is far more polluting that a car with one person in it. He is absolutely right.

The objective that the Government have set out to achieve with the increase in vehicle excise duty is extremely laudable. It should be the case that more polluting vehicles are punished and, broadly, we want to see a reduction in polluting vehicles and in emissions. However, much of the debate—including the discussions that we have heard today—has been characterised by references to what people are wont to call Chelsea tractors. I am not persuaded that that is the appropriate way for the debate to proceed. We are unable to go into any detail today, but I am not persuaded, as a point of principle, that taxation of ownership—in effect, that is what vehicle excise duty does—is the most appropriate way to tackle pollution and congestion. I would look to a form of national road user charging as the appropriate method to do that. In addition, I very much doubt whether any great increase in vehicle excise duty will have much impact on the owner of a Chelsea tractor. Such people tend to live in million-pound homes and have six-figure incomes, so I do not think that they will notice it very much. However, my constituents on whom the increase is to be imposed will see it as a real burden. As I have already said, such people typically have low or modest incomes.

I have raised this matter before in Westminster Hall. The price of petrol and diesel in Wick, Thurso, Durness or any of the other remote areas in my constituency tends to be between 10p and 15p more than even the dizzy metropolitan heights of the cost in Inverness. Typically, the premium averages out at about 12p a litre. One of my constituents who owns a car with an average consumption of sufficient substance to tow the sheep to market will pay something like £200 a year more for their fuel than a person with exactly the same vehicle who operates in an area with a more competitive market for fuel, such as Inverness, Edinburgh, or even London.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I always enjoy the hon. Gentleman's contributions. He has been cut loose from the Front Bench and takes opposing views to those of some of the more radical elements of his Front-Bench team. Does he agree that he should encourage his constituents to consider alternatives, such as liquefied petroleum gas, that would not only be more environmentally friendly to his beautiful constituency, but allow them to pay less vehicle excise duty?

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

I hope that the hon. Gentleman will take up my offer of coming to visit me sometime in the north. As far as I am aware, only two garages in my constituency offer LPG. One is in Golspie, and I think that there is one in Thurso, too. For people in vast swathes of Sutherland, having to make a return trip of 100 miles to top up with LPG would not be hugely helpful.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I suggest that the hon. Gentleman does something that I did in my early days on Newcastle city council by encouraging his local council to make their vehicles run on LPG. That creates a local market and ensures that bunkering facilities can be provided, even in isolated communities such as his.

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

I would be delighted to give such encouragement to the Highland council, which covers three, if not four, constituencies. In parentheses, I should tell the hon. Gentleman that any of my councillors in Thurso who go to a council meeting in Inverness make a round trip of 240 miles, which perhaps—

The First Deputy Chairman:

Order. I ought to remind hon. Members that we are going a little wide of the amendment. Perhaps we can get back to the specifics once again.

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

I apologise for straying, Mrs. Heal.

My constituents already pay an increase to the Treasury due to the increased VAT that they pay because of the higher price of their fuel. It is thus perfectly appropriate to offer them some form of alleviation. My hon. Friends have tried to achieve that through an amendment to this imperfect Bill on vehicle excise duty. The way in which they have tried to achieve that in principle, if not in detail, gives us a good way forward.

The key point is that those who live in genuinely remote rural areas suffer a real burden. It was extraordinary that the hon. Member for Wycombe was so dismissive of that burden, although it might explain why the Conservatives regularly come fourth in elections in my constituency and much of the Highlands. His speech has probably done more for my party's prospects in elections in Scotland than anything that I could ever have done. The amendment is a sensible way forward.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

As the hon. Gentleman has such confidence in his party's amendment, can he confirm that his party will be putting it to the vote?

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

I am a humble Back-Bench Member in this army. I do not have the slightest idea what my Front-Bench colleagues intend to do. It may be that the response from the Government Front Bench will be of such wonderful acceptance and pleasure at what my hon. Friend Julia Goldsworthy has proposed that all will end well. Never mind, we will hope for the best and move on.

There is a technical problem with the amendment. In drafting it, my hon. Friends have referred to the Countryside Agency, and the agency has no remit in Scotland. A fly was cast over my hon. Friend the Member for Falmouth and Camborne as to what the definition should be. That is always a typical answer of the Treasury when a Member is proposing any scheme. The response is "Ah, tell me where the definition is and I will tell you what the problem is."

