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As I was about to say before the hon. Gentleman intervened, my hon. Friend the Member for Putney (Justine Greening) tabled a question to the Exchequer Secretary to ask what the impact of the VED reforms would be on emissions. The Treasury estimated that by 2020 emissions would be reduced by 160,000 tonnes, which is less than one tenth of 1 per cent. of vehicle emissions. It would appear that the way in which the
changes have been designed has led to a situation where the change of behaviour is estimated to be minimal. That is the problem and it is why people are becoming concerned about whether the taxes are genuine attempts to reduce vehicle emissions or whether they are seen simply as a way of raising revenue for the Exchequer.
It is important, as part of creating a sense of trust about the motives behind the tax increases and ensuring that there is some transparency about their impact, that we should ensure that they are independently reported on. I believe that amendment No. 6 would deliver that objective. All Members who are serious about increasing transparency on climate change and want to see the independent committee make a major contribution to the debate should support the amendment. I hope that they will support us in the Lobby tonight.
Rob Marris: As I was saying before I so rudely interrupted myself, the hon. Member for Taunton (Mr. Browne) gave some figures on transport CO2 emissions and household CO2 emissions. The figures that he gave are almost the reverse of the figures in the Red Book—although perhaps he was right. He said that 25 million households produce 27 per cent. of CO2 emissions in the UK, which was double the amount produced by cars. According to paragraph 6.19 on page 94 of the Red Book, CO2 emissions from transport account for 28 per cent. of UK CO2 emissions. Paragraph 6.63 on page 103 states that households account for 14 per cent. of UK CO2 emissions, albeit that households account for a quarter of energy consumption.
In moving the amendment, the hon. Member for Fareham (Mr. Hoban) said that constituents will ask what they are getting. On one level, he has a point. The changes are designed to change behaviour, yet between 1995 and 2005 the average CO2 emissions of new vehicles purchased in the UK fell by about 1 per cent. a year. CO2 emissions overall in the UK this century have increased rather than decreased. However, the amendment considers only—this is a criticism—the causes of climate change. Some hon. Members will know that one thing that upsets me about the tone of public debate in this Chamber and elsewhere is that we do not look sufficiently at the effects of climate change. I do not doubt the hon. Gentleman’s figures about the tax take from vehicle excise duty going up markedly from £1.9 billion in 2006-07 to £2.9 billion in 2008-09. That amount of money should mean that our constituents—and constituents around the country—will potentially get protection from the effects of climate change. The part of the equation that we seldom discuss in the House is adaptation, which is the sort of thing that the amendment does not address.
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I have referred to the effects of climate change, and the Association of British Insurers estimates that last summer’s flooding, principally in England, cost £3 billion. That money effectively comes from almost every householder in Britain, because the insurance premiums of all households, not just those affected by flooding, go up. The Government have massively increased the spending on flood control, both inland and with coastal defences and so on. That is the sort of thing that VED money is being spent on, albeit that it is not hypothecated, and it is something that our constituents are getting
from this green tax. They are getting something that deals with adaptation—the effects side of the equation of climate change; it is not just about causes.
The hon. Member for Fareham went on to say that 88 per cent. of vehicles will pay more. I do not doubt him on that figure. I warn the Government that, next year, we will risk another 10 per cent. kind of debate. This coming year, a vehicle in band F, which emits perhaps 201 g of CO2 per kilometre, will pay £210 in vehicle excise duty. From 2009-10, it will be in band K, paying £300 in vehicle excise duty. That is a £90 or 42.86 per cent. increase. A vehicle in band E, which emits 181 g of CO2 per kilometre, will pay £170 in 2008-09. That vehicle will go into band J from 2009-10, and it will pay £260 in vehicle excise duty. That is an increase of 52.94 per cent.
The difficulty with those increases is that, to most of our constituents, they are retrospective. Table A.8a on page 122 of the Red Book is headed “VED bands and rates for cars registered after 1 March 2001”. It relates not to new vehicles that are bought with those CO2 emissions from, say, next year, but to vehicles that are already in the fleet. So, as I understand it—the Exchequer Secretary can correct me if I am wrong—someone who bought a new car in band F in 2002 will experience a 42.86” per cent. increase in their vehicle excise duty for the very same vehicle—or, in the other example that I gave, a 52.94 per cent. increase. My constituents will regard that, quite understandably, as a retrospective tax increase; they will not take kindly to it, and the Government need to think again.
Mr. Jeremy Browne: My party is happy to support the amendment on the basis that it is always good to monitor progress on environmental matters. I suspect that our motivation for supporting it is rather different from that for which it was tabled. That motivation was to try to make a broader political point about the lack of effectiveness in environmental taxation, whereas my party and I are enthusiastic exponents of the potential benefits of such taxation.
I suspect that the Conservative party’s true motive for proposing the review is to make a broader case that the Government’s policy on vehicle excise duty differentials has been ineffective in dealing with climate change. Therefore, the Conservatives will argue that we ought to conclude that the policy is ineffective and not one to which they are sympathetic, whereas I draw a different conclusion: if the Government’s policy on vehicle excise duty differentials is not having the desired impact on CO2 emissions, it is a good reason for their policy to become more ambitious and the differentials wider to create greater incentives for people to drive fuel-efficient vehicles, rather than for the conclusion that I suspect many Conservative Members draw, which is that the bands should be narrower, because the policy has been deemed to be a failure.
Mr. Hoban: We might draw the conclusion that the Government’s approach is not well designed enough to bring about the behavioural changes that they hope it will. It is a design issue, I think.
