Clause 15 — Rates of vehicle excise duty

Orders of the Day – in the House of Commons at 8:00 pm on 29th April 2008.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury) 8:00 pm, 29th April 2008

I beg to move amendment No. 9, page 8, line 4, at end insert—

'(3A) In paragraph 1C (the reduced rate)—

(a) in sub-paragraph (1) for "or C" substitute "C or D";

(b) after sub-paragraph (4) insert—

"(4A) Condition D is that the vehicle is a working vehicle."; and

(c) in sub-paragraph (6) insert at the appropriate place—

""working vehicle" has such meaning as may be prescribed by the Treasury in regulations made by statutory instrument,"'.

The Temporary Chairman: With this it will be convenient to discuss amendment No. 10, line 17, at end add

'(subject to subsection (7)).

(7) The amendments made by subsection (3A) shall come into force on a day which the Treasury may by order appoint.'.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

I have no ideological or intellectual difficulty with using price to change behaviour, such as the Government want to do with fuel duty, or with using price and changes to vehicle excise duty to encourage car manufacturers, for example, to create low-emission vehicles and to encourage people to buy them. However, I do have difficulty with the implementation of provisions such as those in the Bill, particularly where the consideration of those provisions seems to have taken place without considering the groups of people on whom they may have a disproportionate impact. I suppose that in respect of that argument, there is a similarity with how the Government went about the abolition of the 10p rate, seemingly not understanding the impact that it would have on 20 per cent. of households in the country.

The groups about whom I am concerned in relation to VED are mainly in agriculture, forestry or similar occupations and they work mainly in remote and rural areas. They tend to be employees on low, agricultural wages, although they may be self-employed; they may be small farmers, for example. Many such people need 4x4 vehicles simply to get to or do their work. However, they are unlikely ever to be able to afford a brand new 4x4 with lower emissions, even if such a vehicle existed. They are therefore unlikely ever to benefit from the lower rates of VED.

Although the lower rates will apply to vehicles registered before 21 March 2006, many of those who can least afford the additional cash for the higher rate may be forced to find it in future, as vehicles registered after that date, still roadworthy, become affordable——in five, 10 or 15 years' time—to people on low wages in the sectors that I have mentioned. By that time, those vehicles will attract the higher rate.

Amendment No. 9 would substitute the reduced VED rate for designated working vehicles. It would allow the Treasury to define "working vehicles" by regulation for that purpose and the regulations to be approved by statutory instrument. That would allow scrutiny but enable the definitions to be done quickly. Amendment No. 10, an associated amendment, would allow the changes brought about by amendment No. 9 to come into force on a day that the Treasury may appoint, without a vote in the House, to ensure that they can be introduced speedily.

I said that "working vehicles" would be defined by the Treasury, but I envisage that they would include the vehicles of such people as farmers, particularly hill farmers, and those in associated sectors in remote and rural areas. I hope that some of the comments that I shall cite, from the National Farmers Union Scotland and others, demonstrate not only the desirability but the need for such a measure.

It is worth putting it on the record that many of the people affected by the higher rates of VED, who live in remote rural areas, are already paying very high prices on very low wages, not least for fuel and energy. I think particularly of fuel—diesel is routinely hitting £1.30 a litre.

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

The hon. Gentleman has talked about remote rural areas, and I am sure that he would include the county of Sutherland in that description. He will be aware that crofters, who I hope would be included in his description of those affected, have a particular problem. Very often, the working vehicle is the only vehicle—it is what takes the ewes to market and the children to school. The county is the area with not only the highest diesel price, but the greatest distance between filling stations. Taken together, those factors create real need, and there is no public transport to ameliorate the difficulty.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

The hon. Gentleman is absolutely right in every regard, including his comments about Sutherland. Crofters are defined in a number of ways; there are Acts that define crofting. Crofting is employment, but in a sense it is also a way of life. The hon. Gentleman is absolutely right to say that the vehicle is not only necessary for the job of crofting; given the location of some crofts, it is also absolutely essential to get to the front door from what passes as the main road.

I turn to the support for the measure that I propose, or one similar to it. Jim McLaren, president of the National Farmers Union Scotland, said:

"The Chancellor is clearly trying to penalise those driving big cars in city centres, but hikes in excise duty...will also be penalising those who have no alternative. Particularly after the dismal year faced by many farmers in 2007, an extra 'showroom' price hike on what is an essential business tool is another slap in the face."

Anna Davies of the NFUS put it more clearly when she said only two weeks ago:

"The NFUS has long stressed that 4x4 vehicles are essential for farmers and changing the tax bands to penalise more heavily polluting vehicles will penalise farmers who have no choice but to use these types of vehicles. The key for farmers is band G. An increase in the band G rate vehicle excise duty will have a detrimental impact on farm businesses, since farmers are not able to purchase a vehicle that has lower CO2 emissions and is still able to do the job required of it around the farm."

When she sums up, I hope that the Minister will comment on that technical matter. The NFUS says that farmers have no alternative, and that they simply cannot purchase vehicles with lower emissions that are able to do the job on the farm.

In addition, I hope that the Minister will be a little more generous than she was when she responded recently to a senior Member of the House. In answer to an oral question, she said that he was

"the epitome of Range Rover man."—[ Hansard, 24 April 2008; Vol. 474, c. 1449.]

I shall spare the hon. Gentleman's blushes, Sir Nicholas, but that answer suggests that the Government believe that all the people who drive 4x4s—be they brand new Range Rovers or a beat up old Land Rover on a hill farm—are really just versions of the same person, and that they drive the same cars for the same reasons. That, of course, is wholly and utterly wrong.

The National Gamekeepers Association has said that it is worried about the impact of increased 4x4 taxes on what it considers to be essential rural work. Alex Hogg, chairman of the Scottish Gamekeepers Association, said that four-wheel drive vehicles were

"essential tools for Scotland's gamekeepers, and rarely travel further than rough tracks or estate roads. Gamekeepers use these vehicles for 365 days of the year, and like farmers we simply couldn't do our work without them. We are concerned that an increase in taxation would not only be unjustified in our case, it would also add an extra burden on the sector which is already under serious pressure."

Once again, I hope that when she sums up the Minister will say something about the essential nature of 4x4 vehicles, and that she will take on board the assertion by the Scottish Gamekeepers Association that they

"rarely travel further than rough tracks or estate roads."

They are clearly working vehicles, doing precisely what they are designed for. The people who use them do not earn big money: many are self-employed and bear the full burden of the costs, and I hope that the Minister will take that into consideration in her reply.

