Clause
9
Amusement
machine licence
duty
Question
proposed, That the clause stand part of the
Bill.
John
Healey:
We turn to amusement machine licence duty which is
a slightly esoteric and long-standing excise duty. It is nevertheless
important to those who run establishments in which gaming machines form
a valuable revenue source. Since 27 October last year, our social
regulation, or our social law, has allowed machines with a 30p stake
and a £25 jackpot—in tax law, the so-called category C
machines that are in pubs, clubs and arcades—to increase their
maximum stake and prize to 50p and £35. In return, the industry
agreed to a stronger code of social responsibility on the operation of
these machines.
The
definitions of gaming machines in excise law have traditionally
followed those in social law. We have had this discussion before in
Finance Bill Committees. However, as things stand,
the definition of a category C machine in tax law can be amended only
through primary legislation in a Finance Bill. The clause therefore
amends the definition in line with social law, effective
from22 March this
year.
An operator of
category C gaming machines can now increase the maximum prize that
their machines offer from £25 to £35 without becoming
subject to a higher level of duty. This is the first opportunity that
we have had to legislate for this change, and I hope that members of
the Committee—there are eight Members on each side who last year
supported the cause of an increase in stake and prize levels by backing
early-day motion 1503—will be glad that their campaign and their
arguments have found favour, first with the Department for Culture,
Media and Sport and now as reflected in our taxation
change.
I also should
confirm to the Committee that the change has been widely welcomed by
the industry. The national president of the British Amusement Catering
Trade Association, the trade federation that takes an interest in
amusement machines, welcomed the Budget decision by saying
that
“it’s a big
thank you to Mr. Brown...It’s good
news.”
In
addition to bringing tax law in line with social law, clause 9 also
amends the existing excise legislation so that in future we are not in
this position. In future, commissioners may by order increase the
maximum stakes and prizes permitted for each category of machine for
the purpose of amusement machine licence duty. The clause will prevent
tax law from getting out of step with social law, and I commend it to
the
Committee.
Mr.
Goodman:
We have received no hostile representations on
the clause, so do not intend to oppose it. I feel slightly apprehensive
because I recollect that during the proceedings on a statutory
instrument in the past year in which the Financial Secretary and I
participated—unfortunately, my researchers have been unable to
locate the debate—he disclosed the fact that the statutory
instrument in question had been necessary because an error had crept
into the legislation which the Government, the official Opposition, the
Liberal Democrats
and everyone else had entirely failed to spot. Despite that caveat, as
we have received no hostile representations on the clause, we do not
intend to oppose
it.
Rob
Marris (Wolverhampton, South-West) (Lab): My hon. Friend
the Financial Secretary said that the stake had gone up from 30p to
50p, which is a 67 per cent. increase, and that the maximum prize had
gone up from £25 to £35, which is a 40 per cent.
increase. It seems that the two percentages are out of kilter, and that
there is a bonus for the gambling industry. Perhaps he could say a
little more about that and allay my fears that that is the
case.
John
Healey:
My hon. Friend may be aware that there is a system
of regular review of stakes and prizes for gaming machines. It is
conducted under the auspices of the DCMS, which has policy
responsibility for the area. A review has been conducted and completed,
and a recommendation was made to raise the stake to 50p and the prize
to £35 for this category of machines, which is one of the most
popular types of machine at many
venues.
1.45
pm
The
DCMS, in part because it was considering the implications of changes in
social regulation through the Gambling Act 2005, did not implement the
stakes and prizes review recommendations. Finally, the Minister for
Sport made the decision last autumn that, in fact, we would make that
change. That was a decision for the DCMS. It set the new prize and
stake levels. What we are doing in this tax legislation is simply
bringing the tax category and tax treatment in line with the changes
that have already been made in social regulation. I hope that that
helps my hon. Friend.
Lastly, if the hon. Member for
Wycombe really wants me to, I will track down the details of the debate
that he asked about. I am just a little surprised, because normally his
researchers are very good at such
matters.
Question
put and agreed
to.
Clause 9
ordered to stand part of the
Bill.
Clause
10
Fuel
duty rates and
rebates
Julia
Goldsworthy:
I beg to move amendment No. 1, in
clause 10, page 6, line 23, at
end insert—
‘(2A) After
section 6(1A) there is
inserted—
“(1AA)
The Treasury may, by order made by statutory instrument, specify lower
rates of duty under subsection (1A) in respect of hydrocarbon oil
products sold in remote
areas.
(1AB) For the purposes
of this section ‘remote areas’ shall be defined in
regulations made by the Treasury by statutory
instrument.
(1AC) Orders or
regulations made under this section shall not come into force unless
approved by a resolution of the House of
Commons.”.’.
I
should point out that we are now in the environmental section of part 1
of the Bill, which deals with charges, rates and thresholds. I am
reminded of comments that the hon. Member for Wolverhampton, South-West
made in the Committee of the whole
House, where he spoke, with regard to environmental measures, about the
need for carrots and sticks to try to change behaviour. Since we are
dealing with duty rates, the clause is obviously intended to be a stick
to encourage changes in behaviour. Of course, we welcome the
changes outlined in the clause, which are proposed to take place in
October 2007. Those changes represent indexation, following a freeze of
these duties since 2003. What it will mean is that there will be some
movement on the take of environmental taxes as a proportion of the
total tax take. Therefore, it is an important step in the right
direction, and one that we
support.
However, what
the amendment tries to highlight is the principle that, for some
people, even if there is a very big stick they will still not have the
opportunity to change their behaviour. The amendment would add a new
subsection to clause 10, which would enable the Treasury to specify
lower rates of duty on fuel in remote rural areas. It would go on to
allow the Treasury to specify what it considers to be remote rural
areas by statutory instrument.
