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Column 773Spring, Richard
Squire, Robin (Hornchurch)
Stanley, Rt Hon Sir John
Tapsell, Sir Peter
Taylor, Ian (Esher)
Taylor, John M (Solihull)
Thompson, Patrick (Norwich N)
Thornton, Sir Malcolm
Townsend, Cyril D (Bexl'yh'th)
Twinn, Dr Ian
Vaughan, Sir Gerard
Waldegrave, Rt Hon William
Walker, Bill (N Tayside)
Wardle, Charles (Bexhill)
Wiggin, Sir Jerry
Winterton, Mrs Ann (Congleton)
Young, Rt Hon Sir George
Tellers for the Noes: Mr. Bowen Wells and Mr. David Willetts
Column 773Question accordingly negatived.
`(c) if it is a vehicle with engine size under 1,200 cc, the fuel efficient rate.'.
`(3A) The fuel-efficient rate is 60 per cent. of the general rate.'.
Mr. Taylor: The amendment has two aims. First, it would help those who have been hard hit by rapid increases in petrol prices, a policy that the Government have pursued since the last general election. Secondly, it aims to reinforce the environmental benefits which the Government claim will flow from such changes.
It is ironic that so many Conservative Members attacked the Liberal Democrats during the general election campaign for proposing fuel duty increases because, since the 1992 general election, petrol duty has gone up from 27.79p to 36.14p per litre. That is a 30 per cent. hike and an average increase of 9.1 per cent. a year. When VAT is
Column 774added to the duty, it means that people are paying nearly 10p a litre, or 44p a gallon, more at the pumps. That is double the rate of increase that we proposed, and those hon. Members--there are some in their places--who attacked us for that policy ought to reflect on their position if there is a vote on the amendment.
The Government claim that their policy is intended to have a material impact on emissions and is part of their drive to tackle our environmental problems, not the least of which are air pollution and global warming; but such increases are a very rough tool with which to seek to achieve those aims. It is calculated that a 10 per cent. increase makes a difference of 1 per cent. or less in the amount of fuel consumed. The tool is relatively ineffective and falls hard on people in rural areas and those who depend on car ownership to get about.
The alternative strategy is to use increases in petrol duty to cut vehicle excise duty. That has clear material benefits. First, it is vastly more effective in terms of the environmental aim. It gives people a direct incentive to invest in cars that are more fuel economic in the band that attracts lower vehicle excise duty. That means that the Government's emission targets can be achieved more effectively. People will have a direct financial incentive to downsize their vehicles.
Ultimately, despite catalytic converters and other efforts to achieve greater fuel efficiency and lower emissions, the best way to cut vehicle emissions is to burn less fuel and only two options would achieve that: we can either directly dissuade people from driving, which is the hard option given the modern society in which we live, or persuade them to drive vehicles that burn less fuel. That is relatively easy with financial incentives.
Everybody knows that a fuel-efficient vehicle will cost less to run, and we can add to that incentive by using revenues from petrol price increases to cut vehicle excise duty. Such cuts have another benefit in that they compensate those who are hardest hit by the Government's policy of increases in fuel duty; the money is put back in their pockets because they do not have to pay so much vehicle excise duty. Moreover, it is an affordable policy for those on low incomes for example, rural pensioners who need a vehicle to get to the shops and get on with their lives. Such people find it hard to keep a vehicle on the road because of the highs and lows of the expenses of doing so. If VED is cut to a notional level, they will find it easier to afford a vehicle, because at the moment ownership is taxed. However, those who cover an excessive mileage will pay more, because the use of the vehicle will be taxed. After all, it is the use and not the ownership of the vehicle that is a disbenefit to the wider community, whether it be through congestion or fuel emissions. The amendment takes a moderate approach to the matter. It accepts that money is tight for the Government. The proposal is for the smallest-engined vehicles only. It suggests only a relatively moderate cut. I should have preferred it if the Government had taken a stronger line on the matter. I should have liked the vehicle excise duty for smaller-engined, more fuel-efficient vehicles to be cut to a notional level--possibly no duty at all, with the policing of vehicle insurance and MOTs transferring to an MOT certificate on the window. If we considered cutting the duty to a notional level for smaller- engined vehicles, the vast majority of private motorists could easily be substantially better off. Some
Column 775people find that relatively hard to believe, but let me give an example. If we cut vehicle excise duty to a notional level on vehicles with engines of up to 1300 cc, but put an extra 10p duty on each litre of petrol, as the Government have done in the past few years, running an economical 1300 cc car with an overall fuel consumption of 40 miles per gallon--a real figure that is taken from an actual vehicle--would mean consuming 225 gallons of petrol a year. The extra 10p duty would therefore cost the average rural motorist, who does 9,000 miles a year, £98 a year. He would, however, be a net beneficiary by £37 a year if vehicle excise duty were reduced to a notional level.
