Finance Bill

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Mr. Clappison: Before the Minister moves away from the point about different systems, and the capital allowances and reliefs that were available, I note that he has taken on board the fact that employees could decide whether they wanted to be dealt with under that system or to take advantage of other provisions. Can he tell us how many employees sought to claim capital allowances on their vehicles or relief for interest on loans? If he cannot, I would be grateful if he would write to me, but it would be interesting for the debate if he had the figures at his fingertips.

Mr. Timms: Unfortunately, I do not have the figures. I have asked the same question, and I believe that the information is not available because what the claimed capital allowances apply to is not always clear from self-assessment forms. If on further inquiry the information turns out to be available, I will ensure that the hon. Gentleman is provided with it.

The change will be a significant benefit to those driving between 4,000 and 10,000 business miles a year in small and economical cars, and to the many employees who drive up to 10,000 business miles in medium-sized cars. For any further business miles, the approved rate will be 25p per mile.

The hon. Member for Hertsmere rightly drew attention to the fact that as a further encouragement, to make business travel greener still, from next April employers will be able to choose to pay employees up to 5p a mile free of tax and national insurance for every fellow employee whom they carry on a business journey. Originally, in the pre-Budget report in November, we proposed a sum of 2p per mile. As a result of discussions with both business organisations and organisations such as Transport 2000, we decided that it would be better to increase that sum to 5p a mile, to provide a slightly greater incentive to employees to take fellow employees with them, and so drive in an environmentally friendly manner. We want people travelling on business to share their vehicles whenever they can, so as to reduce further the amount of unnecessary business miles travelled. I am a little disappointed that the Opposition amendments on the subject were not moved, so we have not been able to debate them. I think that those amendments reflected their welcome for the payments, which represent an important change for the better.

There will also be a tax-free accrued rate for business travel using motor cycles and bicycles. The rate for bicycles will be increased to a generous 20p a mile, to encourage their use whenever feasible. We are committed to protecting the environment for everybody. About 225 billion miles are travelled by car in the United Kingdom each year, and about one sixth of that distance is business travel, so it provides a significant proportion of the total mileage driven. Making those miles greener will substantially benefit the environment. We started the process with our reform of company cars. The measures in the clause, and those to follow, complete the picture. I commend the change to the Committee.

The hon. Member for Hertsmere is right: the change will increase the incentives for people who use their own cars for business purposes to drive more environmentally friendly vehicles. He made a point about the treatment of 1500 cc cars, although strictly speaking, the point applies to cars with engines of 1501 cc to 1549 cc—in other words, the extra ones that we added in on Thursday. It is a fair point, but it applies only to a small number of cars at the margin. However, our aim is not to castigate anybody driving any particular kind of car, or to suggest that they should not do so. We are simply ensuring that the tax system provides incentives for people to manage their affairs in an environmentally friendly way. I hope I have demonstrated that the Bill's provisions will have that effect.

I point out to the hon. Gentleman that, according to the AA, the total running cost for petrol cars with engine sizes between 1401 cc and 2000 cc is 18.42p per mile. That is not the total cost—it does not include the cost of owning the vehicle—but the total running cost, which is significantly less than the sum in the schedule. So I hope that the hon. Gentleman will feel that what is proposed in the clause is by no means unfair to people driving such cars.

Mr. Clappison: I shall make two points to qualify what the Financial Secretary said. However, first of all, may I remedy my omission earlier in failing to welcome you to the Chair, Mr. O'Hara? I have quite rightly been pulled up on that by the Government Whip, in his usual charming way, and I hope that I can remedy the defect by giving you a warm welcome to the Chair now.

Two matters arise from the Minister's remarks: first, he described the incentive that the proposal creates for employees to downsize their vehicles. That should be put within the context of the Government's analysis in the environmental regulatory impact assessment, which, having taken into account the effects of the proposal and other changes, concludes:

    ``There is therefore a limited incentive to downsize''.

Secondly, the Minister mentioned the number of 1600 cc cars in use. On the basis of Library statistics, it appears that, considering the distribution of private cars used for business by annual business mileage, the vehicles that do the most mileage are those between 1500 cc and 2000 cc. Many vehicles within that category are between 1500 cc and 1549 cc, so the Government's environmental analysis, despite the Minister's cogent explanation, is a mystery.

