Clause 18

Finance (No. 2) Bill – in a Public Bill Committee at 12:15 pm on 26 October 2010.

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Photo of David Hanson David Hanson Shadow Minister (Treasury) 12:15, 26 October 2010

I beg to move amendment 12, in clause 18, page 15, line 11, at end add—

It is a pleasure to discuss the amendment with the Committee. The Opposition support the development of the scheme as set in the clause and in schedule 7, which provides for 100% first-year allowances for expenditure incurred on goods vehicles with zero emissions between 1 April 2010 and 31 March 2015 for corporation tax purposes, and between 6 April 2010 and 5 April 2015 for income tax purposes.

The Committee will be aware, as I indicated at the start of our consideration of the Bill, that a number of measures in it were initiated before the election and would have formed part of a Finance Bill had a Labour Government remained in office. As the Minister and Members will know, things did not occur as my hon. Friends and I would have liked. None the less, our Bill, and the clause that we proposed in our initial discussions, are effectively before the Committee today. The measure before us was set out in the Labour Government’s Budget in March, and we intended to legislate on it as soon as possible in the next Parliament.

I welcome the broad moves to incentivise businesses to reduce their CO2 emissions and become greener. That will benefit businesses, while, I hope, generating purchases of these vehicles and interest among manufacturers in producing them. This is therefore a win-win situation.

The purpose of the amendment is simply to say that this is a five-year scheme and it is important to look at its impact around the halfway point. There will be lessons that can be learned. Anomalies may well be thrown up, and challenges may need to be addressed further. It is important that these things are open to public scrutiny through a public report on the benefits and usages of the scheme.

The amendment says:

“The Treasury shall by 6 April 2013”— that is just past the midway point set out in the clause—

“produce a report for publication on the operation and take up of the scheme.”

Issues might arise, and we might want to reflect on them publicly, although I would obviously expect the Treasury regularly to monitor the scheme internally.

I would welcome public discussion on a couple of key points. First, we have set an €85 million cap on the scheme. In three or four years’ time, that might or might not be appropriate. I recognise that the Treasury can, under schedule 7, introduce regulations to make changes, but it is important to produce a report saying how the cap has operated over the three years to 6 April 2013. Have currency fluctuations meant that the cap is worth less or more than it was at the start of the scheme in 2010? Is the cap in 2013 appropriate for the last two years of the scheme? I recognise that there will be constant monitoring and evaluation, but it is important that we publish a report looking at these issues and do not just have a stand-alone piece of secondary legislation, which might be passed in a Committee like this one at some point in future, irrespective of what has happened overall in the scheme.

I am interested in the definition of “Firms in Difficulty”. We need some assessment of how many firms in potential difficulty—particularly in what might be economically challenging times over the next two to three years—would  be, could be, or are applying for the scheme. How many would have got the allowance, are getting it, or could be turned down? That needs to be reflected on, in relation to the definition of firms in difficulty. There will be constant monitoring of that issue, but I would be interested—this is why a mid-point report is particularly valid—to know how many firms were turned down, and whether the definition was still appropriate at that time.

We need some public facts and figures, which, as the amendment sets out, would form a report for publication on the operation and take-up of the scheme. It is important to look at the conditions in proposed new section 45DB, which is set out in schedule 7. That new section lists a range of exclusions from the allowance. It is important to monitor, look at and develop that, taking into account the regulations at the time. I want the scheme to succeed, and it is a good scheme, but it is important to monitor it constantly.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Is my right hon. Friend satisfied that the exclusions are appropriate? They include the fishery and aquaculture sectors, and firms undertaking waste management collection. Is he satisfied that those should be excluded?

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am grateful to my hon. Friend for raising that issue. I was going to test the Minister on the reasons behind those exclusions. As part of the review proposed in the amendment, we could look at those exclusions, relevant though they may be, and I would welcome an explanation from the Minister as to why those exclusions have been made. Will those exclusions continue for the duration of the scheme? Will representations be made on them in due course? If the Minister looks at page 61, as my hon. Friend the Member for Edinburgh East is doing, she will see that proposed new section 45DB(4) lists exclusions

“(a) in the fishery or aquaculture sector, as covered by Council Regulation (EC) No 104/2000, or

(b) relating to the management of waste of undertakings.”