We should take on board the fact that the EU has well-defined sparse and remote rural areas and, in many countries, has successfully introduced schemes to help such areas. It recognises the problems that they have. Whatever the definition, it seems to me that if we accept the principle of helping those who need help, which is what I thought that those of us on the progressive side of politics were seeking to do, and we wish to help people on modest incomes who need help, we can find the means.

I am grateful to my hon. Friend the Member for Falmouth and Camborne and other Front Bench colleagues for proposing the amendment. I hope that they will press it if the Government do not accept it, and that the House will support it. I congratulate them.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

It seems that there is a move to tackle two separate issues. The first is to create a vehicle excise duty regime that will offer a genuine disincentive to unnecessary use of high CO 2 emitting vehicles, and the second is to protect car users in rural areas where there is no alternative to the car and unnecessarily high costs.

The amendment draws attention to a number of flaws. First, the main penalty faced by drivers in remote and rural areas is the regular high cost of fuel, not the one-off cost of VED. The price of fuel went through the £1 a litre barrier in many parts of Scotland some time ago. The issue would be far better resolved by a sensible and sensitive fuel-tax regulator to lower the level of duty when world oil prices rise. It is a great pity that such a regulator was opposed by the Liberal Democrats and others last year.

The issue of fuel cost is extremely important. The last available rural Scotland price survey showed that in all of rural Scotland the price of road fuel was 6.3 per cent. higher on average than in urban areas. In the rural highlands and islands area, the price was 9.7 per cent. higher. This is a genuine issue.

The second flaw is that the amendment does not recognise the difference between genuine working vehicles and other high CO 2 emitting vehicles that happen to be in rural areas, for which a disincentive for high use or unnecessary usage would be welcome. For vehicles that are not used for genuine working purposes where the owners are as close, perhaps, to a supermarket or a filling station as the owners of vehicles in some of the suburban parts of my constituency, a reduction in VED would be unnecessary.

The third flaw is the definition—definition is incredibly important—of a sparsely populated rural area. Julia Goldsworthy referred to the Countryside Agency's definition. Would she prepared to accept amendments to the amendment? Obviously the agency has no locus in Scotland or in Wales. That has been accepted. However, there are a number of definitions. The definition used by the Scottish Executive contains a sixfold description of rural and urban areas. That covers 98 per cent. of Scotland's land mass and 18.7 per cent. of the population. That definition would be wholly inappropriate.

There is also the Randall definition, which is based on sparsity of population. A sparsely populated rural area is defined as one with less than one person per hectare. The definition is based on local authority areas that cover Aberdeenshire, Angus, Argyll and Bute, Dumfries and Galloway, east Ayrshire, the highlands and so on. That definition would cover 89 per cent. of Scotland's land mass and take in 29 per cent. of the population. The use of such a definition would also be wholly wrong.

I am on record in this Chamber—twice, and I stand by it—as saying that there is a world of difference between a Land Rover taking animal feed up a snowy field in late spring to early lambs, and a Chelsea tractor sitting outside a flat in Kensington. Of course something needs to be done to help genuine working vehicles.

Photo of Kevan Jones Kevan Jones Labour, North Durham 6:15 pm, 3rd May 2006

I hear what the hon. Gentleman is saying, but surely vehicles working in fields are already covered by red diesel, for example.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

The Financial Secretary will correct me if I am wrong, but I believe that the Budget documentation referred to discomfort with the red diesel regime, because many on-road vehicles now fall within it. So I am not sure that the hon. Gentleman's point is particularly helpful in this regard.

In intervening on Mark Lazarowicz during a previous debate, I argued that there is a difference between working vehicles and Chelsea tractors. He agreed and suggested that there must be a better way of dealing with the problem. I agree entirely. We need to establish a regime that does not penalise genuine working vehicles. We should have started with an analysis of the impact of high fuel and high VED, and I hope that we can soon establish a sensible fuel tax regulator similar to the one proposed previously. I hope, too, that the Government will consider what John Thurso said in a previous debate about an EU derogation for the areas to which he referred. Of course, there are other ways of defining "remote" and "sparse", but those terms are not defined in the amendments before us.

