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6 pm
Amendments Nos. 70 and 71 agreed to.
Clause 9, as amended, ordered to stand part of the Bill.
Question proposed, That the clause stand part of the Bill.
Mr. Stephen O'Brien: Clause 14 amends the general rate of vehicle excise duty and the specific rate for
private and light goods vehicles with effect from 1 May this year. The Committee need not be detained long on this clause, but there is a point that requires consideration.The vehicle excise duty on cars and vans increased by £5, which represents the revalorisation rounded to the nearest £5. The increase impacts lower capacity vehicles and lower emission cars by a larger percentage. For example, a car of less than 1,549 cc has seen general VED increase from £105 to £110, an increase of 4.8 per cent., whereas a car of more than 1,549 cc has seen general VED increase from £160 to £165, an increase of 3.1 per cent. I understand, of course, that the differential is due to the £5 rounding.
Not only are both increases above inflation—a fact no doubt noted by drivers up and down the land—but the £5 increase penalises cleaner cars to a greater extent. Recognising that the £5 is the normal rounding, the Red Book that accompanied the Budget stated:
- "The Government has reformed vehicle excise duty (VED) to provide incentives for motorists to choose the least polluting vehicles"
John Dawson, director of the AA Motoring Trust, recently said:
- "The news on road tax is disappointing because we had hoped that he"—
- "would allow these new bands, which he has only recently set, to bed in with drivers."
I invite the Minister to accept that one of the ways in which the problem could most easily be addressed is by deploying the easy and rather more normal mathematical approach of rounding down the figure rather than rounding it up. Such an approach would have produced numbers that helped to secure the differential with which the Government are seeking to incentivise people who wish to use the least-polluting vehicles. It would also have been in line with the objectives that the Government have set. As I said, we do not take issue with those concerns—far from it. As Conservatives, we want the best conservation and it is our approach to take our environmental responsibilities seriously. Incentivisation is being reduced because the figure has been rounded up, but the problem would be simply cured by rounding it down.
I do not wish to detain the Committee and I do not expect to divide it, but it is important that the Economic Secretary acknowledges the problem. Perhaps he will also take the opportunity to explain how he will address it in future, if not this year.
Mr. Djanogly: The motor industry is worth some £44 billion a year in this country and it contributes 3.5 per cent. of UK GDP and supports 827,000 jobs. That makes it a pretty important part of our economy. In 1997, the Chancellor took £33.6 billion from motorists. In 2003, he is taking £42.6 billion. We have seen an average annual growth rate of 4 per cent. at a time when inflation is 2.4 per cent.
Vehicle excise duty in this country is still far higher than in our European neighbour countries. Even with a freeze for British hauliers, they could increasingly relocate to the continent to avoid paying our exorbitant duty. The Chancellor needs to take note of the importance of interaction between the tax system and the single market so as not to lose tax take.
The duty is not having much effect in encouraging motorists to buy cleaner cars or in discouraging them from buying polluting ones. Some 80 per cent. of best-selling cars are currently in the two middle categories—B and C. The Toyota Prius and the Honda Insight, which are in the AA category, last year managed 291 and 28 sales respectively. As GreenConsumerGuide.com says, vehicle excise duty
- "should be seen as the minor device that it is, not elevated to become the government's flagship green motoring policy".
Mr. John Gummer (Suffolk, Coastal): I declare an interest, in the sense that I try to help a number of companies to improve their environmental performance.
I merely wish to say to the Minister that my hon. Friend the Member for Huntingdon (Mr. Djanogly) made a crucial point about the need for a system that enables the car industry to know where it stands and encourages it to provide more continuously the green answers that are required. In that, as in several other areas, the Government have not provided a sufficiently clear and long-term policy that will encourage people to undertake the necessary investment. If fine-tuning takes place every year, but there is no permanent long-term system, we will not achieve the environmental ends that are desired by hon. Members on both sides of the House—although there are not many of them on one side to join in with the discussion.
I hope that the Minister will give an undertaking that the Chancellor will take this issue seriously, overcome the demands of the Treasury moguls who always dislike the idea of such long-term planning, and ensure that the industry knows that for a significant number of years we will have a policy that increasingly makes the purchase of vehicles that are least likely to pollute a valuable and continual offering to the public.
Mr. Baron: I welcome you to the Chair, Sir Michael.
Clause 14 increases vehicle excise duty by £5 for every car and van, although the rate of duty for lorry and motorcycle drivers has been frozen. The imposition of that tax, which will affect the majority of road users, is very wrong. Coming on the back of the already crippling cost of petrol in this country, this tax rise is symptomatic of the fact that this Government are at war with motorists and are failing in their commitments to invest in our roads. A combination of sky-high taxes and rising crude oil prices means that the car has already become the most expensive item in the household budget, hitting hard-working individuals, families and pensioners in the process.
Our fuel tax is the highest in Europe. The average UK retail price of diesel is more than 20p per litre higher than any other EU country, and under Labour the price of petrol has increased by nearly £1 a gallon. The combination of those costs has had profound implications for motorists. The total tax take, as my hon. Friend the Member for Huntingdon suggested, has gone up by nearly 50 per cent. since 1997, to an estimated £43 billion in 2002. The average annual petrol and diesel bill is about £250 a year higher under this Government.
While costs soar and the Government continue to treat the road user as a convenient way of imposing taxation by stealth, drivers are not experiencing any benefits in turn. The Government have failed to meet their road-building programmes. They have cut road spending and cancelled vital road improvements. Highways Agency figures show that not one inch of new bypass was built anywhere in the UK during 2001. Certainly, in my constituency of Billericay and the surrounding district we are seeing very little by way of road improvements. The consequence of that failure has been a continued increase in congestion. The statistics are damning. Since 1998, average journey times have risen by 16 per cent. Since 1997, motorway congestion is up by 250 per cent. Those are Government figures. On top of that, the Government recently announced that their pledge to reduce road congestion by 5 per cent. by 2010 is unlikely to be met. Instead, they suggest that the best they are likely to achieve is a situation in which congestion in 2010 is no worse than it is now.
In short, the Government are abusing the motorist. The highest fuel taxes in the western world pay for the worst maintained roads in the EU. In south Essex, people are experiencing little benefit from all the taxation. Indeed, the reverse is true. The Government should listen to the legitimate anxieties of motorists throughout the country. Costs are unacceptably high and the latest increase will only make matters worse.
6.15 pm
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