I want to say something about two other small groups of people—one, the employees of Scotland's five ski resorts, is very small indeed. They are a tiny group in the big picture, and people such as ski lift operators earn very low wages, but they are essential to keeping the ski resorts operating. They also ensure that nearby resorts and towns remain tourist destinations for 12 months a year.

Such destinations are sited in parts of Scotland where the economy is very fragile. I fear that the unintended consequence of the fact that the Government did not consider the people employed in Scotland's winter sports sector will be that those people's lives are made harder.

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Photo of Robert Smith Robert Smith Shadow Deputy Leader of the House of Commons 8:45 pm, 29th April 2008

My constituency has two of Scotland's ski resorts, and I want to emphasise how important they are when it comes to bringing in money at different times of the year. The changing climate has added extra burdens on those who try to run the resorts, and they do not need the Government to add any extra costs at a time when they are worried about making decisions on serious investment priorities.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

The hon. Gentleman is right, and two separate costs are involved here. The first is the cost to the businesses, which are often marginal: for instance, although they have had a very good season this year, one of them may still not have made any money. However, the second cost is borne by the people who work as ski lift operators in the winter and who become forest and agricultural rangers in the summer. They are tiny in number, but essential to the sector, and I hope that the Minister will say something about them.

The final group that I would like to mention comprises those involved in mountain rescue. Some 500 vehicles in Scotland are used for mountain rescue. Mountain rescue teams are concerned about vehicle excise duty on the vehicles that they, and their many volunteer members, use to get up the hill to commence a rescue. The example of mountain rescue opens up two interesting points. The mountain rescue commission for Scotland has told me that 4x4 vehicles used as ambulances are already fully exempt from VED, so there can be no argument that this cannot be done. I also understand that the Treasury has been in negotiations with the UK body representing the commission since late last summer, and that the discussions—I hope that the Minister can confirm this—may be about exempting all mountain rescue vehicles from VED.

We have small numbers of people in fragile economies earning low agricultural-level wages. We are absolutely not arguing that price should not be used as an incentive for behavioural change—we believe on balance that it should. However, in terms of the implementation of this measure, the impact on some of the poorest-paid people in the most fragile economies and key sectors could be damaging. I very much look forward to hearing what the Minister has to say, Sir Nicholas—I hope that I spared your blushes earlier—and shall decide after that whether to press my amendment to the vote.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

It is a pleasure to appear before you, Sir Nicholas.

I have some sympathy with the points made as lucidly as ever by Stewart Hosie, who takes a great interest in Finance Bills generally and issues affecting Scotland in particular. I am sure that the Minister will be able to reassure me with her answer, but I will be interested to hear it.

I have to say that I have a bit less sympathy with amendment No. 6. Is it in order to address some remarks to that, Sir Nicholas, or should I wait?

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

I should wait.

I want to talk generally about CO2 emissions, because that is related to the whole issue. First, I should like to correct some of the figures given by Mr. Browne on household emissions versus vehicle emissions. I see that you are looking concerned, Sir Nicholas. Please tell me—I am sure that you will—if you think that I am straying too far.

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Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

We are debating amendments Nos. 9 and 10, and a separate debate on amendment No. 6 will come later. The Chair is always flexible, and if the hon. Gentleman gives an undertaking that he will not speak on amendment No. 6, perhaps we can allow him to digress slightly in respect of his remarks on amendments Nos. 9 and 10.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

I am grateful to you for that guidance, Sir Nicholas, as ever. I am not sure whether my remarks would be better addressed to these amendments or to amendment No. 6, so perhaps I will seek to catch your eye later when we move on to amendment No. 6.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

Stewart Hosie is right. The economies in the remote parts of the United Kingdom are suffering greatly and are very fragile. Many of the businesses in those areas—farming, crofting, forestry and so on—need vehicles that can go off road, and often the same vehicle is used for business purposes as for going into the village. Those businesses therefore need a reduced rate of VED.

I am sympathetic to the amendment, but on the condition that the regulations to which it refers would have to be very tightly drawn to ensure that they were not abused. We would not, for example, want company cars, or even the First Minister's car, to be defined as working vehicles. The regulations would have to apply only in a rural situation and only to cars that are essential to the running of a rural business.

It is not a question of creating a precedent. The hon. Gentleman already referred to existing precedents: police cars and cars used in the health service are exempt, as well as many others. There is a long list of exemptions already, and I urge the Government to accept the amendment so that there can be consultation on the regulations. Regulations should be drawn up that allow the reduced rate to be applied to vehicles that are essential to the operation of a small rural business. I hope that the Government will be sympathetic to rural business by accepting the amendment.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Thank you for calling me, Sir Nicholas. I was caught slightly on my heels by the very brief speech by Rob Marris a moment ago.

My party proposed differentials in vehicle excise duty to reflect the emissions from cars in advance of the legislation being introduced in 2001, and it remains our position that it is reasonable to persuade people of the merits of driving more fuel-efficient and energy-efficient vehicles by creating a differential in the vehicle excise duty that they pay. We are not, therefore, seeking to dispute that principle, but we are sympathetic to the amendment tabled by Stewart Hosie for the reasons already outlined in previous speeches. Those in remote rural or agricultural settings do not find it practical to go about the business of running a profitable organisation using low-emission cars because such vehicles are not able to cover muddy terrain or pull sufficient weight, which farmers, for example, need to do to perform tasks in order to complete their duties.

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Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

I have listened to what the hon. Gentleman says, and I accept his point about the principle of VED differential for carbon emissions. However, another principle is important: we should take into account the needs of rural and remote areas. If we do not do so, we will undermine the effort to get everyone to sign up to meeting climate change targets. Despite the principle concerning emissions, the hon. Gentleman is right. We agree with his point, which was also made by my hon. Friend Stewart Hosie.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I agree with the hon. Gentleman and I was not seeking to imply anything else.

I represent a constituency in Somerset. That is a long way from Scotland, but it has remote rural areas, including parts of Exmoor national park. I observe that the use of expressions such as "Chelsea tractor" give a quite urban perspective on the debate about fuel emissions and vehicle excise duty. I understand the frustration that people have in many towns and cities, which were built and designed before the invention of the car—certainly before the invention of very large cars. It is difficult to manoeuvre one's way along small roads in this country using large 4x4 vehicles, and doing so may have an impact on other road users and pedestrians.

There are concerns about the practicality of using 4x4s in urban settings, but the overall context, of course, is concern about emissions and global warming created by transport—particularly private transport. My party and most people in this House are sympathetic to the case for differentials in vehicle excise duty in that context. We must then consider the exemptions that we put in place to help people who find themselves in exceptional circumstances.