We will not support the amendments because they are ill-conceived and ill-thought through. They seek to reduce vehicle excise duty for too many people, which would be unhelpful in terms of the environment.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

The hon. Gentleman will be aware, given that he has been here for most of today's debate, that this has been a very sparsely populated debate, just as many of the parts of the country that we wish to help are sparsely populated. The amendments would not provide such help.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

Stewart Hosie made much of the difficulties that rural areas face in paying high fuel prices. I sympathise greatly with their situation, to which my hon. Friend John Thurso also referred. I should however point out to the hon. Member for Dundee, East that money is fungible, and that although the people to whom he referred may be experiencing a disadvantage as a result of high fuel duty, if they have a corresponding and offsetting advantage through a reduction in vehicle excise duty, they will be free to spend that money as they like. That would deal with the problem, which is precisely what the amendments before us are meant to do.

The United Kingdom has a difficulty, in that the main instrument available for changing behaviour in terms of greenhouse gas emissions and climate change is green taxes. However, green taxes, of which two thirds comprise fuel duty, have fallen from 3.6 per cent. of gross domestic product in 2000 to 3 per cent., according to the latest figures. The Budget proposals will in fact lead to a further fall in green taxes as a percentage of GDP. One reason for the reluctance to rely more on green taxes and the price mechanism in providing an incentive to change behaviour is precisely those difficult cases such as rural areas. The relevance of amendment No. 21 is that it would deal with a specific set of problems and release a wider instrument to be used against greenhouse gases.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

The hon. Gentleman is speaking in favour of amendment No. 21, which, as I understand it, is not revenue-neutral. He is supporting an amendment that will cut green taxes, so he is speaking against his case.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

The hon. Gentleman has participated in such debates for a number of years and is extremely well informed. He well knows that it requires a Minister of the Crown to table for debate an amendment that raises revenue. The Paymaster General seems to disagree, but that is my clear memory from last year. The amendments on self-invested pension plans were not selected for debate and the reason given was that they would raise revenue. The right hon. Lady was not prepared at that stage to table such an amendment, but I am pleased that by the pre-Budget report in October she had changed her mind, along with all the other Treasury Ministers.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

So that we are all clear, may I ask the hon. Gentleman, who is making the second Front-Bench speech on behalf of his party, which is his preferred amendment for table B? Is it amendment No. 21 or amendment No. 26?

The First Deputy Chairman:

Order. I remind hon. Members that amendment No. 26 has not been selected.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

Thank you, Mrs. Heal. I shall speak about the amendment under discussion and highlight the difficulties faced by people in sparsely populated rural areas as a result of the high cost of fuel and of motoring.

In urban areas about 30 per cent. of households have no access to cars because they can rely on public transport. In rural areas—not even sparsely populated rural areas—only 8 per cent. of households are carless. That underlines how important the car is as a means of getting to work, getting to the GP's surgery, accessing basic services, accessing accident and emergency, doing the school run, and so on

My hon. Friend Julia Goldsworthy pointed out that households in rural areas spend more than £70 a week on transport, compared with £45 a week in regional built-up areas. It is the operating costs of cars, including fuel, that make up the difference.That is why any reliance on green taxes to change behaviour must take account of the high dependency of all households, including poor ones, on fuel in rural areas, and why it is important to propose measures that can alleviate the costs of transport in rural areas as part of a package to encourage us towards more sustainable personal transport. We strongly support the Chancellor's intention to raise fuel duty in line with inflation in September, as announced in the Budget. Relief for rural areas makes that policy more robust and defensible because it takes the edge off for some of the worst losers.

The discount in the proposal is designed not for anyone living on the urban edge, but for areas where distances are important. Hon. Members are right to say that the Countryside Agency has defined the more sparsely populated parts of England, which are areas of Cornwall, Devon, Cumbria, Northumberland and the Fens. The definition covers the 5 per cent. least densely populated parts of England. It is easy to extend that to Scotland and Wales by regulation, as proposed. That answers the hon. Member for Dundee, East. The definition will be exactly equivalent. I look forward to replies from Treasury Ministers when they are in a more co-operative mood to honour written answers.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

Is the hon. Gentleman speaking of the 5 per cent. population in the most sparsely populated areas? Is it the bottom 5 per cent. only, based on sparsity of population? Is that the definition?

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

The hon. Gentleman may have misunderstood me. The Countryside Agency's definition of a sparsely populated rural area in England is of the least densely populated 5 per cent. of areas in England. If the same criterion—the same lack of density—is applied to Scotland, I have no doubt that it would apply to a substantially greater part of Scotland than of England, as Scotland forms 40 per cent. of the landmass of the United Kingdom. As this is a taxation matter, exactly the same definition should be applied in Scotland, Wales and England.