The amendment relates to a
principle that is allowed by article 19 of the EU energy products
directive, which allows member states to apply for a derogation to
reduce duty rates in specific areas. That measure was adopted in 2004
by the French Government, with the support of UK Ministers and other EU
member states in the Council of Europe; Portugal and Greece have also
adopted it. I am sure that this measure will be familiar to some
members of the Committee, because it is identical to an amendment
tabled by my hon. Friend the Member for Inverness, Nairn, Badenoch and
Strathspey (Danny Alexander) on Report for the Finance Bill last year.
It is because we have changes in fuel duty in the Bill this year that
it is even more relevant to raise the issue now.
In future clauses, we will deal
with greater differential rates for vehicle excise duty, so it is clear
that there will be action to encourage people not to use their cars so
much. It is very important at this stage that we consider those people
in very remote rural areas—I am not talking about ordinary rural
areas, but incredibly remote rural areas—who are hit not by a
double whammy but a triple whammy. Very often, they have lower incomes
than people in other parts of the country. In the highlands, including
in the constituency that my hon. Friend the Member for Inverness,
Nairn, Badenoch and Strathspey represents, average incomes are 85 per
cent. of the national average. Across the whole of Cornwall, they are
about 20 per cent. lower.
Therefore, in the first place,
people’s incomes in remote rural areas are lower. Also, their
costs of travel are higher, because they have further to travel and
there is often no public transport at all. On top of all that, they
then face higher fuel prices. It is the duty that forms a very large
proportion of those prices. In some very, very remote rural areas, we
are talking about differentials of 10p to 20p to the litre.
That is the issue that the
amendment seeks to raise in order to highlight a principle. We welcome
the action that the Government are taking, but do they recognise the
impact that it will have in very remote areas? People in such areas
have lower incomes, so their fuel costs will represent a much higher
proportion of their outgoings. The measure will not only have an impact
on the
personal finances of individuals living in those rural areas, but
undermine the economic viability of many of those rural communities,
because if people travel further away to buy petrol, thereby emitting
more carbon, they will probably consume services and buy goods in that
community as well, which will mean that their own local community,
where fuel prices are higher, is undermined more widely than simply at
the petrol pump. Goods that could be purchased in that local economic
community will instead be purchased elsewhere. It will be undermined in
that way as
well.
Mr.
Gauke:
I would be grateful if the hon. Lady outlined which
parts of the country she thinks would constitute remote areas. I
suggest that that might include, say, the highlands of Scotland and the
west country. What other factors do those areas have in
common?
Julia
Goldsworthy:
Obviously, the west country is well
represented on the Liberal Democrat Benches, but I would intend the
amendment’s impact to be very limited, because ultimately we
want to support the benefit that other environmental taxes would have.
I would expect only a very small number of communities or none at all
in my own constituency to be included, because I represent the most
densely populated part of Cornwall and it has relatively good transport
links. The people in my area will not have to travel as far as others,
and the differentials in petrol pump prices are not as great as
elsewhere. However, in the highlands and islands of Scotland, where
there are differentials of 20p a litre, the measure will clearly make a
significant
difference.
I say to
the hon. Member for South-West Hertfordshire that the intention is to
limit the impact of the amendment. It would target only communities and
people who have no alternative to the car and for whom, even if public
transport were available, it would be less fuel efficient, because
there would be a bus driving one person around, rather than one person
using their own
car.
The point, with
which I hope the Minister will sympathise, is that there is a need to
recognise the difficulties that very, very rural communities face, and
unfortunately there is not recognition of that fact at the moment. As I
said, the impact of the amendment is intended to be very limited.
Unfortunately, it does not matter how big the stick is, those
communities will not be able to respond. All that people in those
communities will see is fuel prices taking up a larger and larger part
of their disposable
income.
It is
important, if the Government are to continue with their policy—I
hope that they do—that the difficulties faced by those people
are recognised. There are existing forms of duty, such as fuel duty and
vehicle excise duty. The Government have said that in the long run they
would like to move to road user pricing. Again, we would support them
in that, because it would be the most efficient way of ensuring that
the people least able to change their behaviour were not penalised
unfairly, but in the meantime, if we are continuing with changes to
fuel duty and vehicle excise duty, I make a plea to the Minister
that—
Stewart
Hosie (Dundee, East) (SNP): The hon. Lady has just
suggested a move towards road user pricing—something that her
party imposed on Edinburgh. I am quite supportive of that in principle.
I say that on the basis that I have moved similar amendments in the
past, but at least there was previously the advantage of a VAT offset,
so that we could fund such a measure. However, she has said that she
intends the impact of the amendment to be very limited. She began by
talking about rural and remote. She went on to talk about very, very
remote and she ended up talking about very, very rural. The problem may
lie in the definition, which I am sure other hon. Members will come to
and which we have debated in the past. Can she give us a clear
definition as to the number of people, percentage of population and
percentage of land mass that she expects to be
covered?
Julia
Goldsworthy:
The key point is that the amendment would
enable the Treasury to make that judgment. Indicators are available,
but unfortunately they are not consistently available across the whole
of the United Kingdom. I do not know why it would be impossible for the
Treasury to compile that
information.
We know
the practical difficulties of rolling out road user charging and that
there has to be a long-term policy. We also understand that it cannot
be implemented overnight and that is why there are changes to the
system in the Bill. We cannot introduce road user charging at this
point. On that basis, I do not think there is any inconsistency in
saying that it will ultimately prove more efficient, but we must deal
with the here and
now.
Mr.
Dunne:
In responding to the useful intervention of the
hon. Member for Dundee, East, the hon. Lady has illustrated the
difficulty of her proposal. There is much sympathy for assisting those
in rural areas with the added costs of their daily lives, but her
inability to define the area that she describes as remote is palpable.