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

Is not the key principle that when one is seeking to change behaviour, there has to be another pattern of behaviour to change to? If there is no alternative, all one is doing is punishing. The point is that there is no alternative in remote rural areas.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

As always, that point was extremely well put by my hon. Friend. It is difficult to get about a farm in a Nissan Micra in January, and anyone who attempted to do so would not be running a very successful farming enterprise. There are circumstances, to which I referred earlier, where it is necessary to have a vehicle that can pull more weight or operate on more unsympathetic terrain. That is most obviously the case for farming but other examples, such as forestry, have been given.

Let me inject a note of reservation into our deliberations. The amendment is widely drawn, and some will be concerned that it does not include a definition of a working vehicle, but leaves that to the Treasury. Mr. Reid said that some people may believe that the First Minister is transported in a working vehicle but others may be less sympathetic to that view.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I shall give way first to the hon. Member for Dundee, East.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

The definition of a working vehicle has been left to the Treasury to ensure that it is not too widely drawn, not least because the Treasury will want to maximise the revenue yield. I am sure that it will be sympathetic enough to draw it sufficiently widely to cover those who will be affected by the changes.

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Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

I am grateful to the hon. Gentleman. Surely the definition of a working vehicle is a 4x4 or a pick-up that does a job that a Nissan Micra could not do. As a crofter, I know of umpteen situations on a farm in which something with a bit of guts and bigger wheels is needed to do something that a Nissan Micra could not do. Many of my neighbours are crofters and, like me, use vehicles to do things that a Nissan Micra clearly cannot do. That is one basis for a definition.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I made that point earlier. However, we must be careful that the exemptions are not too wide. Let us consider a famous Scotsman, David Coulthard—I note that he chooses not to pay tax in Scotland. He drives a vehicle that is essential for his task. If he drove a Nissan Micra, he would be less successful in his occupation.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Indeed. It would have to be an extremely souped-up engine. Nevertheless, I am not sure that the exemption should apply in that case.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Indeed, I agree with the hon. Gentleman. His demeanour suggests that we are at odds, but that is not the case. We all agree on the need for differentials in vehicle excise duty to try to influence behaviour and that, in some circumstances, when there is no alternative—the best example is in a rural setting on a farm—an exemption is necessary. The only point of controversy or dissent that I make is that the exemption should not be too widely drawn. The amendment cannot satisfy us that that would be the case because it leaves the matter open.

The Liberal Democrats agree with the principle of the amendment and are sympathetic to the concerns of people throughout the United Kingdom who are in the circumstances that have been outlined. We therefore intend to support it.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

The hon. Gentleman is right about the difficulty with definitions. I do not know whether it is an urban myth, but it is said that, before the introduction of the October congestion charge changes in London, there has been a huge increase in expensive cars being registered as mini cabs. Those definitional problems are difficult to solve.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

There is a danger of widening the debate too far, but the hon. Gentleman makes a reasonable point. If I were a Treasury Minister, I would always be wary of creating exemptions because they may cover many categories that one did not envisage.

I fear that Scottish National party Members appear to be rather resentful that we are supporting them. [Interruption.] They had hoped to be in splendid isolation—the press releases had already been written and will now have to be rewritten, based on my comments. I have disappointed the hon. Member for Na h-Eileanan an Iar by saying that we will support him. [Interruption.]

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. Far too many loud private conversations are taking place.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

To conclude, I am afraid that I am going to disappoint the hon. Member for Na h-Eileanan an Iar and others, by being sympathetic to the arguments that they have put. Even though their amendment is rather too widely framed for our tastes, we will nevertheless support it, because we share their objectives.

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Photo of Robert Smith Robert Smith Shadow Deputy Leader of the House of Commons

I declare an interest as a former owner of a Nissan Micra, which seems to be relevant to this debate. I want to reinforce the importance of recognising just how difficult life is for those operating in the rural economy and how symbolic it would be for the Government to accept the amendment. Doing so would send a signal to those communities that the Government understand just how difficult the current climate is. The rising world costs of fuel and other inputs into agriculture are severely stretching the farming and forestry economies. Removing the added cost of vehicle excise duty on vehicles that many have no choice but to operate would be a way of sending the rural community the signal that the Government understand how difficult life is.

The recent problems in Grangemouth have exacerbated that concern in rural communities. Concerns in those economies about both price and supply could be addressed if the Government took the amendment on board. They would have to come back with regulations and the House would have to approve their drafting, which is an important caveat.

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Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

The cost of diesel, at £1.34 a litre, exacerbates the situation and underlines exactly what the hon. Gentleman is saying.

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Photo of Robert Smith Robert Smith Shadow Deputy Leader of the House of Commons

Current costs—far higher than any planned for by the Treasury—are such that the market is already sending dramatic signals to the wider economy. The amendment would be an important way for the Government to send the signal that they understood the burdens faced by rural economies and the important role that the rural economy plays in the fabric of our society. I urge the Government to support the amendment.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I am probably the first hon. Member to address the amendment whose constituency does not contain any remote rural parts.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

No, I have not got a 4x4, either.

I sympathise with the concerns raised by Stewart Hosie, who made a persuasive case for his amendment. However, we are working in a matrix of ways to determine the exemption that owners of such vehicles will apply for. Part of that is about location and about what is rural and remote—no part of Fareham is rural and remote, which makes things easy.

That matrix is about employment, too. The hon. Gentleman specified some occupations—agriculture, forestry and people working in ski resorts—but it would not take very long to come up with some more suggestions. What about a rural shopkeeper, who might use his 4x4 to load up at a cash and carry? Where do we draw the line in defining the occupations that should be supported through the exemption?

The third element to the matrix is the type of vehicle that will be used. I understand as well as anybody that some vehicles will be seen as a lifestyle choice or fashion statement in one context and a lifeline in another context. The context will depend on where a particular four-wheel drive vehicle is, who is using it and what its purpose is.

That makes it quite difficult to say how we should characterise the types of vehicles that should qualify for the exemption. My concern is that accepting the amendment would put us at risk of having to produce detailed and complex regulations, which would create uncertainty in the minds of taxpayers. They would be expensive to comply with because, when applying for a new VED disc, people would have to provide not only valid MOT and insurance certificates, but proofs of residence, occupation, and whether the job was part or full-time. The process would create a burden for people applying for exemptions, and it would not be as straightforward as the hon. Member for Dundee, East suggested.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

Does the hon. Gentleman agree that unless one got the definition right, people could drive a coach and horses through it?

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I suppose that a coach and horses would not qualify for an exemption. However, the gist of the hon. Gentleman's remarks holds true.