There is a very clear and robust definition, which is perfectly capable of handling the issue. I refer those hon. Members who would care to have more detail to the excellent paper of Messrs. Bibby and Shepherd, entitled "Developing a new classification of urban and rural areas for policy purposes—a methodology", which is published on the Office for National Statistics website.

Some sparsely populated areas, unlike many rural areas, are still declining. About 600,000 people live in the sparsely populated English areas out of a combined rural population of some 9.5 million. Those areas have particular problems in achieving one definition of sustainability—somewhere that people want to live and work—and the underlying problem is remoteness. There are dramatic differences—for example, in broadband connectivity, with just 33.4 per cent. of households in villages in the sparsely populated rural areas having such access, against more than 75 per cent. in villages in the less sparsely populated rural areas. People are further from public services, such as those provided by GPs, hospitals and secondary schools. Bus transport is even less frequent. The economy is clearly less successful. Income poverty is clearly higher than in other rural areas, although it is still broadly in line with the national average. That is why it makes sense to introduce a discount that helps those areas in particular.

In cost terms, this is a modest measure, partly because there are relatively few households in those sparsely populated rural areas and partly because such a high proportion of them are recorded as a second or holiday homes and therefore would be ineligible for the discount. Indeed, in sparsely populated villages, the Countryside Agency reports that almost one in 10 household spaces is recorded as a second or holiday home; about five times the number found in similar-sized settlements elsewhere.

There is another mitigating factor on cost. There would be no discount on the new band G or the vehicles that emit most carbon. The cost of up to £50 million a year for England, using the most conservative assumptions about the size of vehicles, is small by the side of the extra revenue that the Chancellor can hope to gain with both the indexation of fuel duty and a more radical approach to the progressivity of vehicle excise duty.

Although other proposals that deal with revenue raising cannot be debated because of the rules of the House, it is worth pointing out that the £2,000 revenue raising proposal, for example, would more than adequately fund the rural discount. This is a sensible package that would enable green taxes to do their work in helping to change behaviour, without raising taxes overall. As the increases in vehicle excise duty would operate for new cars only, the impact on purchasing decisions is open and transparent. No one could claim that they had not been forewarned. Moreover, there is a benefit for those with existing cars in sparsely populated rural areas that recognises their circumstances, thus allowing greater weight on fuel duty and other green taxes than would be allowed otherwise.

I note that the Liberal Democrats are the only major party to attempt to grapple with the issue. If we consider what the Chancellor has done, as opposed to the spin that he likes to put on the Budget, the reality is that green taxes have been falling, year on year, as percentage of GDP and, indeed, as a percentage of the overall tax take. I am afraid that the Conservative Front-Bench spokesman, Mr. Goodman has confirmed that the Conservatives show no interest whatsoever in using the price mechanism to change behaviour in this direction, and it is matter of regret that, in their proposed amendment to the general motion on the Finance Bill, they did not mention the environmental objectives that are such a clear and important part of such policies; at least that is something that the Chancellor recognises in words, if not in deeds. I very much hope that the House will support the amendment, as it clears the way to a substantially more radical approach to other green taxes.

Photo of Malcolm Bruce Malcolm Bruce Chair, International Development Committee 6:30 pm, 3rd May 2006

I am grateful to my colleagues for tabling this group of amendments and enabling us to have this debate, because it demonstrates that, at least on the Liberal Democrat Benches, there is a recognition that environmental taxes have a social consequence and need to be refined. They cannot be applied as a blunt instrument. The speech made by Mr. Goodman on behalf of the Conservative Front Bench confirms to anyone who listened to it why the Conservative party is almost non-existent in Scotland. It has no understanding of what sparsity and remoteness are about, other than in terms of its own support.

My hon. Friend John Thurso, who represents a constituency that has all those characteristics and has a real understanding of the matter, has given a pretty coherent account of why the needs of people in such areas should be addressed by the House in the way that the amendments try to do.

In a brief intervention I simply want to make the point that car ownership in rural areas, and certainly remote and sparsely populated rural areas, is not a luxury but a necessity, and the costs imposed are a real burden. There are factors that need to be taken on board. For example, the Scottish Executive have been reviewing their definition of poverty because on a previous definition car ownership meant that one could not be poor. In reality, poor people in rural areas simply cannot function without owning a car, yet under a previous definition people owning a car were not allowed to call themselves poor. That is the sort of absurdity that one gets into when the definitions do not take into account the reality on the ground. The amendments seek to do that.