If there are certain geographic areas that benefit from a reduced rate
of duty because they are remote, there is a strong possibility that
those who live in adjacent areas will merely drive the extra miles to
get to the petrol stations offering petrol or other fuels at a
cheaper price and drive back again. Therefore, they will
contribute to excessive emissions because such journeys would be
completely unnecessary were it not for price
differentiation.
Julia
Goldsworthy:
The point that I am trying to make is that,
at the moment, we are talking about price differentials of 10p to 20p.
We are not necessarily saying that fuel prices at the pumps should be
dramatically cheaper in those remote areas. We are saying that they
should at least be comparable and that there should not be a
significant difference. On that basis, such a system would not alter
behaviour.
Mr.
Dunne:
Will the hon. Lady give
way?
Julia
Goldsworthy:
May I just conclude my remarks? The final
point that I wish to reiterate is that there is a precedent for this
concept across the European Union. The derogation is up and running and
has been used in
France, Greece and Portugal. It is not a new or impractical concept that
the Treasury must try to get its head around. The key point, for which
I hope there will be sympathy in the Committee, is that fuel costs are
presently a significant problem for people in very remote areas. If the
Government feel that the amendment is not a suitable way to address
that problem, I would feel reassured if, at the very least, there was
some understanding from the Treasury of the difficulties posed and the
affordability problems for people who live in remote
areas.
Mr.
Goodman:
It is “Groundhog Day” for those
members of the Committee who were present at last year’s
proceedings. I wish to inform the Financial Secretary that my
researchers have found a copy of last year’s debate in
Hansard, to which I will refer in a moment. I shall say on what
points I agree with the hon. Member for Falmouth and Camborne and then
what we disagree about somewhat—in fact, quite a bit. As she
reminded the Committee, and this point is perfectly valid, people in
remote rural areas often do not have access to public transport in the
same way as people in less remote areas— I am not sure if that
should be remote rural, rural remote or remote remote. In addition,
their circumstances often do not make cycling or even walking
practical.
The 2003
national travel survey for England showed that, of half the residents
in rural settlements, less than 3,000 live within a 30-minute walk of a
bus stop. According to the expenditure and food survey for 2002-03,
households in such areas spend £70.60 a week on transport,
compared with households in urban areas, which spend £45.50 a
week on transport. There is less congestion in such areas, which can
lead to some counter-intuitive results. Obviously, a bus in a remote
area will be less environmentally friendly than a car if the bus has
only a few people in it. The hon. Lady is right to say that people in
such areas often need cars more than people in urban settings. Some of
those points were made by us, by the Liberals at some length and by
others during last year’s equivalent debate. In some respects,
the amendment resembles the package that the Liberals tabled and that
we debated during the Committee of the whole House on last
year’s Finance [No. 2] Bill and on Report. The amendment that
they tabled on Report was almost identical to this one: indeed, I
cannot see any difference. They also tabled an amendment to raise band
G VED rates in general, while reducing all bands for what were then
old cars and all bands except band G for what were then new
cars.
2
pm
Rob
Marris:
The hon. Gentleman takes us back a bit. His
recollection of last year is slightly different from mine, but probably
better in parts. I recall that the Liberal Democrat amendments tried to
give a definition for remote rural areas, but it was a pretty rubbish
definition.
Mr.
Goodman:
If the hon. Gentleman checks in Hansard,
he will find that different Liberal Members gave different definitions.
I have a copy here if he wishes to borrow it to aid his
research.
Other hon.
Members and I were mildly critical of the Liberal Democrat amendments,
because we were not
convinced—it says here—that a single convincing definition
of the areas had been offered. Neither am I convinced that we have had
one today. In last year’s debate, the hon. Member for Dundee,
East, who specialises in this sort of observation, pointed out that one
of the definitions would cover 98 per cent. of Scotland’s land
mass. In addition, we were not convinced that cars would not be
registered in one area and used in another, or that we had a single
reliable estimate of the cost to public funds. In summary, we were not
convinced that the House should rush either to cut VED
or——turning to the amendment, which is the same as last
year’s——that a case had been made for the need to
put such a power on the statute book before we had a full assessment of
the need for it and of the likely financial
consequences.
Julia
Goldsworthy:
The amendment does not seek to define remote
areas, so it is difficult to say that we are not providing a consistent
definition. It is meant as an enabling amendment that would allow
problems to be recognised and then brought back to the House so that we
could determine whether the Treasury’s proposals are fair and
whether they address what I hope thehon. Gentleman accepts is
a real problem in many communities.
Mr.
Goodman:
I accept that it is a real problem, but I do not
think that it is particularly enlightening to have no definition this
year, whereas there were rather a lot of definitions last year. That
does not take us forward. The enabling provision is premature, and I
shall explain why in a moment. Whatever view one took of last
year’s proceedings, it is significant that the Liberals’
amendments that called for a cut in band G rates in some areas were not
resubmitted to the Committee of the whole House. Perhaps the Liberals
were persuaded of the difficulties that we argued were inherent in
those amendments, because they have not retabled them.
[Interruption.] I am happy to let the hon. Lady
intervene.
Julia
Goldsworthy:
I am grateful. I was just wondering aloud
whether, now that the hon. Gentleman and his colleagues have identified
those problems, they intend to suggest any potential solutions, because
I certainly have not seen any in the
Bill.
Mr.
Goodman:
I was going to come to that. However, I note that
the hon. Lady has not explained why her party did not retable the VED
amendments in the Committee of the whole House, despite arguing that
they were so very important or why it has not retabled them
now.
