Finance Bill

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Dr. Pugh: I can understand what the Economic Secretary is saying. He is suggesting to the Committee that the basic problem is that we are not looking at a narrow enough focus when we consider the legislation. The legislation will give a tax break or benefit to people who choose to use low-emission CO2 cars rather than high-emission ones, but its object is to reduce CO2 emissions. A piece of legislation that encourages people to use low-emission cars but does not give a similar break to liquefied petroleum gas cars or cars

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that do not emit CO2 will create the kind of objections that we have brought forward. A simple adjustment to the legislation would provide those benefits for both cars that produce low CO2 emissions and cars that produce no CO2 emissions.

11.30 am

John Healey: I urge the hon. Gentleman to bear in mind the aggregate impact of the proposal on the wider package to which he drew our attention. If he will wait, I shall address the amendments after I have dealt with the general points that a number of Members have introduced. I was very struck by his point and will bear in mind his encouragement to us to introduce ''severe fiscal incentives'' for environmental ends.

I now turn to amendments Nos. 18 to 20, which would, as the hon. Member for Christchurch said, extend the special 100 per cent. enhanced first-year allowances to all road fuel gases including liquefied petroleum gas. They would enable LPG-powered cars to qualify, even if their CO2 emissions were up to twice those of other qualifying vehicles. Amendment No. 20 would extend those first-year allowances to LPG refuelling equipment.

The amendments miss the point and purpose of the clause. It may help if I reiterate to the Committee the purpose of the new measures. Clauses 58 and 59 aim to encourage business investment in cars that emit the lowest amounts of carbon dioxide, to expand that market and further to encourage innovation in low CO2 cars. I do not need to tell members of the Committee that CO2 is the key greenhouse gas, and the scheme forms part of a raft of measures to help reduce the UK's emission of that gas to meet our Kyoto and domestic targets. It is not a scheme that aims to support all alternatively powered cars without regard to their CO2 emissions. It therefore focuses deliberately on those cars with the lowest emissions of that gas. Cars that meet the 120g per km limit can qualify for the first-year allowances regardless of how they are powered, and making exceptions for particular fuels runs counter to that purpose. Focusing on a single CO2 figure provides a straightforward and consistent measure for the application of the provision.

Clause 60, to which amendment No. 20 relates, aims to encourage the installation of refuelling equipment for new types of gas fuels, such as natural gas and hydrogen, that will potentially play an important role in future. It targets those new-technology fuels to help increase availability and reduce the barrier to greater take-up and innovation.

There are already 1,000 LPG outlets and the rate of expansion has increased considerably in recent years, with some 350 new refuelling points being installed in the last year alone. Given that growth, I am not convinced that there is a need for further tax incentives.

The Government recognise that road gas fuels such as LPG can deliver the environmental savings that have been ably articulated by a number of hon. Members this morning. That is why there are grants to

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help people buy or convert vehicles to run on LPG. That is why employees with gas-powered cars pay less company car tax and, from 2003-04, will pay less tax on free fuel provided by their employers. That is why LPG attracts a much lower rate of fuel duty. In that context, I recommend that hon. Members reject the amendment.

Mr. Chope: The Economic Secretary's response is very polite and measured, but unfortunately I find the content extremely disappointing. He makes the assertion that the amendment would result in vehicles emitting twice as much carbon dioxide as the limit set out in the clause. He makes it seem as though that would be a disastrous state of affairs. Let me remind the Committee that the amendment would confine the 100 per cent. capital allowances to the top tier of vehicles on the PowerShift register. That is the top tier of low-emission vehicles. I do not think that the Economic Secretary has dealt with that problem adequately.

PowerShift register bands reflect the emissions performance overall compared with prevailing European standards, currently known as stage 3 or Euro III. The key regulated pollutant emissions targeted by the Powershift programme are nitrogen oxide and hydrocarbons. To be eligble for PowerShift funding, vehicles must also offer clear reduction—compared with the conventional fuel alternative—in emissions of carbon dioxide responsible for climate change. If such vehicles comply with the top band under the PowerShift register, why are they not eligible for the 100 per cent. capital allowances?