My hon. Friend Chris Huhne has demonstrated clearly that this is a coherent and balanced part of an overall policy, and one that the Conservative party would be well advised to take a little more seriously and not try to predetermine when, frankly, its own policy has no intellectual coherence whatever. In particular, it showed no interest in the problems of poor people living in rural areas, only a desire to have a go at the Liberal Democrats for really trying to address the issue. I just note in passing that the Scottish Nationalists sent Stewart Hosie to make the argument, not one who represented a rural or sparsely populated area who might have had some greater understanding of the problems being addressed.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

I thank the hon. Gentleman for giving way, not least because I am the party's Treasury spokesman and this is my brief. Two thirds of the landmass of my constituency is in Angus, and one ward is fully rural. I have a perfect understanding of the issues that the hon. Gentleman is discussing.

Photo of Malcolm Bruce Malcolm Bruce Chair, International Development Committee

We shall see, but I do not think that the hon. Gentleman's contribution demonstrated that understanding. He was implying—this was what slightly nonplussed me—that he thought it unfortunate that our amendments would have qualified a greater proportion of the population of Scotland to receive the benefit. I should have thought that a Scottish MP would welcome the fact that amendments were being tabled that had particular relevance to rural areas of Scotland and from which a greater proportion of Scottish households and individuals would benefit. My hon. Friend has confirmed that applying the English Countryside Agency's definition to Scotland would inevitably reach a greater percentage, for the simple reason that we are defining remoteness and sparsity and the problems that go with them.

I have just been dealing with a matter relating to fuel poverty in Scotland. Central heating fuel bills in Scotland can be 68 per cent. higher than in the south of England, and the same applies to transport costs for many people living in the north-east, the north of Scotland, the borders and the rural areas of Scotland. Through necessity, transport costs are much higher. Another problem is that, given that people on low incomes have to struggle to pay high excise duties and higher fuel charges, one thing that often goes by the board is regular vehicle maintenance, which has detrimental effects on the environment.

I commend the amendments, which address a real issue and show the understanding of a party that supports the case for developing green taxes, that in order to ensure that those taxes do not fall disproportionately on people in disadvantaged areas we must introduce refinements. That is what the amendments seek to do and I commend them to the House.

Photo of John Healey John Healey The Financial Secretary to the Treasury

The debate has been entertaining, Sir Michael, particularly for Government Members. It has also been comprehensive and, if I may so, entirely between the Opposition parties. That is also entertaining, given that these are the parties that are supposed to have reached some consensus on climate change. That comprehensive debate leaves me, in all honesty, with very little else to say.

The amendments proposed by Julia Goldsworthy call for the introduction of regional rates of excise duty so that those with a postcode in rural areas can pay less than urban areas. I have both principled and practical objections to those proposals. UK vehicle excise duty rates are set at the current level for good reasons. First, they raise revenue to fund essential services and, secondly, they help to achieve environmental objectives, which apply equally to rural areas as to the rest of the UK.

Photo of John Healey John Healey The Financial Secretary to the Treasury

No, I will not; I am responding to the amendments proposed from the Liberal Front Bench by the hon. Member for Falmouth and Camborne. That is what I am responding to—despite the hon. Gentleman's own speech.

In addition to the technical and practical deficiencies of the amendments, introducing a separate rate of vehicle excise duty for rural areas would also present significant administrative difficulties as well as compliance problems. Motorists could easily register vehicles in designated sparsely populated rural areas and then use them exclusively or predominantly in urban areas. Other hon. Members have already mentioned the technical and practical difficulties, to which I am now adding administrative and compliance difficulties.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I noticed that the Minister referred to the environmental objectives of vehicle excise duty. Will he provide further detail on the impact on behaviour of the structure that he has proposed? Will he also recognise the burden on people living in remote rural areas and the fact that they are reliant on cars because they do not have any realistic alternative? I hope that he will take seriously the points that Liberal Democrat Members have passionately made.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I am disappointed in the hon. Lady. I did not accept the intervention of Chris Huhne, who gave his question to the hon. Lady to put to me. The question she poses, however, is a question for the clause stand part debate, not our debate on vehicle excise duty amendments. I do not accept that the Liberal Democrat amendments are desirable or workable. I do not accept that a principled case has been made for them. I believe that they would prove administratively complex and open to abuse. If pressed to the vote, I urge my hon. Friends to reject them.

Amendment negatived.

Question proposed, That the clause stand part of the Bill.