I agree with the
hon. Lady that we need a more detailed Treasury view on all this. Last
year, the Liberals correctly pointed out that France has a derogation
from the energy products directive that allows it to charge the
equivalent of lower fuel duties in remote rural areas, as do Greece and
Portugal. However, they did not point out what the Financial Secretary
told us: that France was proposing a real increase in other, presumably
urban, areas to offset the decrease in remote areas. Neither has the
hon. Lady mentioned that today. The amendment would prepare
the ground for a fuel duty decrease in some areas without preparing the
ground for an increase in other areas. I am not sure what revenue loss
that would entail; perhaps the hon. Lady can tell us. I am not
convinced that charging different fuel duty rates in different areas is
practicable, and I shall ask my hon. Friends not to support the
amendment if the hon. Lady insists on pressing it to a vote. In summary, the hon. Lady wants
to put the power on the statute book and then, presumably, to obtain
from the Treasury a full assessment of its practicality. That is
putting the cart before the horse. Surely, it is much more practical to
obtain the assessment of the power that the proposal would introduce,
including an assessment of any consequent fuel duty rise in urban
areas, and then to consider whether it is practicable to put something
on the statute book. With the greatest respect, the Liberal Democrats
have got it the wrong way round.
The Financial Secretary said
last year that France was due to introduce its proposal to cut duties
in some areas and raise them in others this year. What news has he from
France on what is happening
there?
John
Healey:
What news from
France?
Mr.
Goodman:
The Financial Secretary seems to be interpreting
my remarks in a Shakespearean way. I know that he is extremely well
briefed and well read. As he was able to report from France last year,
I am sure that he will be able to report from France this year. Should
the Treasury not now make, and in due course publish, an assessment of
what is happening in France, rather than replying briefly to the
debate? It should publish assessments of what is done there and in
Greece and Portugal in relation to fuel duty, and see whether that has
any applicability to the UK. Then we will be able to judge whether the
amendment proposed by the hon. Member for Falmouth and Camborne will
have any merit in the medium or long term.
Rob
Marris:
It is a pleasure to follow the hon. Member for
Wycombe, with his usual eloquence. He has clearly done the homework and
research that the hon. Member for Falmouth and Camborne has not. The
chances of the amendment’s being agreed today are getting pretty
remote, if not very remote. It is a typical Liberal Democrat amendment:
unfocused, uncosted and contradictory. Apart from that, it might be all
right. It is unfocused, because we have no definition of remote areas.
Partly because of that, and because I did not hear the hon. Lady
indicate otherwise, it is uncosted, although that is nothing new for
the Liberal Democrats. It is contradictory partly for the reasons that
the hon. Member for Wycombe pointed out.
A central plank of the Liberal
Democrats’ tax policy is, as I understand it, to increase green
taxes. So what have we here? An amendment that would, on the face of
it, result in a cut in green taxes. One can talk about vehicle excise
duty in lots of terms apart from its being a green tax, but the
amendment mentions lower rates of duty. That implies a differential.
There are two ways of having a differential—one can lower it for
remote areas,
whatever they might be, or raise it for non-remote areas. Raising it for
non-remote areas does nothing for people in remote areas. It might make
them relatively better off, but it does not do anything for them.
Conversely, lowering the rate for remote areas would go against what
the Liberal Democrats have spent the past year telling us that they
are—although I do not think that they are—which is the
party of green taxes. I urge my hon. Friends to vote against this
typical Liberal Democrat amendment, which is unfocused, uncosted and
contradictory.
Mr.
Breed:
I have to disagree with the hon. Gentleman. I
usually agree with him, because he makes intelligent contributions, but
when he decides to move away from those, he falls foul of his own
rhetoric.
We
appear to have agreement on the principle that those who live in
certain parts of the country might suffer significantly more than
others because of the general wish to increase fuel duty in the
important cause of the environment. To an extent, we are asking for
some discrimination, which is a good thing in framing many types of
legislation. Although we want to try to drive it out everywhere, there
are always small casesin particular parts of society that are
badly done by in trying to get the benefits that we want for the whole,
in terms of social and fiscal policies. If we accept that people are
being discriminated against because they have no possibility of
accessing public transport, and it would anyway be inappropriate to
provide it, then, for fairness and justice, we ought to try to find
ways in which we might be able to address that.
First, I think that we are
talking about a very small number, which, to a certain extent, becomes
rather self-defined. Most hon. Members will have seen in their
constituencies a significant reduction in the number of filling
stations, both in and out of towns. In remote rural areas, those that
have survived are normally those that are charging 10p, 15p or even
higher more per litre. They are being charged more for the fuel because
it has to get there; they do not sell enough to sustain their overall
costs. They have kept going because people have gone to them; they
patronise them, not because they want to pay 10p, 15p or 20p more per
litre than people who live closer to supermarkets and towns, but
because it would be inappropriate for them to drive the distance purely
to save the money on fuel. They tend to go to that reasonably local
filling station, and that is why those stations have continued in
business much of the time. If they were any closer to supermarkets or
small towns, where fuel costs are significantly lower, selling petrol
would become almost impossible. They would have to put their prices up
to astronomic levels because they would sell so little fuel.
To a certain
extent, the matter becomes self-defining. It is probably a distance
around certain remote rural filling stations. I do not know what that
would be; perhaps some people might be prepared to drive 10
miles, others a little more. However, essentially, it concerns those
areas that surround those filling stations that charge the levels that
we have been talking about.
Secondly, there is the concept
of main residence, and what qualifies where people live. Our part of
the world has quite a few people who have second homes in remote rural
areas. Whether they would qualify as their
principal residences is another matter——probably not, so
it would be much beyond their residential qualification. Thirdly, harking back to the
original point, there would perhaps be designated suppliers. It would
not be applicable to every person but available only to certain
designated purveyors of fuel. To designate filling stations in that way
might be very helpful, because it might underpin some of their
business. If they could sell fuel at the price that everyone else was
selling at, they might be able to keep going longer. There are often
places that sell food and provide other services. In considering
underpinning the rural economy, it is an important factor that, if
stations can provide fuel at a lower cost, it will stop people driving
even five or 10 miles to get their weekly shop at the local supermarket and
fill up at the same time. There is a plus point in looking at the fact
that some remote rural filling stations might be able to hang on a
little longer, and continue to provide a service for their surrounding
area for longer than they may at present.
