To ask Her Majesty's Government whether, to stimulate the British automotive industry and to reduce emissions, they will extend the tax and duty benefits available to private vehicles to all commercial vehicles.

My Lords, fuel duty and vehicle excise duty apply to all vehicles, both private and commercial, while commercial vehicles already enjoy a range of tax and duty benefits. VED rates for heavy goods vehicles have been frozen since 2000, and heavy goods vehicles that meet European air quality standards are eligible for reduced VED rates through reduced pollution certificates. Business expenditure on vehicles may be tax deductible against companyprofits, subject to corporation tax rules.

My Lords, I thank the Minister for that response. In view of the imminent European emissions regulation 6, is it not time that the Government considered extending to HGVs and light goods vehicles the requirement on vehicle manufacturers of private cars with regard to their CO2 emissions and possibly extending it further to cover NOx?

My Lords, the noble Lord is right that the European requirement comes into force in October this year, but we have already had in place over the past year an incentive to the industry to produce commercial vehicles with lower emissions.

My Lords, given the importance that the Government attach to making the UK a greener-vehicle manufacturing hub, can the Minister take another look at whether the current range of incentives might be strengthened?

My Lords, of course the Government look at the question of improving our performance on reducing pollution, but the noble Lord will recognise the vehicle excise duty incentives for reducing the emissions of cars and commercial vehicles. The greenest cars of all, which are not powered by carbon fuels, do not pay excise duty.

My Lords, nearly two months ago the Government announced to a great fanfare a multibillion pound package for the motor industry focusing on lower carbon initiatives. How much money has so far been paid to the motor industry?

My Lords, this is an ongoing programme, as the noble Baroness will appreciate.

Noble Lords:

Oh!

My Lords, she will recognise that the industry takes time to adjust to a stimulus of this kind, but the direction of travel is quite straight forward—it is low-pollutant travel. Industry will benefit, as will the private car owner, from reducing the pollutants which their engines emit. The level of vehicle excise duty is an important stimulus towards that.

My Lords, I am sure the Minister is aware that the lowest-emitting carbon-fuel-consuming cars are of course those with diesel engines. Their emissions are even lower than those with hybrid systems. Are the government schemes for the taxation and pricing of diesel fuels appropriate?

My Lords, the issues of the differential between petrol and diesel have a substantial history, and the differential is marked. However, the noble Lord will appreciate the extent to which the Government have put emphasis on low-pollutant vehicles. VED is the easiest signal to send because it is paid once a year or at six-monthly intervals and is a gross figure. We are signalling that we expect vehicles with low emissions to be purchased. We are also encouraging manufacturers; it is not as though manufacturers are not aware of worldwide pressure to investigate those technologies that produce fewer pollutants.

My Lords, in view of what the noble Lord, Lord Broers, has said, which was news to me, is there not some mechanism that would reduce taxation on diesel fuel, which would encourage more people to buy diesel cars, instead of petrol cars?

My Lords, it is easy to employ the concept that taxation should be reduced. However, there is a cost involved in the reduction of taxation. It is a reduction in revenue, which means that expenditure would have to be cut elsewhere. I am always interested in the Opposition's proposals that we should cut revenue because I never get any suggestions of where they would cut expenditure.

My Lords, will the Minister congratulate those local authorities that have in mind the need to reduce emissions when they design their car parking policies, such as policies for residents' parking and on-street parking in controlled parking zones? This makes it less expensive for lower-emitting cars to park. My borough of Richmond has been at the forefront of this.

My Lords, of course we welcome anything that local authorities can contribute. There is no doubt that a whole range of strategies can be deployed to encourage the use of low-pollutant cars. The message of the benefit of low-pollutant cars is probably widespread in the community. We need consumers to act accordingly.

My Lords, I revert to the Minister's penultimate and ante-penultimate answer. Allowing for the fact that the Irish have a certain flexibility because of the Kyoto Protocol, they had no difficulty in taxing unleaded petrol higher than diesel. Why would the same freedom not be available to us?

My Lords, it reflects taxation strategy over many years. The Irish economy is often quoted as an exemplar for the British economy. On almost every occasion that it is quoted, I look at the facts and the comparison does not stand up. It is a vastly different economy with vastly different issues of motor transport—in the numbers of vehicles—from those of an advanced economy such as the United Kingdom. The issues facing Ireland and Britain are vastly different.

My Lords, given that transport is by far the greatest contributor to CO2 emissions, and the urgency for this country to reduce CO2 emissions, is it not illogical for the Government not to give some stimulus to the use of diesel, when diesel cars are now the lowest emitters?

My Lords, it is not that we do not give commercial industry any incentives to reduce pollutants. I have indicated the advantage that we have already given in grants to industry for the purchase of commercial vehicles that are lower emitters. We will emphasise that from October when the European directive becomes mandatory. We are concerned to ensure that, as far as possible, transport plays its part in lowering emissions. That is not as easy as the suggestion that one has merely to reduce the tax take on diesel.

My Lords, have the Government considered a scheme similar to that which, I understand, operates in some European countries, whereby cars that have high emissions can be traded in for scrap if the owners replace them with cars with low emissions? The scheme involves a €2,000 offset against the new car, which is financed by government, thereby helping both with the problem of emissions and the car industry?

My Lords, we are looking at that very carefully because it has merits if it is done well. One of the first countries to employ this strategy was France, but it is running into very heavy deficits and its Government are incurring much higher costs in developing the scheme. Therefore, it is not surprising that our Government are taking care to evaluate the effectiveness of the scheme before it is fully deployed.

My Lords, I am sure the Minister would not wish inadvertently to mislead the House but, when he says that the higher taxation on diesel goes back many years, is he aware that when I was Chancellor the tax on diesel was less than the tax on petrol, and at that time we had a budget surplus, not the horrifying and rapidly growing deficit that we have at present?

My Lords, how could I possibly spoil the fun? The noble Lord may refer to days gone past but he has to go back only one year to see that the decline in the cost of diesel fuel over the past year far surpasses anything that people have put forward in terms of a cut in fuel taxes simply because of the decline in world oil prices. Therefore, we have to put this debate not only into the noble Lord's historical perspective but into the more recent and relevant perspective.