I understand wholeheartedly the point that the hon. Member for Dundee, East makes. I have friends and family who live in remote rural areas—

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

Perhaps the hon. Gentleman should spend some time on a Finance Bill Committee to understand how important it is to get this right, not only from HMRC's point of view, but on behalf of our constituents. Getting the issue right is not straightforward, and that is the problem with the amendment. Although we understand the sentiment behind it, we could not support it in the Lobby.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

We have had an important, if short, debate about something that has an impact, especially in rural areas. We heard some arguments in support of the exemption proposed, with perfectly reasonable intent, by Stewart Hosie through amendments Nos. 9 and 10. However, we also heard, not least from the hon. Members for Fareham (Mr. Hoban) and for Taunton (Mr. Browne), why it is difficult to draw a clear line to produce an exemption that would achieve the aims of the hon. Member for Dundee, East.

I welcome the acceptance of the principle that price should be used to influence behaviour. That is an important point of agreement throughout the Committee, and it is good to find points of agreement in such debates before homing in on matters on which there might not be 100 per cent. agreement. I recognise the points made by the hon. Members for West Aberdeenshire and Kincardine (Sir Robert Smith) and for Argyll and Bute (Mr. Reid) about the difficulties experienced in their areas and the pressures on rural businesses and industries.

As the hon. Member for Fareham said, it is important to try to get any exemptions on duties right, be that VED or anything else, and to ensure that they can be defended and maintained consistently and coherently. Although the hon. Member for Taunton is supporting the amendment—and taking quite a lot on trust—he made similar points about the practicalities of any of the exemptions suggested. There are some 4x4 vehicles in bands E and F. We hope that the changes to VED rates in this Bill and those that are signalled for future Finance Bills will lead to the introduction of new 4x4 vehicles in lower bands.

Let me answer the specific questions asked by the hon. Member for Dundee, East, especially that about mountain rescue. First, we have been considering the tax treatment for mountain rescue vehicles, but there is an issue with charity law. Government policy on the tax treatment of charities is neutral between them, and we would not want to pursue a policy that appeared to favour one charitable cause over another. The charitable status of mountain rescue organisations therefore presents the Government with potential difficulties, as a specific VED exemption would appear to favour them over other charities. Some mountain rescue vehicles that are registered as ambulances are exempt, but there is a difficulty with other such vehicles, which we are considering whether we can get around. That is one reason why we have not been able to announce a complete exemption for mountain rescue vehicles.

The hon. Member for Dundee, East discussed a potential exemption, helpfully leaving the relevant definition to the Treasury. It would be difficult to define the exemption in a way that would achieve his aim. His amendment would apply the VED alternative fuel discount to working vehicles, which are undefined in his amendment, but the discount currently applies equally to vehicles that are used primarily either for private travel or for business activity. Adding the condition that only working vehicles that are alternatively fuelled qualify for the reduced rate would undermine the incentive for other vehicles and would unnecessarily complicate the tax system.

We also believe that the compliance and administrative costs of such a change would be considerable, as the hon. Member for Fareham sensibly pointed out. The Driver and Vehicle Licensing Agency would need to verify that a vehicle was a working vehicle, which would be difficult to do on an individual basis and even more difficult to police. Working vehicles such as agricultural vehicles are already exempt from VED, and there is a separate exemption for vehicles, including four-wheel drives, that are used mainly on the land. That exemption is available where a vehicle is used only on a public road for a distance of no more than 1.5 km to pass between different areas of land that are occupied by the same person. So there are already exemptions, which could be policed and guarded more effectively than the very open exemption that the hon. Gentleman suggests.

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Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs) 9:15 pm, 29th April 2008

I understand what the Minister says about definitions, but surely, someone who receives the single farm payment is highly likely to have a working vehicle, whereas someone who lives in Chelsea, for example, is unlikely to be receiving that payment. Many people who receive the single farm payment use such vehicles, but the Government are going to pretend to be blind to them. The Treasury and the Department for Environment, Food and Rural Affairs will be aware that such people have working vehicles. I ask the Treasury to look through DEFRA's eyes; it should then be clear and plain which are working vehicles.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

We always try to be reasonable and consider how these matters can sensibly be policed. I know what the hon. Gentleman means, but what looks simple from his constituency might not look simple at the DVLA, which would have to issue all the licences.

I hope that Opposition Members will accept that there are already exemptions, and will consider that working vehicles that are used off-road can use red diesel. Red diesel rates are lower than ordinary petrol rates and are therefore worth a considerable amount of money. Red diesel and main road fuel differentials widened under the 2007 Budget, which gives some advantage to people who use red diesel. That has not been mentioned, but it should not be sniffed at.

The amendment would clearly be administratively burdensome and complex, confusing for motorists and difficult to police. As the hon. Member for Fareham said, it would be difficult to keep within boundaries. I am therefore in sympathy, but I am afraid that I am unable to think of a workable definition for the purpose of the amendment, so I invite the Committee to reject it.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

Mr. Reid was sympathetic and I entirely agree with him that the regulations should be tightly drawn. Mr. Browne was sympathetic in parts, but he taught us all the important lesson that one should not speak when one has very little to say. He was followed by Sir Robert Smith, who actually made the speech that Mr. Hoban spoke about difficulties in defining the matrix and he quite rightly drew a distinction between lifeline and lifestyle—a very good way to put it, but I was disappointed that he followed that up by finding difficulties rather than solutions to what are very real problems in many parts of the country.

That brings me to the Minister. I welcome the fact that the Government are looking at what can be done for mountain rescue, and I appreciate that. There is, however, a singular lack of pragmatism in seeing the equality of treatment between charities as important, yet being unable since last year's discussions to find a way to help lifeline 4x4s for people setting off in mountains in the middle of winter to rescue others and save lives. In short, having listened to what the Minister said, I feel she was seeing difficulties in the solution rather than seeking a solution to the difficulties faced in many remote and rural areas—difficulties that will be intensified not just by the burden of high fuel costs, the burden of high inflation and the burden of low wages, but by the additional higher vehicle excise duty charge on essential vehicles. With that, I am sorry to disappoint the Minister, but I shall press the amendment to a vote.

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Question put, That the amendment be made:—

The Committee divided: Ayes 43, Noes 287.

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Division number 162 Orders of the Day — Clause 15 — Rates of vehicle excise duty

Aye: 43 MPs

No: 286 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly negatived.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I beg to move amendment No. 6, page 8, line 17, at end add—

'(7) The Treasury shall publish, not later than the date of the Budget 2009, an estimate, audited by the Independent Committee on Climate Change (as established by the Climate Change Act 2008), of the carbon emissions savings resultant from the changes to vehicle excise duty contained in this section.'.