Will the Minister tell us why those sectors are excluded? I was going to talk about that during the clause stand part debate, but the issue would form part of the review in 2013 on the operation and take-up of the scheme.

My final point is that, under the legislation, we are talking about a five-year, limited scheme. Organisations outside this House have welcomed the fact that the clause enables companies to plan ahead and look at the capital expenditure for goods vehicles for the future. As part of that commitment to planning ahead, the Minister could, through the amendment, examine the success, operation and take-up of the scheme at year 3, and all the issues that I have mentioned. She could indicate whether the scheme will come to an end in 2015, as proposed in the Bill, or whether it could, based on the assessment, continue.

It would be valuable, with regard to forward planning, to build in a test mark at 2013, so that the Minister can indicate at that stage whether the scheme will end in 2015, or whether it will be considered for continuation. What views do the manufacturers and purchasers of said vehicles have on the scheme to date?

Photo of Alison McGovern Alison McGovern Labour, Wirral South

As the Minister has mentioned, some of the provisions in the Bill are designed to address market failure. I am conscious of the importance  of the clause in encouraging a new way of procuring zero-CO2-emitting vehicles. The market for such vehicles is changing rapidly.

The construction of such vehicles, and the issue of whether we in Britain build high-tech that gives us a competitive advantage in the production of such vehicles, is changing rapidly, too. I know that from speaking to manufacturers. Does my right hon. Friend feel that the kind of reporting that he has alighted on would assist manufacturers in getting a direction of travel from Government that might be important for business planning?

Photo of David Hanson David Hanson Shadow Minister (Treasury) 12:30, 26 October 2010

I am grateful to my hon. Friend for making her points.

The purpose of the amendment is to bring about a formal review—for formal publication and for formal consideration—at the mid-point of the scheme so that we can take account of the many changes that might occur between now and 6 April 2013 in the manufacturing of, and the demand for, vehicles that produce lower emissions. I want to encourage the manufacture and purchase of such vehicles. I hope that the clause will bring about both those things, and by encouraging purchase, we will encourage manufacturing.

If we have a five-year limited scheme, we will have legislation in place once the Bill has completed its passage through the House and another place. The Minister will have scope under schedule 7 to look at a range of possible changes to the scheme, but while those changes will be considered by the Minister and the Treasury, they will not be subject to formal public review and there will not be a formal document on the effectiveness of the scheme.

I hope that the amendment can be accepted—if not in practice then at least in spirit—so that we can have some formal recognition of how the scheme is operating. We could look at the exclusions that my hon. Friend the Member for Edinburgh East cited and consider whether they are still relevant in 2013. We could also look at the points made by my hon. Friend the Member for Wirral South about how we continue to encourage the purchase and manufacture of low-CO2-emission vehicles. I commend the amendment to the Committee.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

If I set out the rationale behind the clause and then address the points raised about amendment 12, we can cover most of the ground that we need to.

Clause 18 and schedule 7 provide for a 100% first-year capital allowance for expenditure on zero-emission goods vehicles such as electric vans. This focused measure is intended to help to encourage the uptake of cleaner goods vehicles by providing businesses with a cash-flow boost when investing in such vehicles.

Expenditure on new zero-emission goods vehicles registered on or after 1 April 2010 for corporation tax, and 6 April 2010 for income tax, can qualify for the allowance. The time-limited nature of the scheme will encourage businesses to act now, thus giving a boost to the emerging electric van market. It will also allow us to monitor uptake and the cost of the measure, and to ensure that the relief is correctly targeted.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

I am interested in the Minister’s suggestion that the time limit will motivate companies to act. Will she give us a few words of explanation?  What evidence has the Treasury used to arrive at that conclusion? Was there any contradictory evidence to suggest that the time limit or any other aspect of the scheme might cause people to delay any action?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

Whenever such a new measure is brought in, there is a sense of being careful to ensure that it is targeted. On the one hand, we are keen to stimulate the market in this area. It has been clearly shown that similar measures have led to a decrease in emissions from cars over time because investment in technology has improved. We are now keen to look at what we can do to achieve a similar improvement on van emissions which, as I am sure the hon. Lady is aware, are still a significant part of motor vehicle emissions in the UK. On the other hand, however, we need to ensure that any relief is appropriately targeted. The measure will hopefully not only kick-start the electric van market and send a signal that people have a time frame within which they can invest, but—and the amendment refers to this—give the Government the ability to look at the continued targeting of such relief and ensure that it remains appropriate and of good value to the taxpayer.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Is there a particular reason why the relief will apply to the purchase of new vehicles but not second-hand ones? For some firms, buying second hand might be an equally good way into the market so that they can replace a polluting vehicle with a zero-emission one, but at a cheaper price.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

That is obviously an interesting comment. In many respects, our debate is getting ahead of where the market is at the moment. Last year, only about 175 electric vans were purchased. The measure is aimed at stimulating that initial purchase, rather than any secondary trading.