2.15
pm
Mr.
Dunne:
The hon. Gentleman is starting to cast a little
light through the fog of the Liberal Democrat proposals. If I
understand him correctly, he is proposing, first, that individual
retailers should be designated as eligible for the lower rate of duty;
secondly, that individual suppliers should be designated as appropriate
to supply those retail outlets; and thirdly, and most importantly, that
individual householders or motorists should be designated as suitable
parties to purchase their fuel from those designated garages.
Surely, that would mean that a
garage, even if it was in a remote area, would be able to supply the
same fuel at two different rates to separate categories of driver. How
does the hon. Gentleman envisage that the cost of the proposals would
impact on the retailers who would supply these services? The
bureaucratic nightmare that he conjures up is beyond
belief.
Mr.
Breed:
I hope that that is not the case. I do not know
whether the hon. Gentleman, like me, was driving around as a designated
user of petrol in 1972, when because of potential petrol rationing I
was—for some unknown reason as an assistant bank
manager—a preferential user. Should rationing have come in, I
would have been able to purchase fuel at any petrol station because I
had a particular requirement to do so. It was presumably felt that it
would undermine the whole UK economy if one C. Breed could not drive
around the countryside seeing his customers.
I was not alone in getting that
designation, as my bank made an application for certain individuals to
have the necessary access, which was quite easy to do. It was a
relatively simple Government scheme, which did not require huge
bureaucracy, but I can imagine the sort of bureaucratic nightmares that
there might be today.
Fortunately, the scheme was
never pursued, but it provided the opportunity for individuals not only
to access fuel, but to access it at a certain price. There are clear
examples of a similar situation in which differentials can apply. They
have been introduced in other European countries and it cannot be
beyond the
wit of the Treasury team and the massive numbers of civil servants in
that Department to bend their minds around something involving a
relatively small number of
people. That brings me
to the losses. I understand that last year my hon. Friend the Member
for, I think, Caithness—some unearthly, lengthy place somewhere
in Scotland, the other end of the nation; it is a long way from the
nation of Cornwall to the nation of Scotland—said that on very
rough calculations, the losses in Scotland were of the order of
£3 million to £5 million. I do not suggest that
that is an entirely accurate estimate, but in terms of the total amount
of duty that would be foregone—I will give way as my hon. Friend
is coming to my
rescue.
Julia
Goldsworthy:
My hon. Friend may find it useful to know
that the Exchequer yield for the next financial year, when the fuel
duties kick in, is £490 million. In 2009-10, the
additional yield will be £660 million a
year.
Mr.
Breed:
I hope that is helpful to the
Committee.
Julia
Goldsworthy:
As a
proportion.
Mr.
Breed:
As a proportion, it is a tiny amount, so it will
not require much more than a mite on everyone else’s fuel to
equalise it. Equalisation is not a problem; the amount of money that
will be foregone will be tiny in terms of the total cost of fuel
duties. The definitions of remoteness and so on can be addressed and if
we agree the principle it should not be beyond the wit of the Treasury
and the Government to find a way to tackle a small, but nevertheless
significant, injustice to a number of people. It is likely to persist
for ever, because I do not think anything will be
done.
Mr.
Goodman:
Is the hon. Gentleman saying that he wants a cut,
not a rise, in non-remote areas, which is apparently what applies in
France?
Mr.
Breed:
I am sure that I will be able to understand that
when I read
Hansard.
Mr.
Goodman:
It is very simple. Does the hon. Gentleman just
want a cut, or does he want a cut offset by a rise in duty in urban
areas?
Mr.
Breed:
I am grateful to the hon. Gentleman. No, I do not
want a rise. The cut that would be required to address this injustice
is so minimal as to be of little interest to everyone else. It is a
very tiny amount. The remoteness is not likely to change very much. We
have probably got it down to an irreducible minimum of filling stations
that are serving certain remote areas. If petrol prices continue to
rise, the motivation to go longer and to drive further to the
supermarket or the local town will increase. We want to discourage
that.
Mr.
Gauke:
The hon. Gentleman says that he does not want to
see an overall rise in fuel duties to offset the cut in rural areas. As
we have heard, his party is committed to raising more revenue from
green taxes.
The Institute for Fiscal Studies stated that the overwhelming majority
of green taxes, as it would define them, in this country are fuel
duties. The figure is something like 80 per cent. If he does not want
to increase fuel duties, how does the Liberal Democrat policy hold
together?
Mr.
Breed:
We do want to increase such duties, but we have to
recognise that very tiny minorities are sometimes unfairly dealt with
by various aspects of policy. Liberal Democrats argue that there is a
tiny minority who will never get a bus service and public transport. If
we push on with more and more increases for good environmental reasons,
those in that minority will become even more disadvantaged. Even the
small petrol filling stations that they have are likely to disappear.
People will have to travel further and further to get any fuel. We want
to arrest that decline and recognise that this is a tiny amount. The
amount of money that will have to be forgone is very small. In order to
gain our environmental credentials and to satisfy the environmental
agenda, we need to increase these duties. However, we also need to
address the issue of the tiny number of people who will be severely
disadvantaged on a continuing basis. I do not believe that it is
impossible to find a way to do so.
John
Healey:
The debate has powerful echoes of our debates in
Committee on the Finance Bill last year. My arguments remain the same.
I want to be clear about what this proposal would and would not do.
First, it would break a long-standing principle of uniform tax rates in
the United Kingdom. The proposal here is to reduce fuel duties in
certain parts of the UK and not in others. It would also, as Members
have pointed out, conflict with environmental objectives and create the
potential for
fraud.