I am delighted to see that the Chief Secretary to the Treasury has decided to respond to this debate; having missed the earlier groups, she has kindly agreed to help her colleagues deal with this amendment. I look forward to her detailed exposition of the excise duty changes. Perhaps I should keep my speech short so as to give her more time to expand at length about her views on the topic. Relief has arrived, however: the Exchequer Secretary to the Treasury has returned to her place, which means that the Chief Secretary need not respond to this debate in her stead.

We must recognise that at the heart of the vehicle excise duty issue is the fact that the reforms announced in the Budget and the increases included in clause 15 will lead to the imposition of higher taxes on motorists. When motorists see their vehicle excise duty rates increasing, they will ask what benefit that brings in terms of reducing carbon emissions. It is worth reminding the Committee that in 2006-07, vehicle excise duty raised about £1.9 billion. In 2008-09, according to an answer given by the Exchequer Secretary, VED will raise £2.9 billion—an increase of £1 billion in the space of two years. That is a significant tax take that has been justified on the basis that VED is an environmental tax.

The Chancellor put the environment at the centre of his Budget and said that

"our greatest obligation to the future must be to tackle climate change."—[ Hansard, 12 March 2008; Vol. 473, c. 295.]

It was clear that a centrepiece of that was the reform to VED that he announced, with the move from seven bands to 13 to widen the differentials between the most and the least polluting cars, and the introduction of a first-year charge to incentivise people to buy the lowest polluting cars at the moment of choice.

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Photo of John Redwood John Redwood Conservative, Wokingham

Does my hon. Friend agree that we need to look at the changes against the new background that petrol at the pump has gone up to at least £1.10 a litre, of which a massive 70p is now tax and duty—far more than the Government planned at the time of the Budget? We need to view the VED increases in the light of that big environmental tax that the Government are imposing by stealth.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

My right hon. Friend makes a valid point. In fact, just this morning I had an e-mail from one of my constituents who was concerned about the increased tax take that the Government were getting from the increase in petrol prices at the pump. I am conscious that that is outside the scope of amendment No. 6, so I cannot dwell on the issue at as much length as I might have liked to do in other circumstances.

The consequence for many families is that the rate of VED that they have to pay on their car will go up. An analysis of the changes indicates that VED rates will rise on 88 per cent. of cars. The percentage increase on a Nissan Micra is actually greater than that on a Porsche Cayenne. We are starting to see a series of increases in differentials that gives rise to some of the comments mentioned by Stewart Hosie earlier.

The problem is whether people see the increases in VED as simply a tax increase or a legitimate way to tackle carbon emissions. In the evidence given to the Treasury Committee in its inquiry on the 2008 Budget, John Whiting from PricewaterhouseCoopers commented in the context of the environmental measures:

"What is lacking is a clear statement, a clear framework, by Government which says...'Are we raising money by environmental duties or are we changing behaviour?'"

The CBI said that the Government were approaching environmental taxes in "completely the wrong way". It argued that the primary aim of environmental taxes should be to change behaviour and not to raise revenue.

In that context, it is important that there is a mechanism that enables people to measure the behavioural changes that take place as a consequence of the changes announced in the Budget. That is what amendment No. 6 seeks to do, by asking the independent committee on climate change that will be established by the Climate Change Bill to produce a report, not later than Budget 2009, on the carbon emission savings resulting from changes to the vehicle excise duty in this Bill.

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Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

Is not the hon. Gentleman making a false antithesis? Surely any increase in price involves a change in behaviour. The extent of the change will be a function of the price elasticity of demand. If one puts up the price of anything, one reduces demand for it, thereby changing behaviour. Is the Conservative party seriously determined to go back on the changes to VED if it comes to power, or is it just thrashing about for a way to criticise a measure without having the courage to pledge to reverse it, and talking about environmental monitoring as a sort of alibi?

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

The hon. Gentleman should pay more attention to the issues. We have said that we support environmental taxes being used to change behaviour, but unlike the Government whom he now supports, we believe that those additional tax revenues should be used to reduce the burden of taxes on families rather than simply to increase tax revenue. That is part of the problem at the heart of the Budget. We are seeing an increase in vehicle excise duty that will simply fill the Treasury coffers, so people can be much more cynical about environmental taxes. They do not see them as ways of changing behaviour, but simply as a way in which the Government can fill the black hole that is opening up in their finances. The hon. Gentleman is right to say that we should see environmental taxes that help to change behaviour. That is why we want the independent committee on climate change to report on the impact of the amendments.

As I was about to say before the hon. Gentleman intervened, my hon. Friend Justine Greening tabled a question to the Exchequer Secretary to ask what the impact of the VED reforms would be on emissions. The Treasury estimated that by 2020 emissions would be reduced by 160,000 tonnes, which is less than one tenth of 1 per cent. of vehicle emissions. It would appear that the way in which the changes have been designed has led to a situation where the change of behaviour is estimated to be minimal. That is the problem and it is why people are becoming concerned about whether the taxes are genuine attempts to reduce vehicle emissions or whether they are seen simply as a way of raising revenue for the Exchequer.

It is important, as part of creating a sense of trust about the motives behind the tax increases and ensuring that there is some transparency about their impact, that we should ensure that they are independently reported on. I believe that amendment No. 6 would deliver that objective. All Members who are serious about increasing transparency on climate change and want to see the independent committee make a major contribution to the debate should support the amendment. I hope that they will support us in the Lobby tonight.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

As I was saying before I so rudely interrupted myself, Mr. Browne gave some figures on transport CO2 emissions and household CO2 emissions. The figures that he gave are almost the reverse of the figures in the Red Book—although perhaps he was right. He said that 25 million households produce 27 per cent. of CO2 emissions in the UK, which was double the amount produced by cars. According to paragraph 6.19 on page 94 of the Red Book, CO2 emissions from transport account for 28 per cent. of UK CO2 emissions. Paragraph 6.63 on page 103 states that households account for 14 per cent. of UK CO2 emissions, albeit that households account for a quarter of energy consumption.

In moving the amendment, Mr. Hoban said that constituents will ask what they are getting. On one level, he has a point. The changes are designed to change behaviour, yet between 1995 and 2005 the average CO2 emissions of new vehicles purchased in the UK fell by about 1 per cent. a year. CO2 emissions overall in the UK this century have increased rather than decreased. However, the amendment considers only—this is a criticism—the causes of climate change. Some hon. Members will know that one thing that upsets me about the tone of public debate in this Chamber and elsewhere is that we do not look sufficiently at the effects of climate change. I do not doubt the hon. Gentleman's figures about the tax take from vehicle excise duty going up markedly from £1.9 billion in 2006-07 to £2.9 billion in 2008-09. That amount of money should mean that our constituents—and constituents around the country—will potentially get protection from the effects of climate change. The part of the equation that we seldom discuss in the House is adaptation, which is the sort of thing that the amendment does not address.