Zero-emission vans are an emerging technology, and their uptake will help to reduce CO2 emissions in the transport sector. Current sales are low, with only 175 new registrations of electric vans in 2009, and the Government are committed to making the transport sector greener. The scheme is aimed at supporting nascent and innovative transport technologies—not only electric vans but hydrogen fuel cell-powered vehicles. It will encourage the further development of such technologies and increase the size of the electric van market, thus bearing down on CO2 emissions.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

May I ask my hon. Friend a question, although she might not have the answer immediately to hand? She just mentioned hydrogen-powered vehicles. Bristol—just so that we can have another mention of Bristol this morning—is about to have a hydrogen-powered ship in the harbour to transport goods and people. I notice that the Bill refers to “vehicles”, so would that include a ship?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

I do not believe that it would. My hon. Friend is right to point out that although we are talking very much about vans, the provision relates to goods vehicles. That is because some of the technology is literally very heavy, and we therefore needed a measure that covered heavy goods vehicles to ensure that we could capture the technology that we wanted to and encourage investment in such vans.

Amendment 12 would require the Treasury to produce a report for publication by 2013 on the operation and take-up of the first-year allowance for zero-emission goods vehicles provided by clause 18. It is, of course, important to ensure that any tax measure is implemented properly and has the desired effect. The Chancellor keeps all taxes and reliefs—including this one—under review precisely to ensure that they are achieving their aims. It is unnecessary to put the commitment in amendment 12 into primary legislation, mainly because we will be able to see the registration of electric vans within details of the registration of new vehicles, and also because industry bodies, such as the Society of Motor Manufacturers and Traders, are obviously very keen to monitor the scheme.

The right hon. Member for Delyn talked about reviewing progress. When comparable measures have gone through the House—one that springs to mind is the relief on stamp duty for zero-carbon homes—people have been able to establish the progress of the relief and how widely it is used through parliamentary questions. There is therefore no danger that we will somehow be unaware of the effectiveness of the relief, and I assure the right hon. Gentleman that the Government hope to ensure that it is effective, because that is important.

On the important point about exemptions, the reason for them is that we have to comply with state aid rules. Due to its narrow focus, the scheme is a notifiable state aid, so the legislation has to comply fully with state aid rules and we have to reflect that in the Bill. Due to its environmental nature, the scheme can be introduced under the terms of the general block exemption, but that requires restrictions to be placed on certain trade groups benefiting from the allowances and, as we have heard, a cap on the amount of aid that businesses can obtain. Designing the scheme to comply with those conditions has avoided the need to undertake a lengthy process of negotiation with the Commission. The legislation is designed to comply fully with the state aid rules.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport)

One of the areas that I represent in Strangford—Portavogie village—is one of the biggest fishing ports in Northern Ireland. Many van salesmen face increasing costs and wish to consider the use of electric vans, but they do not always have the capacity to cover sufficient distance due to lack of progress and technology. I am concerned that the clause means that those people will not be able to participate. I understand the reasons given by the Minister, but will she review whether there are concessions available under European law—under the de minimis clause, for example—that would enable provisions to be made?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

I reassure the hon. Gentleman that we have sought to ensure that the measure will apply as broadly as possible within the existing state aid rules. He raises a valid point about this kind of measure’s relationship with Europe, but that is more a matter of debate for Europe than it is for us today. On the one hand, we want to ensure free competition across Europe, and the state aid rules help to ensure that. On the other hand, we want to make progress on bearing down on emissions. The clause and schedule stay within the scope of European Union legislation. As I said, the scheme constitutes a notifiable state aid, so we had to be  careful about how we structured it. The hon. Gentleman’s broader point about the sectors outside the provision is fair, and I assure him that the Government will continue to look at that, because we want the application of such measures to be as broad as possible.

