Clause 16 - Duty at higher rate: exception for tractive units

Finance Bill – in a Public Bill Committee at 3:00 pm on 15 May 2003.

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

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

We have moved from betting and gaming to vehicle excise duty. We have passed through clause 15 on Northern Ireland and reached clause 16. The clause provides that an articulated lorry is not chargeable at the higher tax rate if used with fewer axles than when licensed. Provided that actual weight, rather than plated weight or design weight, is used to determine the tax rate, the vehicle will not fall into a higher tax band than when licensed. That will take effect from 9 April.

I am sure that the Economic Secretary will be as aware of that matter as I am. He will not be surprised that I have been made aware of it by the Freight Transport Association, not least because it has been

instrumental—and successful—in making representations on the matter. I generally support the clause, but there is useful background material, and I shall place just some of that history on the record.

I am grateful to the Freight Transport Association for having ensured that the provision is well understood. That is important because, as a constituency Member, I have had many cases on it. I dare say that that is the case with Members across the Room, and I see one of my neighbouring Members of Parliament from across the border in Wales in his place, the hon. Member for Wrexham (Ian Lucas). He is aware that there are many trunk roads in our part of the world, but not that many motorways. Since the introduction of the 44-tonne limit, an increase under European law, the question of axle weight has become key.

Axle weight is causing concern because, clearly, lorries can now be larger. Many of our roads were built after houses were already there, which had been built when the road was a track. There is much grave danger. People have recognised the importance of axle weight as they have come to understand the cost to the Exchequer and to local councils and highways authorities. These heavy lorries are, unquestionably, the greatest determinant of road maintenance costs. With the company for which I used to work, I used to be the leading supplier of aggregates in the FTSE 100, so that situation was very advantageous to us; but it is very poor in terms of the competitive economy of the nation.

The change that the clause contains will protect operators from prosecution if they opt for the flexibility provided by the seven bands of vehicle excise duty introduced in the 2001 Budget. There is a slight history to that, which is building up. I agree with the Freight Transport Association that the change is sensible and will prevent articulated vehicle operators from being prosecuted because of the previous somewhat ambiguous legislation. That is not intended as a criticism; this is a sensible tidying-up. It will also avoid extra administration for the Vehicle Inspectorate and the Driver and Vehicle Licensing Agency. Those costs could be quite significant, and the clause will assist to temper the administrative burdens that there would be on the public purse if operators were required to up-plate and down-plate vehicles according to their circumstances.

It would be gilding the lily to go through the history from 2001—those who wish to know more can always look it up—but the new vehicle excise system introduced that year gave operators of articulated vehicles the choice of seven taxation bands. The main thing to recognise is that as a result of the sensible and determined representations of the FTA, among others, the Treasury has included in the clause an addition that is helpful in relation to the Vehicle Excise and Registration Act 1994. It confirms the flexibility for articulated vehicles to operate at maximum weights with trailers that have fewer axles without attracting a higher rate of duty.

I hope that all that is not as clear as mud. It is enormously important to recognise changes in road usage, even if they may be somewhat unwelcome. It is a fact that weights have been allowed to increase, thereby putting trunk roads under much more pressure. The more we can do to reduce the administrative costs of up-plating and down-plating for such vehicles, the better for all of us.

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

I welcome the hon. Gentleman's welcome for the clause. He recognises the work of the FTA , which I am happy to confirm was helpful and influential.

The clause is intended to clarify the system of vehicle excise duty for lorries that we introduced in December 2001, which greatly simplified the structure of taxation for lorries by replacing more than 100 separate tax rates with seven tax bands that reflected the road wear and environmental impact of different types of lorries. In particular, it was intended to allow greater flexibility to operate a lorry at a variety of weight and axle configurations without the need to re-plate or re-licence it. That significantly reduced red tape for the industry and was greatly welcomed at the time.

The flexibility in the new structure for VED for goods vehicles relied on section 15 of the 1994 Act, which states that a vehicle becomes liable to VED at a higher rate when it is used in such a way as to render it liable to tax at a higher rate. Thus, a vehicle could be used at any weight or axle combination that rendered it liable to taxation at the same or a lower rate.

However, we became aware of a potential conflict between that interpretation and clause 60A of the Act, which states that the rate of tax at which a licence is issued is determined by the plated weight of the vehicle; in other words, the maximum weight at which a vehicle is permitted to operate. It became clear that there was a risk that operators who took advantage of the greater flexibility that we intended might leave themselves open to challenge and prosecution.

The aim of the clause is to resolve that conflict and make it clear that once a vehicle is licensed and on the road, it is the actual weight, not the theoretical maximum weight, of the vehicle that determines the tax liability, in line with the policy that we announced in 2001.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I am grateful for the change, as someone who used to drive such vehicles. Can my hon. Friend tell me whether it will be easier or harder for the police to enforce the law when they stop a vehicle, in terms of having to weigh it rather than refer to its plated weight?

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

We have not yet encountered significant enforcement problems in the operation of the new regime, and I do not anticipate that the clause will change that. Clearly, I must stop pausing for breath before I say my final sentence. On that basis, I hope that the Committee will support the clause.

Question put and agreed to.

Clause 16 ordered to stand part of the Bill.