What the
proposal would not do is also important. It follows directly from the
hon. Gentleman’s observations that there is generally less
competition and therefore higher prices in pumps and filling stations
in many remote rural areas. A duty cut for the provision of fuel in
these areas would not guarantee any reduction at the pumps for the
motorists and the residents whom the Liberal Democrats are concerned
about. It would be impossible to guarantee that a fuel supplier who
might benefit from a reduced rate of duty would pass such a reduction
on at all, or in full, to its customers. That is especially the case in
areas where there is little competition between suppliers because there
are fewer of them: precisely those rural or remote areas that hon.
Members are concerned about.
In addition, we must be clear
that the duty system in the UK does not make any allowances for where
oil is used. The duty becomes payable at the point at which oil leaves
the refinery, regardless of where in the United Kingdom it will be
used. The amendment would require a new system for petrol suppliers and
diesel suppliers to account for and then reclaim the tax that they
paid. I suspect that that would unpopular with many in the sector,
because they would be required to deal with a complex system and a
relatively high administrative burden.
The hon.
Member for Dundee, East also pointed out that definitions are
difficult. How do we define “rural”, “very
rural”, “remote”, “very remote” or
“Liberal”—there are probably no very Liberal areas
in the country these days? With respect to the hon. Member for Falmouth
and Camborne, she is ducking a central issue by simply saying that the
definition would be for the Treasury to determine by order. Unless the
proposal can be defined in a consistent way on a principled and
rational basis, it will not have much
merit.
Mr.
Breed:
I recognise the significant problem in making
reductions. On the point about locality, I do not think that rural
suppliers make an exorbitant profit on their petrol; in fact, they have
to buy fuel at a significantly more cost than those who provide it for
towns. I do not think that they are making significantly greater profit
from their margin than others.
On the definition of
“remote areas”, not so very long ago we had to address
the problem of foot and mouth and we had to define areas that would be
available for special treatment because of their rural nature. We
managed relatively easily, over a much larger area, to give such
reasonable definitions so as to provide for certain areas that were
going to get special treatment following foot and mouth. I do not take
the Financial Secretary’s view that it is impossible to provide
a
definition.
John
Healey:
In that case, may I look forward to the proposal
returning to the Committee members considering next year’s
Finance Bill, together with a formula for making such a definition
stick?
Mr.
Goodman:
Is the Financial Secretary saying that because of
all the difficulties that he has listed, there is no merit in the
Treasury making an assessment of the arrangements that apparently
pertain to France and elsewhere on the
continent?
John
Healey:
The hon. Gentleman is on the ball, because I was
about to turn my attention to France. Should he wish to intervene
again, I shall be happy to give way after I have made my comments about
France.
At the heart
of the French scheme is a proposal not to reduce tax but to aim to
raise additional revenue in certain areas—there is the
flexibility to do that—in order to pay for functions that have
been delegated from the centre to those regions. Hon. Members were
right to press the hon. Members for Falmouth and Camborne and for
South-East Cornwall about the intention behind their proposal. They may
wish to use the model of the French scheme, but that is its aim and
that is how it would work.
In terms of assessing the
French scheme, it has taken advantage of the derogation, but the system
came into effect only on 1 January, thus it is too early to tell with
any clarity or certainty how it is working. I do not believe that the
French model and the French use of the derogation, for the purposes
that the hon. Lady proposed, have much merit. Such an approach would be
hedged around with other
complications.
Stewart
Hosie:
The Financial Secretary is right about the French
model; he is probably also right that it would not
be mirrored exactly here. Does he agree that when we debated this issue
in the past two years, it was
with urgency because petrol prices were high and the rises were sudden?
That is perhaps less of an issue this year. Will he indicate that he
will consider the matter in the longer term, calmly and outside the
debate, to work out how we can protect remote, rural areas, whose
inhabitants pay much higher prices? We must particularly recognise the
possibility of similar episodes in the future, when the price may once
again rise to a disproportionately high
level.
2.30
pm
John
Healey:
I am conscious of the transport difficulties for
people in rural areas. For some years when I was growing up, I went to
school in rural north Yorkshire, so I am concerned about that issue.
The Government remain of the fairly fixed view that such a solution is
not the best way to deal with those problems. If the hon. Gentleman
considers the situation in his own country, Scotland, he will recognise
that the rural transport fund there has supported more than 150 rural
transport projects since 1998. It is through that approach that we can
best deal with some of the difficulties that are faced by those living
in rural areas.
I
hope that the hon. Member for Falmouth and Camborne will not feel it
necessary to press her amendment; if she does, I shall call on my hon.
Friends to resist
it.
Julia
Goldsworthy:
I shall not press the amendment. I am
disappointed, however, because I introduced the amendments in a
constructive tone, to highlight what is a serious issue for a small
number of people. I should like to draw to the attention of the
Committee a report that was commissioned by The Highland council to
illustrate the scale of the problem. It was produced in 2000, but the
principle was the same. It found that £88 million was
spent on fuel in that remote, rural area, which represented 3 per cent.
of its GDP. We are talking about a significant amount of money,
£3 million of which was VAT windfall, so there was a roll-over
effect. It is a significant problem for a small number of people who
should not be overlooked.
I am
frustrated because we have not heard anything new from either the
Government or the Conservatives about what can be done to address the
problem. I am partially reassured by some of the Financial
Secretary’s comments, but I am disappointed because I feel that
perhaps people were not paying attention. The amendment is clear: it is
to allow for a reduction in fuel duty without any accompanying
increases to compensate for that. That is not the same as saying that
we would not support increases in fuel duty in line with inflation,
such as those that will be introduced by the
Bill.
Rob
Marris:
The hon. Lady is obviously reading her amendment
differently from the way that I do. Proposed new section 6 (1AA) says
that the Treasury can
“specify lower rates of
duty”;
it does not say
that “the Treasury shall lower”. In the context of her
amendment, “lower” is an adjective, not a verb. The
amendment is therefore quite clear that a differential could come about
through the raising of duties in non-remote
areas.