Most cars are not as economical as the one in the first example. Imagine a family car owner driving a 2,000 cc estate for 9,000 miles a year, at an average of 30 miles per gallon. On current figures, he pays £132 extra as a result of Government fuel price increases. The high-mileage car owner pays a whopping extra £366 per annum, but, under our policies, half the Tory fuel tax hike would bring in enough revenue to reduce VED to a nominal sum for cars up to 1,500 cc. People driving cars with 2 litre engines and above would not be entitled to any VED reduction, but they would have a substantial incentive to downsize their vehicles, again making substantial cost savings.
The Government need to tackle emissions and to deal with the costs of motoring to the nation. There has been an increase in air pollution and in asthma levels. Increasing numbers of young school children suffer asthma. There is congestion in the cities and even in many rural areas. The Government's policy, however, has almost no impact on those problems, although it takes substantial amounts of money out of pockets, including the pockets of many of the poorest people in society.
There is an alternative. I refuse to believe that Ministers' officials in the Treasury have not argued that abolishing VED and transferring the tax to petrol, so that it is a tax on the use rather than the ownership of a vehicle, makes sense. It makes sense to the people with whom we are most concerned--rural motorists, private motorists and the poorest motorists in particular. Poor motorists in rural areas do an average 7,000 miles a year. They would be clear net beneficiaries from the policies that we advocate.
Mr. Alex Salmond (Banff and Buchan): I am listening with great care to the hon. Gentleman and I have some sympathy with his remarks, but would not his policy benefit, as he put it, low-mileage motorists at the expense of high-mileage motorists? Would not that therefore tend to benefit urban motorists at the expense of rural motorists? The hon. Gentleman has many statistics. Will he assure me on that point?
Mr. Taylor: First, let us bear in mind the fact that, if one is prepared to drive a smaller-engined vehicle, which we all want to encourage in order to reduce pollution, one could still be better off doing up to 20,000 miles a year, a substantial mileage. Secondly, we have argued for road-pricing schemes to tackle urban congestion and to encourage and finance the use of public transport, a policy that the Government are now considering. In those
Column 776circumstances, the rural motorist would be a beneficiary and the urban motorist might well find that he was paying extra, unless he opted to use public transport.
The motorists who would be penalised by such a policy are a rather more specific breed, which may explain why the Government have decided not to pursue it--perhaps they feel that such people are their natural supporters. I refer, of course, to people driving very large-engined vehicles, by themselves, between cities and on a regular basis--in other words, people financed by large companies. It is not something that we want to encourage, and I suspect that it is not something of which the hon. Member for Banff and Buchan (Mr. Salmond) sees a great deal in his constituency, so I do not think that he need worry. It may, of course, be something in which Members of Parliament have a particular interest, but I generally travel by train between London and my constituency.
Mr. David Nicholson (Taunton): Has the hon. Gentleman worked out how he would distinguish, in Cornwall or Somerset for example, between urban motorists--people in suburbs or villages perhaps two or three miles from a town--and rural motorists? Where would he draw the line? Would not his suggestion create a new tier of bureaucracy?
Mr. Taylor: The hon. Gentleman has misunderstood. Some people have advocated specific compensation schemes for rural areas, which I do not believe could be made to work. We have argued for urban road pricing in areas of congestion, as the Government are increasingly doing. That is how the particular cost of driving in urban areas would be reflected. For other motorists, we would merely transfer the cost from VED to petrol.
One of the basic principles of environmental protection involves not taxing something that is essentially good. I do not think that anyone would wish to prevent vehicle ownership; we seek to tax the bad, or the excessive, use of a vehicle--excessive in terms either of mileage or of a vehicle's fuel consumption. That matter should not divide the Committee. Given that the Government have pursued a policy of high petrol price increases and taxation, I am surprised that they have not adopted our policy. As I said, I do not believe that Treasury officials have not investigated it as a possible option. I hope that, while specifically offering the opportunity to compensate those in rural areas who have been penalised by the Government's policy, the amendment will also provide the Minister with an opportunity to explain why he has not accepted such an obvious way of tackling environmental problems without penalising those in rural areas, those on low incomes or those dependent on a car.
Mr. Heathcoat-Amory: The hon. Member says that the amendment is modest because money is tight, but it would cost £242 million a year to implement. As the Liberal Democrats have criticised other Opposition parties for their financial irresponsibility in recent years, I think that it is up to them to apply the same criticism to the amendment. They did not say how else the money was to be raised. As usual, they were extremely good at arguing for tax cuts and public expenditure increases, but that is not a responsible position to adopt.