I have referred to the effects of climate change, and the Association of British Insurers estimates that last summer's flooding, principally in England, cost £3 billion. That money effectively comes from almost every householder in Britain, because the insurance premiums of all households, not just those affected by flooding, go up. The Government have massively increased the spending on flood control, both inland and with coastal defences and so on. That is the sort of thing that VED money is being spent on, albeit that it is not hypothecated, and it is something that our constituents are getting from this green tax. They are getting something that deals with adaptation—the effects side of the equation of climate change; it is not just about causes.

The hon. Member for Fareham went on to say that 88 per cent. of vehicles will pay more. I do not doubt him on that figure. I warn the Government that, next year, we will risk another 10 per cent. kind of debate. This coming year, a vehicle in band F, which emits perhaps 201 g of CO2 per kilometre, will pay £210 in vehicle excise duty. From 2009-10, it will be in band K, paying £300 in vehicle excise duty. That is a £90 or 42.86 per cent. increase. A vehicle in band E, which emits 181 g of CO2 per kilometre, will pay £170 in 2008-09. That vehicle will go into band J from 2009-10, and it will pay £260 in vehicle excise duty. That is an increase of 52.94 per cent.

The difficulty with those increases is that, to most of our constituents, they are retrospective. Table A.8a on page 122 of the Red Book is headed "VED bands and rates for cars registered after 1 March 2001". It relates not to new vehicles that are bought with those CO2 emissions from, say, next year, but to vehicles that are already in the fleet. So, as I understand it—the Exchequer Secretary can correct me if I am wrong—someone who bought a new car in band F in 2002 will experience a 42.86" per cent. increase in their vehicle excise duty for the very same vehicle—or, in the other example that I gave, a 52.94 per cent. increase. My constituents will regard that, quite understandably, as a retrospective tax increase; they will not take kindly to it, and the Government need to think again.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury) 9:45 pm, 29th April 2008

My party is happy to support the amendment on the basis that it is always good to monitor progress on environmental matters. I suspect that our motivation for supporting it is rather different from that for which it was tabled. That motivation was to try to make a broader political point about the lack of effectiveness in environmental taxation, whereas my party and I are enthusiastic exponents of the potential benefits of such taxation.

I suspect that the Conservative party's true motive for proposing the review is to make a broader case that the Government's policy on vehicle excise duty differentials has been ineffective in dealing with climate change. Therefore, the Conservatives will argue that we ought to conclude that the policy is ineffective and not one to which they are sympathetic, whereas I draw a different conclusion: if the Government's policy on vehicle excise duty differentials is not having the desired impact on CO2 emissions, it is a good reason for their policy to become more ambitious and the differentials wider to create greater incentives for people to drive fuel-efficient vehicles, rather than for the conclusion that I suspect many Conservative Members draw, which is that the bands should be narrower, because the policy has been deemed to be a failure.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

We might draw the conclusion that the Government's approach is not well designed enough to bring about the behavioural changes that they hope it will. It is a design issue, I think.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I am grateful for that intervention, because for many years—since before the Government introduced the policy—my party has been an exponent of the merits of differentials in vehicle excise duty. We want to try to encourage, rather than compel, behavioural change through price mechanisms. In 2001, the Government introduced a timid, modest form of the policy for which the Liberal Democrats have long argued. Over a number of years, the Government have slowly sought to expand the number of bands, and to make the policy more radical. Our argument is that the policy should be more adventurous still, that the rewards for driving low-emission cars ought to be greater, and also that the penalties for driving high-emission cars ought to be greater, with one or two exemptions that we touched on in discussion on the previous group of amendments.

Mr. Hoban asked whether the differentials in vehicle excise duty were about raising money or changing behaviour. We argue that they are about both. It is perfectly possible for both those effects to be produced simultaneously. Taxation on cigarettes, for example, is designed to try to dissuade people from smoking, but it also raises substantial amounts of revenue for the Treasury.

I agree with the Conservative party spokesman, and the Conservative party more generally, that environmental taxes are discredited if they are used solely as a revenue-raising measure. Certainly, my party would like money raised through environmental taxation to be used to offset other types of taxes, including taxes on income, particularly the income of those on low salaries, who most need assistance at a time of rising prices.

The Conservative party is playing a risky political game. Its leader cycles to work at the House of Commons [Interruption.] I will ignore the interjections about how his clothing gets here. He cycles here, and he and others create the impression that the Conservative party is extremely sympathetic to wind farms and low-emission vehicles, yet that is done with a nod and a wink. For example, in The Daily Telegraph's lead story a few weeks ago, people who might be inclined to vote for the Conservative party were encouraged to believe that the party is not sympathetic to vehicle excise duty differentials. Indeed, in Treasury questions last Thursday, a Conservative Front-Bench spokesman, Justine Greening, asked:

"Will the Minister add the band A to J losers to the 10p compensation package review?"—[ Hansard, 24 April 2008; Vol. 474, c. 1449.]

She sought, slightly bizarrely, to create some sort of parallel between people who drive high-emission vehicles and some of the poorest people in the country who are losing out as a result of the doubling of the 10p rate. That is not an accurate parallel.

The Conservative party is in danger of trying both to persuade people that they are victims of a malicious environmental policy put in place by the Government, and to outflank the Government with their green credentials. The Conservative party says "Vote blue, go green", but what it is effectively saying is "We'll talk green; vote blue."

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Photo of Anne Main Anne Main Conservative, St Albans

May I inquire whether the hon. Gentleman would support the retrospective application of the vehicle excise duty differentials?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

What we propose is trying to ensure that people are given the greatest encouragement to drive fuel-efficient vehicles.

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Photo of Mike Penning Mike Penning Shadow Minister (Health)

The question is simple: yes or no?

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I will come to the point that is being made. People need to be persuaded to drive fuel-efficient vehicles wherever possible, and they need to be persuaded that there is an environmental benefit from doing so. The Government change vehicle excise duty rates every year, and our view is that those changes should, over a period, persuade people to drive cars that are more fuel-efficient. I warn the Conservative party that it is in danger of trying to have it both ways; it cannot claim, as a rebranding exercise, to be the party of the environment, but consistently refuse to support environmental measures when it comes to votes in the House.

