Clause 20 - Calculating cylinder capacity of vehicles

Finance Bill – in a Public Bill Committee at 10:30 am on 16th May 2002.

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

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I would like the Minister to explain, because some of us do not understand, how there can be more than one way of calculating cubic capacity. The clause appears to give powers to calculate cylinder capacities in different ways.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

I do not think that the hon. Gentleman is alone in his response to the clause. Let me explain the thinking behind it. It was important that the Secretary of State should have the powers to calculate the cylinder capacity of all vehicle engines recognised in statute. Prior to 1999, cars and light vans paid a flat rate of vehicle excise duty. In June of that year, a reduced rate was introduced for certain vehicles based on their cylinder capacity. The relevant regulations defining how such capacity should be calculated was apparently only extended to motorcycles.

There was not, therefore, a recognition in statute that the Secretary of State should fulfil such a role in relation to all vehicle engines. The provision corrects the position and grants the Secretary of State powers to calculate the cylinder capacity of all vehicles. We will all be reassured that the Secretary of State acts within powers in making what are, as the hon. Gentleman says, rather obvious calculations.

Photo of Michael Jack Michael Jack Conservative, Fylde

I am afraid that I find the clause intriguing. What would happen if the vehicle manufacturer made its own calculation of the cubic capacity of an engine and there was a dispute between it and the Government over the matter? As far as I can tell—perhaps I have not studied the clause in the exacting, detailed manner that it deserves—the clause does not contain the formula by which such calculations would be made.

Perhaps the Financial Secretary would tell me where I might find the mathematical formula. Cars are often described in populist terms as having engines with a capacity of 1.8 or 2 litres, whereas the capacity according to the vehicle manufacturer's definition may be 1 or 2 cu cm above or below that publicly stated capacity. That precise capacity as calculated by the manufacturer usually appears on the vehicle documents. How is that potential difference of opinion to be resolved? It could have quite a material effect on taxation.

Secondly, how will the formula deal with Wankel-type engines, which contain a different form of technology from the traditional normal cylinder arrangement? Will the clause enable the Financial Secretary to deal with future developments?

Thirdly, how will the clause deal with engines that have variable strokes? The Financial Secretary will appreciate that I am not offering him a sensorial opportunity. In vehicle technology terms, there are performance reasons for engines with such a facility, but it is not clear how the clause will deal with it.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

Different strokes for different folks. As usual, the right hon. Gentleman—this time, donning his anorak—has asked for detailed clarification, and I shall do my best to accommodate him.

It is important to realise that it would be inappropriate to include in a Bill the basis on which precise mathematical calculations are made. Secondary regulations normally cover matters such as the calculation of cylinder capacities for all vehicles. The clause is intended to firm up the primary legislative position in respect of such regulations, by which I mean that it corrects an anomaly. It will ensure that the Secretary of State has the right to say how cylinder capacity is calculated for all vehicles.

Rotary engines, or Wankel engines, are subject to the general rate, which I hope answers the right hon. Gentleman's specific question on that form of engine.

If the Committee takes the view that the proposed change should not be made, the power to make regulations to calculate the cylinder capacity for cars will be incomplete. The revenue might be challenged in such a way that it is threatened, unless the Committee gives the Secretary of State the powers in the clause, as I hope that it will.

Photo of Michael Jack Michael Jack Conservative, Fylde

The Minister did not deal with the point at the heart of his last remark: what is the resolution mechanism, should a dispute arise over measurement?

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

It is the wisdom and balanced judgment of the Secretary of State, subject, of course, to proper oversight by the courts through judicial review. That is always the way, as the right hon. Gentleman well knows. I am sure that a resolution will be achieved using the primary legislation that the Committee is being asked to put in place and the secondary regulations that will be published in due course. I referred to the Secretary of State's wisdom, but we should not forget that there will be sympathetic and careful consideration of the issue, that advice will be readily proffered, as my hon. Friend the Paymaster General said, and that, if necessary, my learned friends will offer their assistance. There will be no need to go to the extremes that the right hon. Gentleman contemplates.

Question put and agreed to.

Clause 20 ordered to stand part of the Bill.

Clause 21 ordered to stand part of the Bill.