Column 777Another reason why we oppose the amendment is that it would not deliver the desired environmental objectives efficiently. Higher fuel prices have a part to play in reducing harmful emissions because they encourage people to reduce fuel consumption in a variety of ways. They encourage people to purchase smaller cars, drive less and more efficiently, make shorter journeys and switch to other modes of transport, whereas the technique advocated by the hon. Member for Truro (Mr. Taylor) would not cover fuel consumption and would not penalise those who clock up high mileage or allow their vehicle's engine to fall into disrepair. Older cars, even if they are smaller, pollute more than newer cars, which have a larger capacity and are often fitted with catalytic convertors.
The hon. Gentleman got into a bit of a muddle over the effect on the rural motorist. The effect of increasing petrol prices but cutting vehicle excise duties on some cars would not help those in rural areas. It would help those in urban areas who have a low mileage. I refuse to accept not only the hon. Gentleman's amendment but his logic.
One other point--
Mr. Matthew Taylor rose --
If we were to relieve smaller cars of part of their VED, it would invite manufacturers to reclassify their engines at 1199 cc, which would have very little benefit for the environment and highly distort the automobile market. For all those reasons, I invite my hon. Friends to reject the amendment.
Mr. Taylor: I do not think that the Minister's arguments are terribly coherent. First, manufacturers already have various incentives, mainly because of markets overseas, to classify vehicles under the various capacities and, in this country, under the level of company taxation. Government policy, indeed, even in this country, already anticipitates that. It would be extremely difficult, however, for a company to reclassify a 2 litre, a 2.5 litre, or a 2.8 litre engine as a 1.199 litre engine. Simply, that is not practical. Although it is true that particulate emissions and various other emissions from older vehicles are relatively high, the main aim of Government policy, as I understand it, is to reduce global warming gases, especially the emission of carbon dioxide. Whichever fuel is burned, carbon dioxide is burnt off and carbon dioxide levels are directly related to the amount of fuel used. Vehicles with smaller engines use less fuel.
Mr. Taylor: It is a fact. It is also a fact that, because people are relatively affluent and can afford faster and more powerful vehicles, the fuel-efficiency savings available with modern, small-engined vehicles have been used up in achieving higher acceleration rates and higher power rather than higher fuel efficiency. Vehicles bought in the 1950s and 1960s, when petrol prices were relatively high, had 650 cc, 850 cc and 1 litre engines, whereas now
Column 778they have 1.3 litre, 1.4 litre and 1.5 litre engines. There are no disincentives to buying larger-engined vehicles. We see a clear trend in--
Mr. Ian Bruce rose --
The Minister argued that there was no advantage for rural motorists. The figures that I quoted came from the Automobile Association. The average rural motorist does 9,000 miles a year. The poorer rural motorist does an average of 7,000 miles a year. They are not the high-mileage drivers; they are beneficiaries of the policies that we advocate. The amendment is directly beneficial to them. Even if we took the more extreme examples of policy that I gave earlier, rural motorists would benefit; indeed, all motorists in smaller cars would benefit up to 20,000 miles a year. That is a simple fact. I do not understand why the Government have not followed that path. It seems popular, effective in tackling environmental problems and far fairer than the policies that the Government have pursued. The only assumption to make is that the Government's proposals are a fund-raising measure rather than one to tackle the environment--in which case, the Minister should be more blunt in saying so, rather than dressing up the proposal in green language.
Mr. Bruce: I wanted to intervene only on the basis that the hon. Gentleman was making an assumption that vehicle manufacturers had increased engine sizes, as they did in many smaller cars, which made them more expensive to run. In fact, the very opposite happened. Many vehicles that have a larger engine for the same weight of vehicle use less fuel. One cannot assume that the size of the engine means that it uses more fuel. Often, the opposite is true.
Mr. Taylor: The hon. Gentleman is talking nonsense. The only people who benefit in financial terms from larger-engined vehicles, as far as I know, are Members of Parliament. In the real world, people know that, broadly speaking, smaller-engined vehicles burn less fuel. That is a simple fact. To understand my point, the hon. Member for South Dorset (Mr. Bruce) need only consider the fuel efficiency statistics and the rated fuel bands, as we did in working out this policy using figures from the Automobile Association and the Royal Automobile Club and from motor manufacturers. If, at some stage, he loses his job in this place and decides to sell cars in a garage, if he argues with the customers who walk through the door that the bigger the engine size, the less fuel the car will use, he may experience a reaction similar to the one that he may receive at the next general election.
Question put, That the amendment be made:--
The Committee divided: Ayes 246, Noes 277.
Division No. 57] [9.55 pm
Column 778Abbott, Ms Diane
Adams, Mrs Irene
Ainsworth, Robert (Cov'try NE)
Anderson, Donald (Swansea E)
Anderson, Ms Janet (Ros'dale)
Column 778Ashdown, Rt Hon Paddy
Banks, Tony (Newham NW)
Beckett, Rt Hon Margaret
Beith, Rt Hon A J