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Photo of John Redwood John Redwood Conservative, Wokingham

I am glad that my party tabled the amendment. It is important to see whether there would be a reduction in carbon emissions from the rather large further increase in taxation on motorists. I cannot see how such a proposal can change behaviour when it applies to cars that people have already bought, because by definition they cannot change their behaviour—they have already bought their cars—unless it is the Government's intention to have all those cars scrapped prematurely, in which case one needs to do proper carbon accounting to see how much carbon would be emitted in the manufacture of the replacement vehicles, which should be taken into account. That would have to be amortised over their shortened life, if one is to continue the practice of ratcheting up the vehicle excise duty on vehicles already purchased and out there in the vehicle park.

If the main aim of the Government's policy is to reduce emissions from vehicles, surely tax should be placed on use of vehicle and on fuel, which the Government are doing in huge measure anyway. They recently increased that greatly by stealth as a result of the increase in petrol and diesel prices at the pumps, rather than putting the tax on ownership of the vehicle. There is nothing environmentally unfriendly about owning a vehicle once it has been made and purchased, whereas using the vehicle can be environmentally unfriendly.

I hope the Government will think again and will understand that this is another rather difficult equation where we need better carbon accounting in order to know what the true impact of the policy is. We should not let the debate go by without somebody saying that motorists have been clobbered time and again by the Government, who do not seem to understand that many people need working vehicles, and that many people have to go by car because there is no public transport alternative. The provision is just another sign that the Government regard the motorist as a source of massive revenue and are hitting them for owning a car, buying a car and using a car—

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Photo of Robert Key Robert Key Conservative, Salisbury

Does my right hon. Friend agree that there is another group of poorly paid workers who are hit doubly? I am referring to community nurses, for example, in large rural areas such as mine. The HMRC tax-free allowance on mileages has not risen in line. When I pursued the matter with Treasury Ministers, the answer came back that they were trying to change people's behaviour and encourage them to get out of their cars. Try selling that to the district nurse in Tisbury.

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Photo of John Redwood John Redwood Conservative, Wokingham

My hon. Friend is right. There are other low-paid workers who work antisocial hours and clearly need their car to get to and from work. People often have to take their children to school by car because there is no alternative. I hope that Ministers will think again about the overall magnitude of tax. After all, Ministers must have some spare money to play with, because we know that far more will be collected from diesel and petrol than was in the original Budget forecast. I tabled a question elsewhere to try to get at that figure. Why cannot some of that money be used to abate some of the severity of the proposal?

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

We have had an interesting debate about vehicle excise duty rates. Various Members on both sides of the Committee have made important points and observations about the general approach. The amendment calls for an estimate of the carbon savings that result from the changes to VED contained in the clause, and for that to be audited by the independent committee on climate change, which is being created by the Climate Change Bill. We hope that when that is approved by both Houses and is on the statute book it will enable us to make progress towards our carbon accounting, which we have discussed in relation to more than one amendment this evening.

UK vehicle excise duty rates are set at their current rates for good reasons—to raise revenue to fund essential services, and to help to achieve our environmental obligations and objectives. The changes to vehicle excise duty in 2008-09, which were announced in Budget 2007, further sharpen the environmental signal to motorists to purchase more fuel-efficient vehicles and continue to support the development of the low-carbon market. The rate for the most polluting cars in band G increases by £100 to £400 in 2008-09, whereas the rate for low-carbon band B cars is frozen.

In deciding VED rates the Government take account of all relevant economic, social and environmental factors, including proportionality and fairness to motorists to ensure that there are appropriate signals across the entire system. The vehicle excise duty system is designed to signal, at purchase, that the more polluting the vehicle, the more VED will be payable and the higher its fuel costs will be. As my hon. Friend Rob Marris pointed out, table 7.2 of the 2007 Budget sets out the environmental effect of the VED changes announced in that Budget. However, the climate change committee's role is not to audit Government policy, but to advise on technical issues, such as setting carbon budgets and the level of the 2050 carbon emissions target, which will be needed if we are to stabilise climate change.

Although the carbon savings from VED changes are initially small, they will increase over time as the number of low-carbon cars is forecast to increase significantly. In addition, VED is part of a package of measures that support the European Union 2012 proposal to reduce average new car CO2 emissions to 130 g per kilometre, which could save as much as an additional 800 tonnes [This section has been corrected on 30 April 2008, column 6MC — read correction] of CO2 per year by 2020. Estimating the amounts of CO2 saved merely through VED rates is a tiny part of the entire picture. It is easy to argue that increases in tax achieve only tiny savings in CO2 emissions, but that is not the whole story, although some Conservative Members are trying to make out that it is.

The change in respect of CO2 emissions and engine technology was pointed out by Professor Julia King in her important report, which was published alongside this year's Budget. She said that a 100 g target was achievable by 2020. In the 2008 Budget, the Government confirmed that they will push the EU Commission to include a longer-term target of 100 g per kilometre by 2020 in its proposals for reducing vehicle emissions.

Professor King has also concluded that a typical driver can reduce their fuel bills and CO2 emissions by 25 per cent. by choosing the most efficient vehicle in the preferred class. That is why this year's Budget contained announcements that further increase the VED signals that aim to encourage people to move from high-emission to low-emission cars; confusingly, however, they are not in this Finance Bill, but for debate in next year's Finance Bill.

My hon. Friend the Member for Wolverhampton, South-West also read out some of the increases planned not for 2008-09, but for 2009-10 and 2010-11. I suppose that he is entitled to consider the very high emitting levels in the top bands, including the six new bands that have been created. However, in the interests of fairness he should also have pointed out that 55 per cent. of drivers will be better off or no worse off as a result of the changes announced in this year's Budget. Their VED bands will be frozen or go down.

The changes to the VED bands are designed to strengthen the signals so that people move from the top-emitting class of car to lower-emitting cars. I am thinking first of purchasers, but the changes are also designed to give those who design and produce new cars further incentives to produce more cars that qualify for the lower bands of VED.

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Photo of Russell Brown Russell Brown PPS (Rt Hon Des Browne, Secretary of State), Scotland Office 10:00 pm, 29th April 2008

I appreciate that there has been much discussion of working vehicles during the debate on a previous amendment. However, may I draw the Minister's attention to a group that has not been mentioned this evening? I am thinking of disabled people and those who have great difficulty with mobility. A saloon car is extremely difficult for them to access, so they must use a four-wheel drive vehicle. Will she encourage car manufacturers to look hard at the possibility of developing more small-engined, low-emission vehicles to meet the needs of that group of people?

