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10.28 pm
Mr. Roy Hughes (Newport, East): In seeking this debate about VAT on toll charges, I confess that I am particularly concerned about the two Severn bridges, although if VAT were imposed on those crossings, it would also apply to many others throughout the country.
Hon. Members, especially my Welsh colleagues, know that, over the years, I have taken a good deal of interest in the Severn crossing. It is, after all, the lifeline of Wales.
The background to this issue is that tolls at present on the Severn crossings are simply prohibitive. For example, for a motor car the charge is £3.80. For a small van, it is £7.70 and for a heavy lorry it is £11.50. They are, I believe, the highest tolls in the country.
Many people on either side criss-cross the channel each day to follow their employment. Many on the Newport, East side and in other areas on the Welsh side cross the channel to follow their employment in Bristol and Avonmouth. Likewise, quite a number do the journey in the opposite direction from Bristol, many of them teachers in south Wales.
On the Newport, East side some years ago, there were many thousands of redundancies in the steel industry, and the people affected at the time were advised by the then Mr. Norman Tebbit, now Lord Tebbit, to get on their bikes. Many of them took that advice, taking jobs in Avonmouth and Bristol, and now have to pay these punitive toll charges. Small companies on either side of the channel--perhaps small plumbing or electrical contractors--need to cross the estuary frequently, and they have to pay £7.70 for their small van. That adds considerably to their costs and subsequently to their charges to the consumer.
The third category is heavy lorries, which pay £11.50 for each journey into Wales. Incidentally, they carry the goods that provide our standard of living in this country, and it has often been said that, when the cost of transport is put up, it just about puts up the cost of everything.
The journey out of Wales across these bridges is free, so the toll is paid on the return journey. Consequently, some companies in south Wales instruct their drivers not to use the bridges when coming back into Wales; accordingly, many lorries are diverted into the villages of Gloucestershire. That in turn causes a good deal of consternation in those villages, because of the serious environmental and safety problems that the diversions cause.
All in all, the toll charges are simply an abomination, and much of the responsibility for this situation rests squarely with the Government. Some years ago, the Select Committee on Transport called for the phasing out of toll charges on estuarial crossings. It was a perfectly sensible recommendation, but, instead of taking that advice, the Government decided to hand over the then existing Severn bridge to a foreign-backed consortium. They also authorised it to build a second crossing, and to charge exorbitant tolls on both bridges so that the company could recoup its costs and more.
I come now to the nub of my argument. From time to time there are reports in the press that the European Commission is threatening to take Britain to court over
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The report continues:
There is speculation, too, on how the issue will be handled. Will action be taken against all the offending countries at once or will particular countries be singled out? It has been suggested that France will be the first country to be taken to court, particularly because it has a large motorway network, with many toll positions.
The Government take the issue seriously. If such a court hearing went against France, it is pretty obvious that a precedent would be set, and action would quickly follow against Britain. I have a letter dated 24 October 1995 from the then Paymaster General, the right hon. Member for Wells (Mr. Heathcoat-Amory), in which he specifically says:
Only yesterday, the Western Mail contained the headline "Wales next to bottom in the UK prosperity league table". The article stated:
Male unemployment in Wales is still about 11 per cent. There is much hidden unemployment. Many people who have been made redundant draw state benefits but do not sign on, so they are not recorded in the unemployment statistics. There is no doubt in my mind that VAT on top of the existing tolls would do a good deal of harm to the economy of Wales.
The European Union Commissioner for Transport is Mr. Neil Kinnock, the former Member of Parliament for Islwyn and former leader of the Labour party. In response to a submission from me on the issue of VAT on toll charges, he said in a letter dated 14 November 1995:
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I took this matter up--I call it a reasonable suggestion--with the French-American consortium that operates both bridges, which goes under the name of Severn River Crossing plc. The reply came from the well-known former Liberal Member for Montgomery, Lord Hooson, who is now the chairman of that company. In a letter dated 2 October 1995, he said:
The reality is very different, to say the least. A local journalist, Mr. David Barnes of the South Wales Argus, conducted a survey last summer, when we had only the first Severn crossing. He said that the Severn bridge was reckoned to be taking no less than £16,000 per hour. I should point out that toll charges have risen since then.
I have no doubt that the company is simply profiteering on a massive scale. It is all the Government's fault for entering into such an arrangement with the company. The new bridge should have been paid for by the massive amounts they receive in motor taxation. The original bridge was paid for several times over. The so-called debt was merely a paper figure on the Consolidated Fund; it could well have been wiped out at a stroke.
We are now faced with the doctrinaire, meddling approach of the European Union. If court action goes ahead, as is being threatened, we could well face additional toll charges. The Government would shed crocodile tears; they would be in receipt of a nice little earner.
In Wales, it cannot be said too often that the Severn bridges are our lifeline. As a direct result of the Government's handing over control of those bridges to a foreign-backed consortium, we are being subjected to prohibitive toll charges, and, as I have said, the company is profiteering on a massive scale. Any further increases in toll charges would be very damaging to Wales and its economy.
The Exchequer Secretary to the Treasury (Mr. Phillip Oppenheim):
I am glad that the hon. Member for Newport, East (Mr. Hughes) has raised this important issue. He raised a number of other issues that are not directly related to VAT on tolls, and I think that it would
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"Britain remained defiant yesterday after the European Commission threatened court action over its refusal to charge VAT on road tolls.
and, I might add, the Severn crossings.
If the EC wins, the case could force up the cost for dozens of crossings such as the Skye Bridge and the Dartford Tunnel"--
"France, along with Greece and Ireland, has also been accused of failing to comply with the EU directive on VAT. All four countries will be given 40 days to change their legislation."
That is clear enough. We recognise that the 40 days have elapsed, but I have been reliably informed that that court action will take a long time and is now expected in the second half of next year.
"If tolls were to be subject to VAT it would have to applied at the standard rate of 17.5 per cent. Under EC law it is not possible to apply a reduced rate of VAT to tolls."
What would that mean in practice? It raises an interesting situation. Tolls for cars would rise from £3.80 to £4.47, for light vans from £7.70 to £9.05, and for lorries from £11.50 to £13.51. I repeat that, in Wales, the Severn crossings are our lifeline, and the toll charges are already prohibitive.
"Prosperity in Wales is lower than almost any other part of the United Kingdom, with a person's average income almost half that of a Londoner.
Wages in Wales are abysmally low. It was reported in the press a week or two ago that 13,000 people in Wales are paid less than £1.50 an hour. Those people must be subsidised by the state through social service payments. In other words, the firms that employ those people at such a low rate of pay are being subsidised.
Of 11 parts of the United Kingdom included in a new prosperity survey, only Northern Ireland has a lower income per head."
"The Commission has been asked by the Member States to promote the harmonization of the different VAT regimes applied. . . if tolls are levied for the use of a motorway or a bridge, VAT should be levied as well."
That seems clear enough, but he goes on to point out:
"if no toll is charged, there will be no VAT payable. In this context, it would be possible, for example, to apply reduced toll rates (or even zero toll rates) for local people and residents who have to use the Severn Crossing often for their daily journeys to and from work."
I referred to that earlier.
"With regard to the suggestion that either no tolls should be levied or that there should be special concessions, these are entirely unrealistic. It was a political decision to build the bridge through the medium of private enterprise."
That is the attitude of his company. Lord Hooson goes on to talk as if the company is finding it a little difficult to make ends meet.
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