I hope that I have answered everybody’s queries. The clause is positive and shows that we can build on the progress of reducing car emissions.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am grateful for the Minister’s comments. We do not disagree about the worthwhile nature of the clause, nor on its operation and practice. She reflected on the points made by my hon. Friends the Members for Edinburgh East and for Wirral South, but I want to press her a little more.

I might be old-fashioned, but I like to know the outcome of any proposed action downstream. If we do something, I like to know what we expect it to achieve and how we expect it to impact on the community at which that is targeted. The Minister has not told us how many vehicles she expects to be newly acquired as a result of the clause’s benefits. One of the reasons why I tabled an amendment to establish a midway review was so that we could test the impact that she expects. She has helpfully mentioned that about 175 electric vehicles are in current use. Under the clause, how many vehicles would there be in 2011-12, 2012-13 or 2014-15? There is a five-year proposal, and I should have thought that the Treasury would consider the numbers and the impact, in relation to judging its success or value as a taxation measure to help to stimulate the industry, and accordingly establish first-year allowances for zero-emission vehicles.

One reason why I tabled the amendment was to enable us to hear from the Minister what she expects the clause to achieve over five years by way of stimulus to the industry. At the mid-point, in 2013, I want a test of whether the Government have achieved the objective, or whether the scheme needs to be re-examined or tweaked, and whether the €85 million is still relevant without, as could happen under schedule 7, the Government necessarily changing things without reference to the wider parliamentary system.

It would be welcome to me, before I roll over on the amendment, to hear from the Minister whether she has obtained an assessment of the numbers that she can tell the Committee about, so that we can monitor the scheme’s effectiveness, irrespective of whether the report is accepted.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury 12:45, 26 October 2010

I am grateful for the hon. Gentleman’s remarks, because they give me the chance to explain that the €85 million is effectively the maximum expenditure that any company could make to get the maximum benefit from the measure, to stay within our state aid rules.

It is difficult to say how many vehicles’ purchase the measure will stimulate, because it depends on a range of factors, not the least of which are progress on economic growth, and other transport issues that may have an effect, such as the price of petrol, or the extent to which cities set up localised charging schemes with or without emissions aspects. It is obviously difficult to put a figure on it. The point is that we know what the direction of travel should be: we should aim to stimulate the purchase  of more electric vans. That is what the measure is intended to do, and I hope that the right hon. Gentleman will support it.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

We agree with the measure, but the Minister is telling the Committee that she does not know how many vehicles it will encourage, or over what period. She does not know whether the measure will be a success at the end of five years. The rationale for the amendment is simply that at the mid-point of the scheme we should produce a report about its impact.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

I was a little disappointed with the Minister’s response to my earlier question about numbers—and I think that this relates to the point made by my right hon. Friend the Member for Delyn. The Minister gave the argument for the measure, but gave no detail about the evidence that had been built up into a case to prove it would work. Hence the need for a report.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Order. I understood that the hon. Lady had sat down, and that the right hon. Member for Delyn was making a speech, on which the hon. Member for Wirral South was intervening. I am sure that the Minister will have plenty of opportunity to speak further if she wishes, but perhaps the right hon. Gentleman will answer his hon. Friend’s intervention first.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am grateful for my hon. Friend’s intervention, and if the Minister wants to intervene on me I am happy to allow it. The point has been made that the principle of the scheme is accepted on both sides of the Committee. We think it is a good scheme and wish it well, but I am not yet clear about how we measure its success or the number of vehicles that will be purchased because of it, or whether its operation will be given a positive examination after three years.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

It is a pleasure to speak for the first time under your fantastic chairmanship, Mr Chope.

Do the Government not routinely provide reports and answer questions to the House? There will be opportunities for written questions and for all manner of methods of debate in the House to measure progress in 2013. If there are questions, surely it would be better to ask them at that time, rather than bizarrely putting this requirement into primary legislation. As far as I am aware, this kind of requirement is never put into primary legislation; we hold Ministers to account on the Floor of the House. That is how it has been, and surely it is how it should remain.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am happy to hold Ministers to account on the Floor of the House and in Committee. That is what we do in opposition; I did so when I was in opposition many years ago, and I will do so again.

In order to hold Ministers to account, however, we need to know the proposed outcome of a particular activity. The Minister has volunteered that she cannot tell the Committee how many vehicles will be purchased as a result of the stimulation that this relief will give in the five-year period. The Minister cannot tell me how we will judge the success of the measure.