The Economic Secretary said that because there were already 1,000 LPG outlets and there was an increasing use of LPG, he was not convinced that there was any need for extra incentives. At the moment, the proportion of vehicles in the vehicle park that are fuelled by LPG or indeed by fuels other than petrol or diesel is very small indeed. Every extra vehicle that we can get in the vehicle park that is a low-polluting vehicle is of benefit to the environment and the health of the people of this country. The Government have the opportunity to give a joined-up signal in the Bill. In other policies, they have linked the issues of air quality and environmental benefit, but in this case they seem to stick solely to the criterion of whether the vehicles contribute an enormous amount to the reduction in global warming, and have set a limit so low that even an LPG vehicle cannot meet the limit, given present technology.

It appears that the Economic Secretary may be motivated by the protection of the revenue resulting from the clause. If that is so, let us be open about it. Let him say that he does not believe that it is reasonable that the Exchequer should subsidise new technologies to the extent that we encourage. If that is his argument, we can debate it. However, it seems that the Government are duping people into switching to LPG, and after 2004 they will remove the fiscal benefits that come from having a lower rate of duty for an LPG vehicle. The Economic Secretary said that he did not

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think that there was any need for extra incentives, but that view is not shared by his own Government's quango, TransportAction, whose website states:

    ''The research also considered the importance of a number of market factors in influencing decisions to switch to clean fuels . . . The strongest concern was a lack of confidence in the Government maintaining the fuel duty differential''.

I know that the Economic Secretary is new to his portfolio but, although he may have been convinced that there was no need for extra incentives or for maintaining existing incentives beyond 2004, I hope that he reviews his position in light of what TransportAction says. I repeat:

    ''The strongest concern was a lack of confidence in the Government maintaining the fuel duty differential.''

I am told that a fleet manager or a car purchaser needs a long planning horizon; if an individual is not given an assurance beyond 2004 that LPG will be favoured by a beneficial tax regime from the Government, he may wonder what is the point of investing long term. At the moment, only Vauxhall and Volvo produce dual-fuel vehicles at a significant volume. The Government should encourage other vehicle manufacturers to invest in the technology, but they will not be able to do so if they are not prepared to extend their planning horizons beyond 2004; if vehicle manufacturers are to consider extending manufacturing lines and producing dual-vehicles, they need clearer signals of a longer time frame. I am disappointed that the Economic Secretary has not gone further than his colleague, the new Chief Secretary to the Treasury, went in a debate in the House last October; he also said that he could not say what would happen beyond 2004.

The amendment would restrict the capital allowance to vehicles that are at the top of the PowerShift register in terms of low emissions, so I hope that Committee members will press it to a vote. I hope that the hon. Member for Wolverhampton, South-West, who spoke so eloquently from the Back Benches, will join us by voting in favour of the amendment. He may be outvoted by his colleagues, but if he does rebel he will reflect the balance of debate in the Committee. Although Committee members from both sides—Conservatives, Liberal Democrats and Labour Members on the Back Benches—have spoken with one voice, the Minister has spoken with another. How can the people be sure that their spokesmen will take action against the Government when they are wrong unless those spokesmen join together and vote accordingly? I will be disappointed if the hon. Member for Wolverhampton, South-West does not vote with us.

I hope that the Minister realises that today's debate is another consequence of his Department using misleading language in its press releases. When the Inland Revenue issued its press release on 17 April, it announced the 100 per cent. enhanced capital allowances for low-emission cars. We now find that cars at the top of the PowerShift register will not qualify—we have discovered that only during the debate and as a result of reading the Bill's small print. If the Government had referred to 100 per cent. enhanced capital allowances for some low-emission

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cars, it would have been a more accurate press release. I hope that the Economic Secretary will report back to his spin doctors that they have once again been involved in counter-productive spin.

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Prepared 11 June 2002