Photo of John Healey John Healey The Financial Secretary to the Treasury

We had a wide-ranging debate on a narrow set of amendments, but I should make some remarks in the clause stand part debate. In general terms, I welcome the fact that climate change is increasingly recognised as one of the most serious global challenges that we face. In the UK, we produce just 2 per cent. of global greenhouse gas emissions, but we must build on the progress that we have made on our Kyoto obligations. We are and remain one of the few countries on track to meet our obligation. We must also build on our ambitious domestic goals to cut carbon and move to a low-carbon economy. It is right to do more and it was right for the Chancellor to have done more in his Budget announcements.

Transport is one of the key sectors in which we need to build on existing reforms. It is the second largest source of carbon dioxide emissions in the UK and a source of significant air pollution. The vehicle excise duty system has been radically restructured, and it is now based on carbon emissions. Under this Labour Government, the UK has taken the lead in introducing a structure for vehicle taxation that differentiates according to CO 2 emissions, just as we did with the climate change levy and the first economy-wide emissions trading scheme. The European Commission has recommended that graduated VED should form the blueprint for vehicle taxation across the EU. The graduated VED system is designed to provide a signal to consumers at the point of purchase to bear in mind the environmental impact of the models that they are considering.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I shall give way to the hon. Lady, who is leading for the Liberals in this debate and who is shadow Chief Secretary.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Returning to my earlier intervention, what impact does the Financial Secretary think that the new VED band will have on consumer behaviour?

Photo of John Healey John Healey The Financial Secretary to the Treasury

If the hon. Lady studies the evidence on the impact of the graduated VED scheme, she will see that the VED scheme at the point of purchase has a relatively modest impact on consumer behaviour. The point is to incorporate into the system signals to the consumer at the point of purchase to consider the environmental impact and environmental performance of the models that they are considering buying. The system is also designed to provide signals to car manufacturers to encourage still greener engine design and performance.

Clause 13 builds on the environmental signals already in place by reducing VED band A to zero. It reduces the VED for cars in band B by £35 a year and for cars in band C by £5 a year. It freezes VED for cars in bands D and E, and it increases VED for vehicles in band F by £25. To further strengthen the environmental signals, the clause also introduces a new band G, which increases VED for the most polluting cars.

In the run-up to the Budget, we received representations from a number of organisations, including the RAC Foundation, which advanced the argument that now is the right time to widen the differentials between the least and the most polluting bands. Clause 13 does just that and it means that the differential between the lowest VED rate for petrol cars and the highest, which was £100, is now more than double that at £210. The Budget announcements will see VED frozen or reduced for 50 per cent. of cars, with around 3 million cars now paying VED at £100 or less. The clause 13 reforms build on the existing VED framework and support the drive for further falls in transport emissions for new cars in the future.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

The changes in clause 13 are one of the main headlines in the Budget and were used by the Chancellor to bolster his green credentials. He announced with great fanfare that there would be a new band of VED. Incidentally, given the fight to get on the front foot on that issue between the Conservative party and the Labour party, I am surprised that the Conservatives did not call for this clause stand part debate.

In his Budget speech, the Chancellor said:

"I propose to radically reform vehicle excise duty."—[Hansard, 22 March 2006; Vol. 444, c. 295.]

The Financial Secretary has said this about the measure:

"The strengthening of environmental incentives announced in the Budget is designed to give a clear signal to motorists to consider the environmental performance of vehicles at the point of purchase" which is a point that he has just restated. The reality is that the measure involves the smallest possible change to the most polluting vehicles. The new band G includes a maximum charge of £250 per annum, which means that the most polluting cars—cars that emit more than 225 g of CO 2 per kilometre—attract a price differential to the next band down that is equivalent to less than half a tank of petrol. What difference will that make to consumer behaviour? The environmental impact of the change in consumer behaviour will be negligible. My hon. Friend David Howarth tabled a parliamentary question about the issue and was told that the estimated carbon savings of the new higher band of vehicle excise duty would be equivalent to 0.06 metric tonnes of carbon emitted by 2010. He was told, however, that

"calculating this figure is complex and subject to a significant margin of error."—[Hansard, 28 March 2006; Vol. 444, c. 972W.]

As there is virtually no impact on behaviour, the initiative is an eye-catching but ultimately meaningless measure.

On what evidence did the Treasury base its decision to set the new band at a maximum of £215? The Energy Saving Trust produced a significantly different figure and came to some very different conclusions. It agrees that a new band G should be introduced, but it made it clear that

"very high carbon cars should pay significantly higher VED than they do now."