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I agree that our signals through the VED rates are for those designing and putting new cars on the market, as well as for purchasers. We want to see more accessible vehicles in lower-emission bands. That is why these signals have been sent through the tax system.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I agree that our signals through the VED rates are for those designing and putting new cars on the market, as well as for purchasers. We want to see more accessible vehicles in lower-emission bands. That is why these signals have been sent through the tax system.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

What signal is given to people about reducing CO2 emissions when the biofuel duty discount is reduced? The result is that the price of biofuel is going up.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

The hon. Gentleman makes an important point, and we could spend a long time talking about it. Some worries are emerging about the effects of biofuels on CO2 emissions, and work is being done to determine biofuels' whole-life emissions levels. We have to look very carefully to see whether there are advantages to maintaining the differentials for biofuels. The idea of raising the biofuels differential before the new evidence about biofuels' CO2 emissions and whole-life costs came into the public domain was dealt with in the King report, which I recommend that the hon. Gentleman has a look at. The original idea was to shift the Government's support away from the development of the biofuels industry, and to transfer it to the road transport fuel obligation. However, new and important questions have been asked about biofuels. What are the whole-life costs of producing them? Are they putting food prices up and displacing the growth of food for human consumption? If so, what effects is that having, and what are biofuels' overall CO2 emission levels?

We could talk about all those things at great length, but I do not want to go down that road this evening. We are talking about VED at the moment, and I am sure that many of the hon. Members who have come into the Chamber to vote would not want me to move away from that.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

The Minister has cited my earlier remark about sending a signal. I agree that we should send a signal to prospective purchasers of new cars, but the changes that will come into force next year and the one after that will send a retrospective signal to people who may have owned a vehicle for upwards of seven years already. The problem with the proposals is that they are retrospective.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

My hon. Friend makes his point in his own way, but the important thing is to strengthen the signals being given to people with higher-emission cars. We have announced what VED rates will be three years into the future: the higher a car's emissions, the more likely it is that its VED costs will rise. We are attempting to bring about a behavioural change. People need to look at how they can migrate over time to lower-emission cars.

I turn now to why we are opposing amendment No. 6 and recommending that clause 15 stand part— [ Interruption. ]

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The level of private conversations among people who have just come into the Chamber has risen considerably in the last few minutes. Some hon. Members have been here throughout the debate and would like to hear the Minister's response.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

What signal is given to people about reducing CO2 emissions when the biofuel duty discount is reduced? The result is that the price of biofuel is going up.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

The hon. Gentleman makes an important point, and we could spend a long time talking about it. Some worries are emerging about the effects of biofuels on CO2 emissions, and work is being done to determine biofuels' whole-life emissions levels. We have to look very carefully to see whether there are advantages to maintaining the differentials for biofuels. The idea of raising the biofuels differential before the new evidence about biofuels' CO2 emissions and whole-life costs came into the public domain was dealt with in the King report, which I recommend that the hon. Gentleman has a look at. The original idea was to shift the Government's support away from the development of the biofuels industry, and to transfer it to the road transport fuel obligation. However, new and important questions have been asked about biofuels. What are the whole-life costs of producing them? Are they putting food prices up and displacing the growth of food for human consumption? If so, what effects is that having, and what are biofuels' overall CO2 emission levels?

We could talk about all those things at great length, but I do not want to go down that road this evening. We are talking about VED at the moment, and I am sure that many of the hon. Members who have come into the Chamber to vote would not want me to move away from that.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

The Minister has cited my earlier remark about sending a signal. I agree that we should send a signal to prospective purchasers of new cars, but the changes that will come into force next year and the one after that will send a retrospective signal to people who may have owned a vehicle for upwards of seven years already. The problem with the proposals is that they are retrospective.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

My hon. Friend makes his point in his own way, but the important thing is to strengthen the signals being given to people with higher-emission cars. We have announced what VED rates will be three years into the future: the higher a car's emissions, the more likely it is that its VED costs will rise. We are attempting to bring about a behavioural change. People need to look at how they can migrate over time to lower-emission cars.

I turn now to why we are opposing amendment No. 6 and recommending that clause 15 stand part— [ Interruption. ]

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The level of private conversations among people who have just come into the Chamber has risen considerably in the last few minutes. Some hon. Members have been here throughout the debate and would like to hear the Minister's response.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

Thank you, Mrs. Heal. I want to emphasise the Government's reasons for opposing amendment No. 6. We do not believe that it is appropriate to use the independent committee on climate change to audit the Government. As we move forward, it is important that we follow the King report's recommendation about making use of new technology. For example, we can ensure that better engine technology reduces emissions if we use VED to send the proper signals to motorists. By the time that the announcements in this year's Budget come into force, 15 of the 30 best selling cars in 2006 will be better off in VED terms, while nine will be no worse off. That means that people will be able to migrate to lower-emission cars in the same class.

We also hope that these tax signals and changes will result, reasonably quickly, in the development of 4x4s in lower VED bands so that people can not only drive the class of car that they want but have lower-emission cars, thereby ensuring that over time we will be able to make considerable carbon savings.

I wish to emphasise that the Government will vote against amendment No. 6 and hope that the clause will stand part of the Bill.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I want to make two brief points in response to the Minister and the debate. Conservative Members believe that taxation can be used to tackle climate change, but also that the tax revenues raised should be replacement revenues, not extra revenues. That is where we part company with the Government on these changes. They will pocket this money, put it into the Exchequer, and fail to reduce the burden on families. That is the approach that is being taken to environmental taxes, and that is why we will oppose this package of measures.

It is also important that where taxes are used to change behaviour, the impact of that should be monitored, and we believe that the independent committee on climate change is the best vehicle for doing so. We therefore wish to press amendment No. 6 to the vote.

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D

"Conservative Members believe that taxation can be used to tackle climate change" King Canute would be very proud of the Conservative members. Has no-one noticed that the warmer cycle is now changing again after a roughly thirty year period and is getting colder? Carbon dioxide is not a pollutant and taxing our energy usage will not make one iota of difference to the climate. It is already making a considerable difference to those least able to afford it and who cannot vote for their own...

Submitted by Dennis Ambler Continue reading

Question put, That the amendment be made.

The Committee divided: Ayes 175, Noes 299.

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Division number 163 Orders of the Day — Clause 15 — Rates of vehicle excise duty

Aye: 175 MPs

No: 299 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly negatived.

Motion made, and Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 325, Noes 145.

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Division number 164 Orders of the Day — Clause 15 — Rates of vehicle excise duty

Aye: 324 MPs

No: 145 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly agreed to.

Clause 15 ordered to stand part of the Bill.

Bill (Clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new clauses amending section 74 of the Finance Act 2003) reported, without amendment, to lie upon the Table.

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