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John Healey: I shall give way to the hon. Lady, who is leading for the Liberals in this debate and who is shadow Chief Secretary.
Julia Goldsworthy:
Returning to my earlier intervention, what impact does the Financial Secretary think that the new VED band will have on consumer behaviour?
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John Healey: If the hon. Lady studies the evidence on the impact of the graduated VED scheme, she will see that the VED scheme at the point of purchase has a relatively modest impact on consumer behaviour. The point is to incorporate into the system signals to the consumer at the point of purchase to consider the environmental impact and environmental performance of the models that they are considering buying. The system is also designed to provide signals to car manufacturers to encourage still greener engine design and performance.
Clause 13 builds on the environmental signals already in place by reducing VED band A to zero. It reduces the VED for cars in band B by £35 a year and for cars in band C by £5 a year. It freezes VED for cars in bands D and E, and it increases VED for vehicles in band F by £25. To further strengthen the environmental signals, the clause also introduces a new band G, which increases VED for the most polluting cars.
In the run-up to the Budget, we received representations from a number of organisations, including the RAC Foundation, which advanced the argument that now is the right time to widen the differentials between the least and the most polluting bands. Clause 13 does just that and it means that the differential between the lowest VED rate for petrol cars and the highest, which was £100, is now more than double that at £210. The Budget announcements will see VED frozen or reduced for 50 per cent. of cars, with around 3 million cars now paying VED at £100 or less. The clause 13 reforms build on the existing VED framework and support the drive for further falls in transport emissions for new cars in the future.
Julia Goldsworthy: The changes in clause 13 are one of the main headlines in the Budget and were used by the Chancellor to bolster his green credentials. He announced with great fanfare that there would be a new band of VED. Incidentally, given the fight to get on the front foot on that issue between the Conservative party and the Labour party, I am surprised that the Conservatives did not call for this clause stand part debate.
In his Budget speech, the Chancellor said:
"I propose to radically reform vehicle excise duty."—[Official Report, 22 March 2006; Vol. 444, c. 295.]
The Financial Secretary has said this about the measure:
"The strengthening of environmental incentives announced in the Budget is designed to give a clear signal to motorists to consider the environmental performance of vehicles at the point of purchase"
which is a point that he has just restated. The reality is that the measure involves the smallest possible change to the most polluting vehicles. The new band G includes a maximum charge of £250 per annum, which means that the most polluting cars—cars that emit more than 225 g of CO 2 per kilometre—attract a price differential to the next band down that is equivalent to less than half a tank of petrol. What difference will that make to consumer behaviour? The environmental impact of the change in consumer behaviour will be negligible. My hon. Friend the Member for Cambridge (David Howarth) tabled a parliamentary question about the issue and was told that the estimated carbon savings of the new higher
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band of vehicle excise duty would be equivalent to 0.06 metric tonnes of carbon emitted by 2010. He was told, however, that
"calculating this figure is complex and subject to a significant margin of error."—[Official Report, 28 March 2006; Vol. 444, c. 972W.]
As there is virtually no impact on behaviour, the initiative is an eye-catching but ultimately meaningless measure.
6.45 pm
On what evidence did the Treasury base its decision to set the new band at a maximum of £215? The Energy Saving Trust produced a significantly different figure and came to some very different conclusions. It agrees that a new band G should be introduced, but it made it clear that
It reasoned that the average carbon dioxide emissions from cars sold to the private consumer market has increased—not decreased—since 2002–03. That should be of concern to the Minister, as private car sales account for nearly half of new annual registrations in the UK or 1.2 million sales. We therefore need to change consumer behaviour, and Government intervention is required to promote and incentivise the low-carbon car market.
Another key finding in the Energy Saving Trust report is that vehicle excise duty has had little impact on the carbon profile of the private car market. It argues that the proportion of vehicles falling into band F is too high at 50 per cent., and that the differentials are too low to change behaviour. Although there has been some tinkering with differentials and bands in the Bill, the differentials remain incredibly small. For example, the differential between bands F and G equates to less than a tank of petrol, which is hardly enough to change behaviour. Does the Minister believe that the differentials in the Bill are sufficient to achieve a significant impact on consumer behaviour and, if so, on what evidence is that view based? The Energy Saving Trust calculated that the differential for the new band should be about £2,000, rather than £50, to have an impact on behaviour. Will the Government consider adopting such a measure in future years?
Mr. Kevan Jones: I am listening carefully to the hon. Lady, but less than 10 minutes ago Liberal Democrats moved an amendment to make rural areas a tax-free haven for gas guzzlers and petrol heads. Is she trying to tell the House that those areas are exempt from the provision, but that the rest of us must go down the green route?
Julia Goldsworthy:
I was making the point that they are much more vulnerable to increases. We are therefore trying to release the mechanism so that it can be used to change behaviour effectively. In rural areas, it does not matter how the VED bands are set as people have to use a car. If they are on a lower income they are forced to spend more and more, so we are trying to provide relief
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for people who are disproportionately and unfairly affected. The mechanism can be used to change behaviour if there is an alternative.
A series of amendments on the need for wider differentials was tabled by Liberal Democrat and Government Members who tried to provide a solution to the problem. I accept that it is not appropriate to refer directly to those amendments, but I urge the Government to consider them. They should investigate the differentials required to make an impact on behaviour and consider ways of implementing them. In the longer term, road user charging may represent a fairer alternative. The Government are looking into the feasibility of such a scheme, which Liberal Democrats support, and I hope that they will seriously consider the practicalities and time scales. An effective mechanism is required so that motorists pay when and where they are driving. That is a fairer way to target relieving congestion in problem areas without penalising people in rural areas, and it provides freedom from pollution, congestion and the effects of climate change. I hope that the Government will consider that alternative.
In conclusion, the decisions in the Budget and the proposals in the Bill mean that green taxes will continue to drop as a proportion of the total tax take, regardless of the Chancellor's warm words. The Bill was an opportunity to create real incentives for people to choose more environmentally friendly cars. It was an opportunity even to consider more radical proposals such as road user charging. It is an opportunity that has been wasted, and in its place we have seen tokenism of the worst kind.
Rob Marris: We should review what the Government have done as regards motoring and emissions. In 1997, they introduced monitoring of CO 2 emissions from vehicles. They introduced bands A to F labelling on fuel efficiency. They carried out a major overhaul of the company car tax regime, which has led to a significant fall in the average emissions output of company cars. They introduced banding of vehicle excise duty—the graduated scheme that has been mentioned. This country is likely to more than meet its Kyoto targets. Between 1997 and 2004, there was a 10.7 per cent. cut in the new car average emissions of noxious gases, particularly CO 2 . Now, clause 13 introduces band G, with lower bands at the beginning of the scale.
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