Rates for light passenger or light goods vehicles, motorcycles etc

Finance Bill – in a Public Bill Committee at 10:45 am on 16th June 2020.

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

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary

Clause 81 makes changes to uprate the RPI vehicle excise duty rates for cars, vans and motorcycles with effect from 1 April 2020. VED is paid on vehicle ownership, and rates depend on the vehicle type and first registration date. The Government have uprated vehicle excise duty for cars, vans and motorcycles with inflation every year since 2010, which means rates have remained unchanged in real terms during this time. As announced in the 2018 Budget, all vehicle excise duty revenues will be used specifically for the national roads fund from this year, to provide certainty for road investment.

The changes made by clause 81 will uprate vehicle excise duty for cars, vans and motorcycles by RPI for the 10th successive year. As a result, the rates are unchanged in real terms since 2010, and that comes on top of the Government’s decision to freeze fuel duty rates for the ninth successive year. By April 2021, this will have saved the average car driver £1,200 in comparison with the pre-2010 escalator.

From April 2017, a reformed VED system was introduced that strengthened the environmental incentive when cars are first purchased, with all cars paying a standard rate in subsequent years. The standard rate will increase by only £5, the flat rate for vans will increase by £5 and the rate for motorcyclists will increase by no more than £2. These changes will ensure that the Government continue to support motorists with the cost of living, and that the vehicle excise duty system continues to incentivise the purchase of lower emission vehicles.

Photo of Felicity Buchan Felicity Buchan Conservative, Kensington

Does my hon. Friend agree that as the economy comes out of the dislocation of coronavirus, we need to build a greener and cleaner economy? Incentivising the use of low-carbon cars is part of that, and clearly we cannot do so just through the tax system; we also need a structure of electric charging points. I am glad to say that my borough is one of the top boroughs in the country in that regard. As we look to build a greener economy, I commend this clause and the related clauses.

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary

I thank my hon. Friend for her intervention, and I agree with her.

Photo of Wes Streeting Wes Streeting Shadow Exchequer Secretary (Treasury)

Following a previous theme, we support this approach to incentivising the use of greener and more environmentally friendly vehicles. It shows how decisions taken at the Treasury can support the public policy aims of other Departments and promote positive consumer change. Clearly, we have to do a lot more to ensure that people are using environmentally friendly vehicles, which produce fewer emissions and have a less detrimental impact on air quality and the wider environment than other vehicles do. I, in common with many stakeholders, welcome the reduced rate applied to alternatively fuelled light passenger vehicles, including hybrids and those powered by bioethanol and liquid petroleum gas.

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary

I think that is a point we can all agree on. The Government are doing a lot to encourage the uptake of low emission and zero emission vehicles. As I mentioned earlier, the reformed VED system was introduced in 2017 for new cars. To elaborate, on first registration the owners of zero emission models pay nothing, while those of the most polluting pay more than £2,000. In subsequent years, most cars move to a standard rate, which is currently set at £145. The exceptions are electric cars, which attract a zero rate, and hybrids, which receive a £10 discount.

In the Budget, the Government announced a number of further steps to reduce zero emission vehicle costs, including exempting zero emission cars from the vehicle excise duty expensive car supplement; extending low company car tax rates for 2024-25, as we discussed earlier; and extending the plug-in grant scheme for zero emission cars and ultra-low emission vans, taxis and motorcycles until 2022-22.

Question put and agreed to.

Clause 81 accordingly ordered to stand part of the Bill.