For example, suppose the measure is put in place—I support it, and I do not argue with the principle behind it—and I table a parliamentary question on 6 April 2013 asking how many vehicles have been purchased as a result of the scheme. If I am told that 10, 20, 50 or 60 vehicles have been purchased, how do we know what the Minister’s objective was when the scheme commenced? It could be underperforming by 100%, 50% or 20%.

If the Minister has to produce a report on the outcome and take-up of the scheme by 2013, she will effectively have to focus now on what the scheme will achieve. She will have to focus on how it will be beneficial; how it will work; whether it will be good for the manufacturers of green vehicles; whether it will be good for the purchasers of such vehicles; whether the €85 million cap is still relevant; whether the exclusions of firms in difficulty are still relevant—

Charlie Elphicke rose—

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I will give way in a moment. The Minister will have to consider whether the exclusions that my hon. Friend the Member for Edinburgh East has mentioned are still relevant and whether the factories and businesses that are being developed, which my hon. Friend the Member for Wirral South has mentioned, are still in the same situation. If we know clearly what the Minister wants to achieve now, we can review with certainty in 2013 whether those objectives have been reached. We will be able to amend the scheme or advance proposals before it ends in 2015, and/or we can give businesses clarity about whether we want to continue with it after 2015 or to wind it up.

I do not argue with the principle, but the amendment is designed to extract an indication from the Minister of what she wants to achieve, how she will achieve it, and how she will make sure that businesses relate to her cause and activity. In addition, halfway through the scheme we would review it to ensure that it is doing what we both want it to do.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

Correct me if I am wrong, but did the policy not originate from the previous Government? Was it not originally advanced in the previous Government’s most recent Budget? The right hon. Gentleman has a better repository of knowledge of the aims and objectives of the scheme on his own Benches, because presumably his colleagues the former Ministers generated and brought forward the measure. It is a measure that we are happy to endorse because we are so concerned about the matter, but surely this is—I regret to say—politicking of the worst kind.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

We have no objection to the principle of the scheme. The Labour Government proposed the scheme, and I am pleased to see that the Minister has accepted it in principle. When the scheme was introduced in the Budget in March of last year, I was Minister for Policing, Crime and Counter-Terrorism, so I was not dealing with the matter at that stage. At some point, it is our job as the Opposition to ask the Minister what the clause will achieve. What outcomes is she seeking? Are they the same outcomes that my colleagues were seeking previously? What outcomes are the Government trying to achieve? I want those matters considered.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I am concerned about what is being said. I accept the principle, but we want to move things forward. I am worried that, for the first time in Committee, the debate is going down to the unnecessary level of stifling the ultimate aim of the clause, something with which all members of the Committee agree.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am not trying to stifle anything. I am asking the Minister to accept that, at the point midway in the five-year scheme, she should produce a report that sets out what has been done over the previous three years, how many vehicles have been purchased because of the scheme, the cost to the taxpayer, the benefit in respect of CO2 emissions, details of the current operation and whether people have found the scheme to be worth while. The report should note that there are two years left of the scheme and state whether the Government intend to continue its operation or pull the scheme because it has not proved successful.

I want the Economic Secretary to be clear about what she wants to achieve and to be happy to have such details available for public scrutiny in due course, so we know how the scheme is operating. Those suggestions are not meant to stifle the discussion or be “politicking”—with due respect to the hon. Member for Dover. It is simply good business practice to know what we are doing, why we are doing it, what the outcomes will be and ultimately why we have proposed such measures in Committee.

I am looking to Opposition Members to see how strongly they feel about such issues, but I am minded to withdraw the amendment today for the sake of progress. The hon. Lady needs to examine such matters because we will be here in 2013 and, given current practice, sadly so will she. We will hold her to account on the effectiveness of the scheme. We might even table some questions today on the points that have been mentioned about the number of vehicles and the outcome that she expects from the operation of the scheme.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

The right hon. Gentleman sounds as though he is already tabling his parliamentary questions for use in three years’ time. I very much hope that more electric vans will be sold than the number of homes relieved of stamp duty because they are zero carbon.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Mr Goodwill.)

Ordered, That the Bill be further considered today at half-past Six o’clock.—(Mr Goodwill.)

Committee adjourned.