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The Chief Secretary to the Treasury (Mr. William Waldegrave): The debate initiated by the hon. Member for Dudley, West (Mr. Pearson) has become something of an annual event, which always produces an interesting speech and a response from the Government which sympathises with a great deal of what he says. He will understand if I do not refer in detail to Merry Hill because I understand that a planning application has been submitted to extend that great site, and obviously I must not say anything that might be taken wrongly and prejudice the decision. The experience that the Member for Dudley, West has had in Dudley is obviously interesting and important.
I want to offer one or two new arguments to show why I do not think that the hon. Gentleman's approach, with which in principle the Government are sympathetic, is right. We are sympathetic because he is trying to use market forces, by offering incentives to get things moving, rather than the dirigisme of planning. In some senses, that fits in very well with Conservative philosophy. However, one or two points lead us--I am sure that it does not surprise the hon. Gentleman--to reject his new clause.
I also come from an inner-city constituency, where there have been some extremely controversial planning applications over the past two or three years. As a constituency Member of Parliament, I have campaigned against some applications for big retail centres within the city, but on green space within it, which had widespread opposition from my constituents and others on the grounds of loss of green space and also because they would divert shopping from existing shopping areas and streets in the city of Bristol. There has also been rapid development outside Bristol in the north fringe of some classical out-of-town centres--not as big as those in Dudley but of the kind with which the hon. Gentleman is probably familiar.
If we had designated areas of the city to try to counteract the pull of the north fringe, we might have found ourselves facing the paradoxical outcome of encouraging some of those very big inner-city developments, which--it would have been argued--would not have been very satisfactory. We might still have ended up with a new conflict and encouraged big inner-city shopping developments, which, arguably, would also have damaged the more traditional high streets in the city.
Mr. Andrew Smith:
I am following the right hon. Gentleman's speech, as I am sure are all hon. Members, with some interest. The argument of my hon. Friend the Member for Dudley, West (Mr. Pearson) is that in some respects at least there is not a genuinely level playing field, in fiscal terms, between new out-of-town, or indeed new inner-town, developments, such as the Chief Secretary has described, and more conventional and traditional developments, especially in inner-city
Mr. Waldegrave:
The point made by the hon. Member for Dudley, West is valid. There is certainly a perception that a new green-field site has a range of advantages over the redevelopment of an existing site. In Bristol, if I may refer to it again--the hon. Member for Dudley, West spoke of Dudley--we have the great Broadmead centre, which was built after bombing in the war and which is not very satisfactory in many respects. It is a classic late 1950s or 1960s development. There has been much good investment in it over recent years by Ladbrokes and others and some major steps have been taken, but it was probably more expensive than, as the hon. Members for Oxford, East (Mr. Smith) and for Dudley, West are arguing, it would have been on a wholly green-field site. None the less, the advantages do not seem fiscal. They derive not from any oddity in the tax regime, but from an inherent greater ease of developing on green-field sites, except for possible strains on the road system.
Therefore, a better way to right the balance is through direct control of the planning system. Although I understand the argument of the hon. Members for Dudley, West and for Oxford, East, with which we experimented in the early 1980s through enterprise zones, and which is still one weapon in the armoury, such a weapon has turned out to be a fairly blunt instrument, which creates curious boundary problems and a deadweight problem. It finances developments that might have happened anyway. Although I am glad to hear that the centre of Dudley is coming back to life, to some extent under its own steam as the hon. Member for Dudley, West was arguing, one ends up helping to finance developments that would have happened anyway.
We have mechanisms to address the point made by the hon. Member for Dudley, West that have been established and used on a bipartisan basis or by other parties separately over many years through the Town and Country Planning Acts, and the hon. Gentleman was generous enough to say that in recent years we have been steering the system that way. The turnaround was begun by the present governor of Hong Kong, and was carried through by his two successors as Secretary of State for the Environment. I am told that the current draft is quite restrictive. The balance is difficult to maintain because cities are dynamic. I know that many of the shops that are threatened--allegedly--by new developments in Bristol are where they are today only because they had to be moved out of the centre of Bristol because of the bombing in the war. They were not there before the war.
Things cannot be set in aspic. The traditional British urban centre is usually around a railhead, which was a result of ruthless free-enterprise competition 150 years ago. The only question is whether touching the tiller,
which is legitimate for Governments to do, is better done through the fiscal system or the planning system. We argue for the planning system. As usual, the hon. Member for Dudley, West has stimulated an interesting debate and chivvied us along a little in remembering that the balance must be got right.
Mr. Pearson:
I thank the Minister for his careful and considered reply, and for his acknowledgement that I am making a real point. His preference for the direct control mechanism of the planning system is all very fine for future developments, but it does nothing to redress the problems caused to my constituents and their businesses in the Dudley borough.
I must also point out that Merry Hill--uniquely, I think--is not a green-field out-of-town development but a brown-field development in an enterprise zone, which was not subject to any planning approvals whatever. Under that regime, there were 100 per cent. industrial building allowances and a 10-year rate-free period, so it is clear that the tax system offered significant incentives.
Mr. Waldegrave:
I must not prolong the debate simply because it is interesting; that would get us into trouble with the usual channels. The hon. Gentleman is pointing to one of the inherent problems of the enterprise zone--the boundary problem. We may find that we have simply moved things from one place to another, and the argument revolves around righting the fiscal balance again. We could extend the zone, but then the inherent problems that we have been trying to solve might spread somewhere else. That was probably the right move to deal with the acute problem of Merry Hill, but every time we spread the boundary, perhaps we undermine the principle of the enterprise zone.