It reasoned that the average carbon dioxide emissions from cars sold to the private consumer market has increased—not decreased—since 2002–03. That should be of concern to the Minister, as private car sales account for nearly half of new annual registrations in the UK or 1.2 million sales. We therefore need to change consumer behaviour, and Government intervention is required to promote and incentivise the low-carbon car market.

Another key finding in the Energy Saving Trust report is that vehicle excise duty has had little impact on the carbon profile of the private car market. It argues that the proportion of vehicles falling into band F is too high at 50 per cent., and that the differentials are too low to change behaviour. Although there has been some tinkering with differentials and bands in the Bill, the differentials remain incredibly small. For example, the differential between bands F and G equates to less than a tank of petrol, which is hardly enough to change behaviour. Does the Minister believe that the differentials in the Bill are sufficient to achieve a significant impact on consumer behaviour and, if so, on what evidence is that view based? The Energy Saving Trust calculated that the differential for the new band should be about £2,000, rather than £50, to have an impact on behaviour. Will the Government consider adopting such a measure in future years?

Photo of Kevan Jones Kevan Jones Labour, North Durham 6:45 pm, 3rd May 2006

I am listening carefully to the hon. Lady, but less than 10 minutes ago Liberal Democrats moved an amendment to make rural areas a tax-free haven for gas guzzlers and petrol heads. Is she trying to tell the House that those areas are exempt from the provision, but that the rest of us must go down the green route?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I was making the point that they are much more vulnerable to increases. We are therefore trying to release the mechanism so that it can be used to change behaviour effectively. In rural areas, it does not matter how the VED bands are set as people have to use a car. If they are on a lower income they are forced to spend more and more, so we are trying to provide relief for people who are disproportionately and unfairly affected. The mechanism can be used to change behaviour if there is an alternative.

A series of amendments on the need for wider differentials was tabled by Liberal Democrat and Government Members who tried to provide a solution to the problem. I accept that it is not appropriate to refer directly to those amendments, but I urge the Government to consider them. They should investigate the differentials required to make an impact on behaviour and consider ways of implementing them. In the longer term, road user charging may represent a fairer alternative. The Government are looking into the feasibility of such a scheme, which Liberal Democrats support, and I hope that they will seriously consider the practicalities and time scales. An effective mechanism is required so that motorists pay when and where they are driving. That is a fairer way to target relieving congestion in problem areas without penalising people in rural areas, and it provides freedom from pollution, congestion and the effects of climate change. I hope that the Government will consider that alternative.

In conclusion, the decisions in the Budget and the proposals in the Bill mean that green taxes will continue to drop as a proportion of the total tax take, regardless of the Chancellor's warm words. The Bill was an opportunity to create real incentives for people to choose more environmentally friendly cars. It was an opportunity even to consider more radical proposals such as road user charging. It is an opportunity that has been wasted, and in its place we have seen tokenism of the worst kind.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

We should review what the Government have done as regards motoring and emissions. In 1997, they introduced monitoring of CO 2 emissions from vehicles. They introduced bands A to F labelling on fuel efficiency. They carried out a major overhaul of the company car tax regime, which has led to a significant fall in the average emissions output of company cars. They introduced banding of vehicle excise duty—the graduated scheme that has been mentioned. This country is likely to more than meet its Kyoto targets. Between 1997 and 2004, there was a 10.7 per cent. cut in the new car average emissions of noxious gases, particularly CO 2 . Now, clause 13 introduces band G, with lower bands at the beginning of the scale.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I will not, I am afraid, because I do not have time.

There are some negatives. In recent years, private buyers have been buying fewer fuel-efficient cars each year. In 2003–04, the average figure for CO 2 emissions was 170 g per km. On average, that is higher than the figure for private fleet new vehicle purchases in 2002. In 2005, the UK average was 169 g per km, making us fourth worst out of the 15 European Union countries before accession. The western European average is 160 g per km. The European Union target, which is adhered to in principle by this Government, is to get average emissions for new vehicles purchased in the UK down to 140 g per km by 2008. Unless something dramatic happens, there is no prospect whatsoever of our reaching that target, given that our average in 2005, three years beforehand, was 169 g per km. In some ways, we are even behind China, which has legally binding maximum CO 2 emissions for cars based on their weight.

