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Mr. Hoban: Perhaps the hon. Gentleman should spend some time on a Finance Bill Committee to understand how important it is to get this right, not only from HMRCs point of view, but on behalf of our constituents. Getting the issue right is not straightforward, and that is the problem with the amendment. Although we understand the sentiment behind it, we could not support it in the Lobby.
Angela Eagle: We have had an important, if short, debate about something that has an impact, especially in rural areas. We heard some arguments in support of the exemption proposed, with perfectly reasonable intent, by the hon. Member for Dundee, East (Stewart Hosie) through amendments Nos. 9 and 10. However, we also heard, not least from the hon. Members for Fareham (Mr. Hoban) and for Taunton (Mr. Browne), why it is difficult to draw a clear line to produce an exemption that would achieve the aims of the hon. Member for Dundee, East.
I welcome the acceptance of the principle that price should be used to influence behaviour. That is an important point of agreement throughout the Committee, and it is good to find points of agreement in such debates before homing in on matters on which there might not be 100 per cent. agreement. I recognise the points made by the hon. Members for West Aberdeenshire and Kincardine (Sir Robert Smith) and for Argyll and Bute (Mr. Reid) about the difficulties experienced in their areas and the pressures on rural businesses and industries.
As the hon. Member for Fareham said, it is important to try to get any exemptions on duties right, be that VED or anything else, and to ensure that they can be defended and maintained consistently and coherently. Although the hon. Member for Taunton is supporting the amendmentand taking quite a lot on trusthe made similar points about the practicalities of any of the exemptions suggested. There are some 4x4 vehicles in bands E and F. We hope that the changes to VED rates in this Bill and those that are signalled for future Finance Bills will lead to the introduction of new 4x4 vehicles in lower bands.
Let me answer the specific questions asked by the hon. Member for Dundee, East, especially that about mountain rescue. First, we have been considering the tax treatment for mountain rescue vehicles, but there is an issue with charity law. Government policy on the tax treatment of charities is neutral between them, and we would not want to pursue a policy that appeared to favour one charitable cause over another. The charitable status of mountain rescue organisations therefore presents the Government with potential difficulties, as a specific VED exemption would appear to favour them over other charities. Some mountain rescue vehicles that are registered as ambulances are exempt, but there is a difficulty with other such vehicles, which we are considering whether we can get around. That is one reason why we have not been able to announce a complete exemption for mountain rescue vehicles.
The hon. Member for Dundee, East discussed a potential exemption, helpfully leaving the relevant definition to the Treasury. It would be difficult to define the exemption in a way that would achieve his aim. His amendment would apply the VED alternative fuel discount to working vehicles, which are undefined in his amendment, but the discount currently applies equally to vehicles that are used primarily either for private travel or for business activity. Adding the condition that only working vehicles that are alternatively fuelled qualify for the reduced rate would undermine the incentive for other vehicles and would unnecessarily complicate the tax system.
We also believe that the compliance and administrative costs of such a change would be considerable, as the hon. Member for Fareham sensibly pointed out. The Driver and Vehicle Licensing Agency would need to verify that a vehicle was a working vehicle, which would be difficult to do on an individual basis and even more difficult to police. Working vehicles such as agricultural vehicles are already exempt from VED, and there is a separate exemption for vehicles, including four-wheel drives, that are used mainly on the land. That exemption is available where a vehicle is used only on a public road for a distance of no more than 1.5 km to pass between different areas of land that are occupied by the same person. So there are already exemptions, which could be policed and guarded more effectively than the very open exemption that the hon. Gentleman suggests.
Mr. MacNeil: I understand what the Minister says about definitions, but surely, someone who receives the single farm payment is highly likely to have a working vehicle, whereas someone who lives in Chelsea, for example, is unlikely to be receiving that payment. Many people who receive the single farm payment use such vehicles, but the Government are going to pretend to be blind to them. The Treasury and the Department for Environment, Food and Rural Affairs will be aware that such people have working vehicles. I ask the Treasury to look through DEFRAs eyes; it should then be clear and plain which are working vehicles.
Angela Eagle: We always try to be reasonable and consider how these matters can sensibly be policed. I know what the hon. Gentleman means, but what looks simple from his constituency might not look simple at the DVLA, which would have to issue all the licences.
I hope that Opposition Members will accept that there are already exemptions, and will consider that working vehicles that are used off-road can use red diesel. Red diesel rates are lower than ordinary petrol rates and are therefore worth a considerable amount of money. Red diesel and main road fuel differentials widened under the 2007 Budget, which gives some advantage to people who use red diesel. That has not been mentioned, but it should not be sniffed at.
The amendment would clearly be administratively burdensome and complex, confusing for motorists and difficult to police. As the hon. Member for Fareham said, it would be difficult to keep within boundaries. I am therefore in sympathy, but I am afraid that I am unable to think of a workable definition for the purpose of the amendment, so I invite the Committee to reject it.
The hon. Member for Argyll and Bute (Mr. Reid) was sympathetic and I entirely agree with
him that the regulations should be tightly drawn. The hon. Member for Taunton (Mr. Browne) was sympathetic in parts, but he taught us all the important lesson that one should not speak when one has very little to say. He was followed by the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), who actually made the speech that the hon. Member for Taunton should have made. The hon. Member for Fareham (Mr. Hoban) spoke about difficulties in defining the matrix and he quite rightly drew a distinction between lifeline and lifestylea very good way to put it, but I was disappointed that he followed that up by finding difficulties rather than solutions to what are very real problems in many parts of the country.