Mr. Pearson:
I understand. We could have an interesting debate about boundary problems and creating special local economic initiatives by using the tax system. Arguably, those problems could equally apply to a whole range of other economic development initiatives such as single regeneration budgets, city challenge, and the old task force areas. I do not want to pursue that line, other than to repeat that I think that there is a special case for justice for Dudley, because it is the only area in which something of that size--Merry Hill is the second biggest retail complex in Europe--was built in an enterprise zone. As a result, it had massive tax advantages, and that persuaded virtually all the major retailers to move into it, not only for the capital benefits but for the revenue benefits of the rate-free period.
The example of the borough of Dudley makes a clear case for justice for our town centres. In view of the Government's reluctance to support my new clause, I shall seek other avenues by which to pursue that case, and I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
Mr. Roger Gale (North Thanet):
I beg to move amendment No. 24, in page 2, line 22, leave out '£0.2817' and insert '£0.10'.
I begin by congratulating the Government on the fact that the provision already in the Bill proposes a 15 per cent. cut in excise duty on gas used as a road fuel. That is an important, indeed a vital, step--a step towards sustainability and towards protecting the health of adults and children in all our towns and cities.
It is accepted that vehicles using gas fuel pollute much less than their petrol and diesel counterparts. To someone standing on any traffic-filled high street, the case for gas-fuelled vehicles is self-evident. If one stays there long enough, one does not need to read recent Government reports to know that vehicle emissions are far too high.
In local and national newspapers, the subject of air quality is now discussed. As an asthma sufferer myself, I have a heightened awareness of the effects of polluted air. Regrettably, local government activities sometimes make that worse. I happen to favour traffic calming measures, but the fact remains that, as we introduce them, especially road humps, we cause petrol and diesel vehicles to pollute more.
The extra acceleration and deceleration caused by traffic calming substantially increases vehicle emissions into our city streets. That is all the more serious because vehicle emissions rise geometrically rather than arithmetically, so the increases in pollution are sixfold, eightfold or even tenfold. More gas vehicles will undo such damage, and help to stop one form of protection for our children--slower speeds--exacerbating another--emission pollution.
Recently, my hon. Friend the Minister for Transport in London announced the publication of a report by the energy technology support unit highlighting the benefits of gas as a road fuel. Furthermore, gas is transported by pipeline, thus avoiding the need to use road-based oil tankers, so it offers additional quality-of-life benefits. Those of us who travel on Kent's roads recognise only too clearly the need to reduce the heavy traffic that uses them, including the rural roads, as rat runs.
I wholeheartedly endorse the existing clause that compensates for the extra costs of delivering compressed natural gas to vehicles. The 15 per cent. cut will allow gas fuel to be sold at the same price as petrol and diesel, and that sends the right fiscal message to the marketplace. Unfortunately, the signal is neither strong enough nor clear enough, which is a great shame, because it is the right signal. If we are to develop a large and growing gas fleet, with all its attendant air quality benefits, clearly we need to do more. We need not only to equalise the fuel costs but to allow for the additional costs of gas vehicles themselves.
Whether they are new or converted, gas vehicles are currently more expensive. That is not inevitable. In time, once the industry has begun mass production, gas vehicles need be no more expensive than existing petrol or diesel vehicles. But for the moment, and probably for some time to come, they are bound to cost more, because they lack the economy of scale of their rivals.
The Government's existing provision already accepts the benefits of gas fuel, but I suggest that, without greater incentives, especially for fleet operators, the environmental benefits of compressed natural gas usage will not be delivered. My amendment addresses that problem. It would create a differential of 16p a litre between petrol and diesel, on the one hand, and gas on the other.
My amendment would also lower the duty rate to the European Union minimum. Our current duty on natural gas is 340 per cent. of that minimum, while our duty on diesel is only 160 per cent., and on petrol only 140 per cent. We have a tremendous opportunity to give the market an unequivocal message by reducing our gas duty to the minimum permitted under EU rules.
The figure that I have selected is not random, for another reason. It has been carefully selected, because it would give gas vehicles life-cycle costs similar to those of petrol and diesel vehicles.
It is believed that the natural gas vehicle industry is ready to take off. Its specific early targets are buses, taxis and mid-range trucks--for example, the refuse trucks found in every town and city. These are all largely urban vehicles, and are obvious polluters in the eyes of the public. Research that I have seen suggests that all that is holding fleet managers back is the significant price differential. By making gas fuel substantially cheaper than petrol and diesel, we can compensate them for the extra capital costs of the vehicles and allow the industry to take off. That is what the amendment will do.
I should emphasise to my right hon. Friend the Paymaster General that I see the enhanced reduction as a temporary measure, lasting only until the economies of scale to which I have referred take effect. Once the industry achieves 20 per cent. of the share in any market, the economies of scale will begin to take hold, and unit costs will fall. The markets will then move to become more environmentally friendly, and the need for such a large differential--I accept that I am suggesting a large differential--will disappear.
In year one, the revenue impact of what I am suggesting would be minimal, as the actual number of vehicles that could conceivably take advantage of any cut this year is 5,000 at the very most. The potential net cash loss to the Treasury would therefore be relatively small--about £7 million at most. Clearly, the extra reduction could cost more in the longer term.
Were 200,000 vehicles to convert to natural gas, the Treasury would lose about £200 million a year, but even this would be more than offset by the estimated environmental and social benefits of reduced pollution. It is estimated that 200,000 gas vehicles could save about £240 million a year, and recent reports laying greater emphasis on the health problems caused by particulates suggest that even that may be an underestimate.
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