I am disappointed with clause 13 in terms of where we should be going. Next year, we should hit gas guzzlers—4x4s are not the only issue. MORI research for the Department for Transport indicated that 72 per cent. of people would swap their vehicles if there was a £300 or more differential on vehicle excise duty. Clause 13 is a start, but the new band G is not nearly enough of a differential.

We have heard about people in rural areas going across the fields in 4x4s to do their spring lambing. I have to say to hon. Members that of the 10 highest CO 2 –emitting cars, only the Chrysler Jeep SRT 10 comes into the category of a vehicle that one could take lambing. Those that do not include the Lamborghini Diablo, the Lamborghini Murcielago, the Bentley Arnage, the Aston Martin DB7 GT, the Ferrari 612 Scaglietti, the Aston Martin DB7 Vantage, the Lamborghini Gallardo and the Aston Martin V12 Vanquish. They all emit more than 448 g of CO 2 , compared with 109 g for some of the lowest-emitting vehicles, such as the Toyota Aygo, whether petrol or diesel. Band G is not set high enough. As Julia Goldsworthy said, some 4x4 vehicles, for those who need them, emit considerably less than 200 g per km—the Toyota RAV4, for instance. I urge my hon. Friend the Minister to look at this seriously and to do a whole lot better than clause 13 in next year's Budget.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

Given that we have not had the chance to vote on the Liberal Democrat amendments for reasons that have not been satisfactorily explained, I shall contribute briefly to the stand part debate.

Tables A and B are the key to the clause. It is clearly sensible in principle to use the tax system to encourage motorists to go green. It therefore follows that one should tax the most polluting vehicles most heavily and the least polluting vehicles least heavily, if at all. Changes to vehicle excise duty bands must therefore be carried out with conviction and at least look to make a difference to consumer behaviour.

Let me sum up the consensus of opinion of the organisations that commented on the Government's proposals. It is that, although the Government are moving in the right direction, the changes lack conviction. Transport 2000 called the new top rate "derisory" and said that the changes would hardly pay for the new paperwork. Friends of the Earth called the changes "utterly inadequate" and said that they

"will not result in the widespread uptake of cleaner vehicles, and will, therefore, not reduce the rising cost of climate change to the transport sector."

Greenpeace said that

"the Chancellor must know that £210 is far too little money to stop anyone buying a gas guzzler."

On the lowest rate, it is not unreasonable to expect a tax incentive to be of some use to the consumer. Members on the Treasury Bench will be aware of the point that was made previously that no cars on which the new rate would apparently apply are currently available on the market. There therefore appears to be little conviction.

There are two courses than an Opposition can take on the Government's proposed changes. They could table amendments to try only to reduce the take from vehicle excise duty because one cannot propose an increase in a Finance Bill. If the Liberal Democrats want to do that, that is up to them. We believe that that is an irresponsible approach and that the Opposition should look forward to 2009, when my hon. Friend Mr. Osborne will present his first Budget. We will try to provide greater incentives at the bottom band and consider heavier increases at the top. If the Liberal Democrats want to make tax and spending pledges, that is up to them, but we cannot say whether our proposal will be a revenue-neutral package or constitute a reduction.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I apologise but I want to allow the Financial Secretary time to reply. We cannot say now whether, in 2009, the incentives will be part of an overall package that tries to reduce the tax take—which the Liberal Democrats propose today—whether they will be revenue-neutral or constitute an increase.

In summary, the Government are heading in the right direction by introducing a new zero bottom band and a heavier top band but that does not appear to be done with conviction because it will make little difference to what people consume in the market.

Photo of John Healey John Healey The Financial Secretary to the Treasury

Earlier, I set out the purpose and outlined details of clause 13 and I am glad that Mr. Goodman says that it is going in the right direction. It may interest hon. Members, especially Julia Goldsworthy, to know that in 1997 only 4 per cent. of the cars that were registered that year had emissions below 140 g per km. In 2005, the figure was 18 per cent. Our reformed vehicle excise duty system plays a part and makes a contribution, alongside other policies, towards driving down the average emissions by cars.

I am especially grateful to my hon. Friend Rob Marris for reiterating many of the points that I made about the Government's strong environmental record. I take his point about gas guzzlers as an early representation for the Budget in 2007.

I commend the clause to the House.

Question put and agreed to.

Clause 13 ordered to stand part of the Bill.

Clauses 14 and 15 ordered to stand part of the Bill.

Bill (Clauses 13 to 15, 26, 61, 91 and 106 and Schedule 14) reported, without amendment; to lie upon the Table.