Julia
Goldsworthy:
I am grateful to the hon. Gentleman. My
understanding is that the Treasury may specify lower rates of duty for
remote rural areas; it does not say that it may increase them for all
areas that do not fall into that
category.
I shall turn
now to another point. The green tax switch, about which my hon. Friend
the Member for Eastleigh (Chris Huhne) has spoken, is designed to
encourage changes in behaviour. The point that we have been trying to
make is that, in such circumstances, it would not encourage changes in
behaviour. Our position is therefore not at all inconsistent. My hon.
Friend the Member for South-East Cornwall clearly showed how limited
the measure would be in terms of the number of petrol stations that it
would affect.
The
amendment does not say that we should adopt wholesale the scheme as it
exists in France; it says that there is clearly a problem for a limited
number of people. If the Government pursue their current policy, that
will make the problem increasingly difficult for those groups of
people. It also says that there is a precedent, a derogation, that the
Government have supported other countries in adopting, but the Govt
have so far chosen not to adopt that derogation themselves. That
derogation may provide a way to alleviate the difficulty that these
people face.
If the
Government felt that the amendment is not an ideal solution, I had
hoped that they would put forward a better alternative. Unfortunately,
we have not heard such an alternative. Therefore, what most disappoints
me is the fact that the principle that the amendment tries to put
forward has been ignored. Until this issue is resolved, it will keep
returning.
The
Financial Secretary made some valid points about the difficulties of
ensuring that that differential in duty ended up being passed on to the
customer in terms of price; those are valid issues to raise. However,
the concern is that this problem will not be addressed. A limited
number of people face this problem, but to them it is a significant
one, because a differential of 20p a litre will mean several
more pounds for every tank of petrol. If people are travelling longer
distances, that extra cost will be a significant proportion of their
income. So this is an important problem that has not yet been
addressed, and I am afraid that it may be “Groundhog Day”
again next year, if there is not even an indication from the Financial
Secretary that these issues will be examined. I beg to ask leave to
withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Question
proposed, That the clause stand part of the
Bill.
Several
hon. Members
rose
—
The
Chairman:
I shall call the Financial Secretary
first.
John
Healey:
I had anticipated making my comments after I had
heard the other contributions to the clause stand part debate, but I am
quite happy to make a few brief observations at this
point.
The clause
provides for an increase in the main road fuel duty rate of 2p a litre,
and an increase in the duty
on the rebated oils of 2p a litre to maintain cash differential with the
main road fuels rate in support of the oil fuel strategy. It also
provides for consequential increases in duty rates for biofuels and
road fuel gases, in order to maintain the differentials with the main
road fuel duty, differentials that, of course, are guaranteed under the
alternative fuels framework. It is the Government’s
policy that, in general, fuel duty rates should rise each year at least
in line with inflation, and Budget 2007 set out fuel duty rates for the
next three years, first for environmental reasons; secondly, to ensure
funding for public services; and thirdly to provide greater certainty,
alongside other tax reforms that were in the Budget. Increases in 2008
and 2009 will be provided for in subsequent Finance
Bills.
In recognition
of the impact on specific sectors, the duty rates for rebated oils will
increase in future years by the same percentage as the main rates. That
represents, therefore, a much lesser increase than has previously
occurred; it also reflects the detailed discussions and analysis that
we have conducted with heavy users of rebated oils, such as open-cast
coal mining and rail companies. On that basis, I commend the clause to
the
Committee.
Mr.
Goodman:
As the Financial Secretary just said, the
Government have, in general, a policy of raising these duties in line
with inflation. That is perhaps a properly cautious approach, and
possibly the best assessment of the changes that he has just proposed
was provided by the Financial Times. It said that he
had
“deferred to
motorists’ and lorry drivers’ sensibilities by imposing
an increase in line with inflation, putting the increase off until
October and announcing in advance planned
increases”.
Those moves
were typical of what the Financial Times
called
“the cautious
approach to fuel taxation that the Chancellor has taken ever since
protests over fuel duty in 2000 forced him to abandon the fuel duty
escalator”.
Certainly the
Government do not want to go there again.
It is significant that these
increases, like several others in the Budget, were set up quite a long
way in advance. The Chancellor has left his successor with little room
for manoeuvre if that successor should seek room for manoeuvre. The
Government certainly have to reconcile what the Financial Secretary
would call “complex interactions”—the phrase he
used about tobacco duties in relation to fuel duties. They have a
target of ensuring that 5 per cent. of all transport fuels should be
renewable by 2010-11. They have to take into consideration not only the
requirement to hit that target, but the competitive position of
industry, the effect on agriculture and farming, the consequences for
consumers and the effect on the balance between public and private
transport. All the while, I am sure there is in the Financial
Secretary’s mind the memory of the events of 2000.
Those are not very easy
pressures to reconcile and we shall not oppose the changes, but I
should like to ask the Financial Secretary a few questions that arise
from the generally favourable comments on the rises issued by green
organisations and the generally more
unfavourable comments issued by those who have a direct users’
concern with transport. Has he ruled out a return to the Environmental
Audit Committee’s preferred solution, namely real-terms rises in
fuel duty? Secondly, as the Chancellor announced in the pre-Budget
report last year that revenues from any real-terms increases in duties
would go straight into a ring-fenced fund for improving public
transport and modernising the road network, can the Financial Secretary
confirm that announcements to this effect will be contained in the
comprehensive spending review later this year? Thirdly, what analysis has the
Treasury made of the effect of these rises on inflation, industry in
general and the road haulage sector in particular? Finally, is there
not an increasingly strong case for an increased duty differential for
high blend biofuels in order to make them cost competitive as the
Environmental Audit Committee has urged? That committee said that it
recognised
“the
environmental benefits of a properly sustainable and well-regulated
expansion in the use of high-blend biofuels such as E85. Under the
current fiscal regime, however, it is unlikely that the market for
highblend biofuels will take off, due to its increased
costs.”