Mr. Timms: The hon. Gentleman is right that the bulk of the vehicles that we are discussing are between 1501 cc and 2000 cc. I do not agree with him that the Government are giving a conflicting signal in that respect, but even if we were, only cars between 1501 cc and 1549 cc, a small proportion of the total, would be affected.

Question put and agreed to.

Clause 57 ordered to stand part of the Bill.

Schedule 12

Mileage allowances

Amendment made: No. 30, in page 142, line 43, leave out from `subsection (1),' to end of line 44 and insert

    `after ``provisions of this Chapter'' insert ``and sections 197AD and 197AE''.'.—[Mr. Timms]

The Chairman: The Question is that the schedule—

Mr. Michael Jack (Fylde): I have a question for the Financial Secretary. I notice that in paragraph 3 of schedule 12 there is a definition of a car—

The Chairman: Order. I thought that the right hon. Gentleman was raising a point of order. The Committee has approved amendment No. 30, and the hon. Gentleman rose as I was proposing that we debate whether the schedule should be the twelfth schedule to the Bill.

Mr. Jack: On a point of order, Mr. O'Hara. Could you therefore guide me? The Chairman's selection list shows schedule 12 as a separate item. I therefore assumed that there would be a debate on schedule 12.

The Chairman: I was in the process of proposing the Question on the schedule so that it could be debated.

Question proposed, That this schedule, as amended, be the Twelfth schedule to the Bill.

Mr. Jack: Thank you for your helpful clarification, Mr. O'Hara. Paragraph 3 describes the car as a mechanically propelled vehicle. There are new technologies in the wings—electrically driven vehicles, for example—that may not necessarily be mechanical in the same sense as a petrol engine vehicle. [Interruption.] I am disappointed that there is so much carping comment from the Labour Benches. I should have thought that hon. Members would be interested in ensuring that the proposals covered the new forms of environmentally friendly technology. I merely wanted the Financial Secretary to make a statement on the record that electric, or petrol-electric, vehicles were covered by the measure.

With reference to the mileage allowances in paragraph 4, the Financial Secretary cited figures from the AA that indicated a running cost of 18p per mile. He did not say what was in the 18p, and therefore whether, in the context of the first 10,000 miles, the remaining 22p was adequate compensation for the depreciation and other costs not included in the 18p. Can he give a source for the Treasury's figure of 22p? People like to know how the numbers are calculated. Finally, can he say why 10,000 miles was selected, rather than any other distance?

11 am

Mr. Timms: I can give the right hon. Gentleman the reassurance that he seeks about what is covered by the term ``car''. That certainly would include electric and dual-fuel vehicles, and I agree that it is important that it should.

With regard to the costs, I quoted from the AA's most recently published assessment of motoring costs. The AA sets out the running costs under the headings of petrol, oil, tyres, servicing, repairs and replacements, which add up to 18.42p per mile for 1400 cc and 2000 cc cars. The total cost per mile, including ownership, for those vehicles, when run for 20,000 miles a year, comes to 40.78p per mile. Many of the AA's figures for motoring costs are for smaller cars, whose costs per mile are less. The costs are greater for larger cars. In setting the various figures used, the Government have paid close attention to the costs incurred by drivers. We also wanted to ensure that the impact on those who lost out because of the changes was kept modest. More people are gaining from the changes than are losing from them, and the overall impact on the Treasury will be negative: it will lose about £45 million a year in tax. I hope that no one will allege that the changes are harsh. In fact, we have been able to develop them in a way that minimises the adverse impact on any individual.

Mr. Jack: I thank the Financial Secretary for that information. I note that under paragraphs 4(3) and 5(4) the Treasury may by regulations alter the rates in the schedule. As the Government have substantially increased taxation on hydrocarbon fuels in the past, and there are uncertainties about the cost of those fuels in the future, will the Financial Secretary enlighten us, for the record, about the process that would be employed for a review to determine whether those two provisions were to be exercised?

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