That brings me to the Minister. I welcome the fact that the Government are looking at what can be done for mountain rescue, and I appreciate that. There is, however, a singular lack of pragmatism in seeing the equality of treatment between charities as important, yet being unable since last years discussions to find a way to help lifeline 4x4s for people setting off in mountains in the middle of winter to rescue others and save lives. In short, having listened to what the Minister said, I feel she was seeing difficulties in the solution rather than seeking a solution to the difficulties faced in many remote and rural areasdifficulties that will be intensified not just by the burden of high fuel costs, the burden of high inflation and the burden of low wages, but by the additional higher vehicle excise duty charge on essential vehicles. With that, I am sorry to disappoint the Minister, but I shall press the amendment to a vote.
(7) The Treasury shall publish, not later than the date of the Budget 2009, an estimate, audited by the Independent Committee on Climate Change (as established by the Climate Change Act 2008), of the carbon emissions savings resultant from the changes to vehicle excise duty contained in this section..
I am delighted to see that the Chief Secretary to the Treasury has decided to respond to this debate; having missed the earlier groups, she has kindly agreed to help her colleagues deal with this amendment. I look forward to her detailed exposition of the excise duty changes. Perhaps I should keep my speech short so as to give her more time to expand at length about her views on the topic. Relief has arrived, however: the Exchequer Secretary to the Treasury has returned to her place, which means that the Chief Secretary need not respond to this debate in her stead.
We must recognise that at the heart of the vehicle excise duty issue is the fact that the reforms announced in the Budget and the increases included in clause 15 will lead to the imposition of higher taxes on motorists. When motorists see their vehicle excise duty rates increasing, they will ask what benefit that brings in terms of reducing carbon emissions. It is worth reminding the Committee that in 2006-07, vehicle excise duty raised about £1.9 billion. In 2008-09, according to an answer given by the Exchequer Secretary, VED will raise £2.9 billionan increase of £1 billion in the space of two years. That is a significant tax take that has been justified on the basis that VED is an environmental tax.
our greatest obligation to the future must be to tackle climate change.[ Official Report, 12 March 2008; Vol. 473, c. 295.]
It was clear that a centrepiece of that was the reform to VED that he announced, with the move from seven bands to 13 to widen the differentials between the most and the least polluting cars, and the introduction of a first-year charge to incentivise people to buy the lowest polluting cars at the moment of choice.
Mr. Redwood: Does my hon. Friend agree that we need to look at the changes against the new background that petrol at the pump has gone up to at least £1.10 a litre, of which a massive 70p is now tax and dutyfar more than the Government planned at the time of the Budget? We need to view the VED increases in the light of that big environmental tax that the Government are imposing by stealth.
Mr. Hoban: My right hon. Friend makes a valid point. In fact, just this morning I had an e-mail from one of my constituents who was concerned about the increased tax take that the Government were getting from the increase in petrol prices at the pump. I am conscious that that is outside the scope of amendment No. 6, so I cannot dwell on the issue at as much length as I might have liked to do in other circumstances.
The consequence for many families is that the rate of VED that they have to pay on their car will go up. An analysis of the changes indicates that VED rates will rise on 88 per cent. of cars. The percentage increase on a Nissan Micra is actually greater than that on a Porsche Cayenne. We are starting to see a series of
increases in differentials that gives rise to some of the comments mentioned by the hon. Member for Dundee, East (Stewart Hosie) earlier.
The problem is whether people see the increases in VED as simply a tax increase or a legitimate way to tackle carbon emissions. In the evidence given to the Treasury Committee in its inquiry on the 2008 Budget, John Whiting from PricewaterhouseCoopers commented in the context of the environmental measures:
What is lacking is a clear statement, a clear framework, by Government which says...Are we raising money by environmental duties or are we changing behaviour?
The CBI said that the Government were approaching environmental taxes in completely the wrong way. It argued that the primary aim of environmental taxes should be to change behaviour and not to raise revenue.
In that context, it is important that there is a mechanism that enables people to measure the behavioural changes that take place as a consequence of the changes announced in the Budget. That is what amendment No. 6 seeks to do, by asking the independent committee on climate change that will be established by the Climate Change Bill to produce a report, not later than Budget 2009, on the carbon emission savings resulting from changes to the vehicle excise duty in this Bill.
Mr. Quentin Davies (Grantham and Stamford) (Lab): Is not the hon. Gentleman making a false antithesis? Surely any increase in price involves a change in behaviour. The extent of the change will be a function of the price elasticity of demand. If one puts up the price of anything, one reduces demand for it, thereby changing behaviour. Is the Conservative party seriously determined to go back on the changes to VED if it comes to power, or is it just thrashing about for a way to criticise a measure without having the courage to pledge to reverse it, and talking about environmental monitoring as a sort of alibi?
Mr. Hoban: The hon. Gentleman should pay more attention to the issues. We have said that we support environmental taxes being used to change behaviour, but unlike the Government whom he now supports, we believe that those additional tax revenues should be used to reduce the burden of taxes on families rather than simply to increase tax revenue. That is part of the problem at the heart of the Budget. We are seeing an increase in vehicle excise duty that will simply fill the Treasury coffers, so people can be much more cynical about environmental taxes. They do not see them as ways of changing behaviour, but simply as a way in which the Government can fill the black hole that is opening up in their finances. The hon. Gentleman is right to say that we should see environmental taxes that help to change behaviour. That is why we want the independent committee on climate change to report on the impact of the amendments.
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