It is worth
noting, though, that it raised the same concerns about biofuel sourcing
as Friends of the Earth raised about sustainability criteria. I look
forward to the Financial Secretary’s response to these
points.
Adam
Afriyie:
I have just a few observations. The Financial
Secretary said that the objectives of these duties are for
environmental reasons, to raise revenue for public services and to
create certainty by laying out the future progression of these duties.
They are all fairly admirable goals and I have no complaint with them.
There is a danger that the green taxes are an excuse for revenue
raising or that they obfuscate the drive to raise revenues by hiding it
behind environmental issues. It strikes me that when we come to
vehicles and the duties on vehicles, consumers quite possibly already
pay many times more than it costs to tidy up the carbon they may be
emitting from their exhaust pipes.
We are coming on now to vehicle
excise duty with many different gradings. That is arguably a green tax.
We have these fuel duties now escalating with the various
differentials. Residents parking permits in some areas will be cost
more for gas-guzzling or large vehicles, the cost of parking at railway
stations is always increasing and then there is congestion charge in
central London which is arguably an environmental or a green tax to a
certain degree. Now we have talk of road
pricing.
2.45
pm
It strikes me
that at approximately £30 per tonne to clear up CO 2,
there is no doubt that, if we are considering this as a green issue,
the motorist is already well over-taxed in that area. That is why, to
an extent, I am pleased with the Conservative party’s position,
which is that if we raise green taxes, we will offset them against
taxes in other areas of the economy. Can the Financial Secretary
confirm—or advise otherwise—that there is an intention in
here somewhere to offset the increases in what are called “green
taxes” against
those in other areas? To echo my hon. Friends on the Opposition Front
Bench, how much of the additional money raised from these duties will
go directly to road improvements and carbon removal? The technologies
are available, so is anything ring-fenced to be passed, for example,
directly to carbon sequestration or other means of removing carbon from
the atmosphere? It is not that I would argue for any form of
hypothecation; I should just like to give the Financial Secretary a
platform from which to tell us what measures are being undertaken and
how much they have been increased, given that there is increased
revenue from fuel
duty. Finally, on a
point that applies to most broadly based taxes, does the Financial
Secretary recognise that the increases in these duties will, by virtue
of the kind of tax that they are, disproportionately affect the least
well off?
Julia
Goldsworthy:
I do not intend to add further to the
comments that I made when introducing my amendment about our support
for the re-indexation of fuel duty to inflation, but I have a very
brief question. There is a differential in duty that is designed to
encourage greater take-up of biofuels, but different biofuels come from
more or less sustainable sources. That is a cause of great concern to
many people. Is it possible to differentiate through the fuel duty
mechanisms between biofuels from more and less sustainable
sources?
John
Healey:
First, there has been reference in passing to the
road fuel transport obligation that we propose to bring in from 2008.
That will require an increasing percentage of all fuel suppliers to
supply biofuels as a part of their product. It will be introduced in
2008 and by 2010-11 it will affect 75 per cent. of them. It is designed
to give a big boost to the biofuels market, with the environmental
gains that can flow from it in the UK. A central feature of the
introduction of and preparation for the obligation is an assurance
scheme, which the Department for Transport is discussing with those who
are interested, and on which it is leading the design work. The purpose
of the obligation is to secure the environmental contribution to
dealing with climate change. The quality and climate change impact of
biofuels that will be encouraged by that means will be important to us
as we introduce and develop the obligation scheme. I hope that that
gives a degree of reassurance to the Committee and others, particularly
to the green groups that have made that point and have helped us in the
work.
I am grateful
to the hon. Member for Windsor for his offer to give me a platform, and
for the fact that he regards the rationale for the proposals in this
clause to be fairly admirable goals. I shall come back to his question
about offsetting green taxes, because that links to a point made by his
hon. Friend the Member for Wycombe, who asked two or three questions.
The first was, “Are the Government considering any real-terms
increases in fuel duty?” We discussed this morning the basis of
the Government’s forecasting in tax terms, and that element of
the Red Book is the quarter three RPI figure for this year, which is
3.38 per cent. So the rises of 2p per litre this year, 2p per litre
next year and 1.84p per litre the year after represent respective
increases of just over 4 per cent., just under
4 per cent., and about 3.5 per cent. In answer to the hon.
Gentleman’s question, we are already looking at three years of
fuel duty rises that have a real rise element to them. We have been
clear from the start that the resources that these will help to raise
will help contribute to the Government’s spending on our
priority areas, such as transport and environmental protection. Our
decisions on that will be taken in the context of the comprehensive
spending review. I do
not want to pre-empt the discussion that we may have on a subsequent
clause, but would say that we have been clear about offsetting in
relation to the proposed landfill tax rises. The rise in the landfill
tax take from business will contribute to what we also announced in the
Budget as offsetting significant cuts in the main rate of corporation
tax.
Finally, on the
question of biofuels, which was raised by the hon. Members for Wycombe
and for Falmouth and Camborne, we are examining the place that they
will have in the obligation framework. We are looking at ways to ensure
that the framework can incentivise those. Hon. Members will be aware
that we have given special support through the company car tax and
vehicle excise duty systems to try to encourage high-blend biofuels. I
remain unconvinced that a duty rate differential is the best way to
encourage them, but they clearly have a potential to offer us a greater
gain in our efforts to tackle climate change, and in particular, to
offset what is at the moment, still an escalating path for the
emissions that we anticipate from road transport. It is an area of
policy that we are actively examining. I hope, on that basis, that the
Committee will allow clause 10 to stand part of the Bill.
Question put and agreed
to.
Clause 10
ordered to stand part of the
Bill.
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