Clause 33 - Employer-subsidised public transport business services

Part of Finance Bill – in a Public Bill Committee at 4:15 pm on 16th May 2002.

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Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury 4:15 pm, 16th May 2002

The brevity of that contribution was a relief. I say that because my hon. Friend is not only a former solicitor with Thompsons—there could not be a more distinguished firm—but is also a former bus driver. I was expecting that Ted was either about to take a bus or subsidise his employee. I did not want to fall victim to Ted in quite the same way that my hon. Friend the Paymaster General almost did.

Leaving Ted aside for the duration, the measure will allow employers to subsidise local bus services that are used by their employees to get to work, knowing that they can enjoy free or reduced-price travel, tax-free. As several hon. Members will know, it is a continuation of a process that began last year of encouraging a form of behavioural change. The hon. Member for Cities of London and Westminster made a specific point about bus services provided by employers. We are going further this year to encourage people to adopt what I believe Members of all parties agree is a desirable behaviour change, which will promote sound environmental objectives.

The hon. Member for Southport, who has just joined us, is much too modest about his own abilities in this area—he knows a great deal about the subject. I have been cross-examined by him in an appearance before the Transport Sub-Committee. I would be the first to concede to him that the measure is modest. As

I said earlier, it is a continuation of a process. Measures in previous Finance Bills have included, for instance, tax-free cyclists' breakfasts on cycle-to-work days, which was an even more modest assistance in changing behaviour, and tax-free lunchtime use of works buses—again, a modest contribution to changing behaviour and promoting good, sound environmental objectives. This measure is another step forward.

The tax exemption is limited to local stopping bus services. We believe that that is the most cost-effective way to benefit the majority of bus commuters, and there will be knock-on benefits to local residents who use the same routes. They are likely to be better served by more regular buses and, possibly, extra stops. The right hon. Member for Fylde, one of my predecessors as Financial Secretary, gave an example from his constituency of someone who started their journey on a tram and ended it on a bus. It is perfectly true that, unlike subsidy of buses, subsidy of trams will not attract the relief under the provision. Indeed, the provision is further limited in that the bus must provide a local bus service as defined by the Transport Act 1985. It must be available to the general public at separate fares. In the right hon. Gentleman's example, it would have to stop at least every 15 miles, so one could not get off a tram and get on a bus that went for 20 miles. That would be outside the definition.