Mr. Browne:
I am grateful for that intervention, because for many years—since before the Government introduced the policy—my party has been an exponent
of the merits of differentials in vehicle excise duty. We want to try to encourage, rather than compel, behavioural change through price mechanisms. In 2001, the Government introduced a timid, modest form of the policy for which the Liberal Democrats have long argued. Over a number of years, the Government have slowly sought to expand the number of bands, and to make the policy more radical. Our argument is that the policy should be more adventurous still, that the rewards for driving low-emission cars ought to be greater, and also that the penalties for driving high-emission cars ought to be greater, with one or two exemptions that we touched on in discussion on the previous group of amendments.
The hon. Member for Fareham (Mr. Hoban) asked whether the differentials in vehicle excise duty were about raising money or changing behaviour. We argue that they are about both. It is perfectly possible for both those effects to be produced simultaneously. Taxation on cigarettes, for example, is designed to try to dissuade people from smoking, but it also raises substantial amounts of revenue for the Treasury.
I agree with the Conservative party spokesman, and the Conservative party more generally, that environmental taxes are discredited if they are used solely as a revenue-raising measure. Certainly, my party would like money raised through environmental taxation to be used to offset other types of taxes, including taxes on income, particularly the income of those on low salaries, who most need assistance at a time of rising prices.
The Conservative party is playing a risky political game. Its leader cycles to work at the House of Commons— [Interruption.] I will ignore the interjections about how his clothing gets here. He cycles here, and he and others create the impression that the Conservative party is extremely sympathetic to wind farms and low-emission vehicles, yet that is done with a nod and a wink. For example, in The Daily Telegraph’s lead story a few weeks ago, people who might be inclined to vote for the Conservative party were encouraged to believe that the party is not sympathetic to vehicle excise duty differentials. Indeed, in Treasury questions last Thursday, a Conservative Front-Bench spokesman, the hon. Member for Putney (Justine Greening), asked:
“Will the Minister add the band A to J losers to the 10p compensation package review?”—[ Official Report, 24 April 2008; Vol. 474, c. 1449.]
She sought, slightly bizarrely, to create some sort of parallel between people who drive high-emission vehicles and some of the poorest people in the country who are losing out as a result of the doubling of the 10p rate. That is not an accurate parallel.
The Conservative party is in danger of trying both to persuade people that they are victims of a malicious environmental policy put in place by the Government, and to outflank the Government with their green credentials. The Conservative party says “Vote blue, go green”, but what it is effectively saying is “We’ll talk green; vote blue.”
Anne Main (St. Albans) (Con): May I inquire whether the hon. Gentleman would support the retrospective application of the vehicle excise duty differentials?
Mr. Browne: What we propose is trying to ensure that people are given the greatest encouragement to drive fuel-efficient vehicles.
Mike Penning: The question is simple: yes or no?
Mr. Browne: I will come to the point that is being made. People need to be persuaded to drive fuel-efficient vehicles wherever possible, and they need to be persuaded that there is an environmental benefit from doing so. The Government change vehicle excise duty rates every year, and our view is that those changes should, over a period, persuade people to drive cars that are more fuel-efficient. I warn the Conservative party that it is in danger of trying to have it both ways; it cannot claim, as a rebranding exercise, to be the party of the environment, but consistently refuse to support environmental measures when it comes to votes in the House.
Mr. Redwood: I am glad that my party tabled the amendment. It is important to see whether there would be a reduction in carbon emissions from the rather large further increase in taxation on motorists. I cannot see how such a proposal can change behaviour when it applies to cars that people have already bought, because by definition they cannot change their behaviour—they have already bought their cars—unless it is the Government’s intention to have all those cars scrapped prematurely, in which case one needs to do proper carbon accounting to see how much carbon would be emitted in the manufacture of the replacement vehicles, which should be taken into account. That would have to be amortised over their shortened life, if one is to continue the practice of ratcheting up the vehicle excise duty on vehicles already purchased and out there in the vehicle park.
If the main aim of the Government’s policy is to reduce emissions from vehicles, surely tax should be placed on use of vehicle and on fuel, which the Government are doing in huge measure anyway. They recently increased that greatly by stealth as a result of the increase in petrol and diesel prices at the pumps, rather than putting the tax on ownership of the vehicle. There is nothing environmentally unfriendly about owning a vehicle once it has been made and purchased, whereas using the vehicle can be environmentally unfriendly.
I hope the Government will think again and will understand that this is another rather difficult equation where we need better carbon accounting in order to know what the true impact of the policy is. We should not let the debate go by without somebody saying that motorists have been clobbered time and again by the Government, who do not seem to understand that many people need working vehicles, and that many people have to go by car because there is no public transport alternative. The provision is just another sign that the Government regard the motorist as a source of massive revenue and are hitting them for owning a car, buying a car and using a car—
Robert Key (Salisbury) (Con):
Does my right hon. Friend agree that there is another group of poorly paid workers who are hit doubly? I am referring to community nurses, for example, in large rural areas such as mine.
The HMRC tax-free allowance on mileages has not risen in line. When I pursued the matter with Treasury Ministers, the answer came back that they were trying to change people’s behaviour and encourage them to get out of their cars. Try selling that to the district nurse in Tisbury.
Mr. Redwood: My hon. Friend is right. There are other low-paid workers who work antisocial hours and clearly need their car to get to and from work. People often have to take their children to school by car because there is no alternative. I hope that Ministers will think again about the overall magnitude of tax. After all, Ministers must have some spare money to play with, because we know that far more will be collected from diesel and petrol than was in the original Budget forecast. I tabled a question elsewhere to try to get at that figure. Why cannot some of that money be used to abate some of the severity of the proposal?
Angela Eagle: We have had an interesting debate about vehicle excise duty rates. Various Members on both sides of the Committee have made important points and observations about the general approach. The amendment calls for an estimate of the carbon savings that result from the changes to VED contained in the clause, and for that to be audited by the independent committee on climate change, which is being created by the Climate Change Bill. We hope that when that is approved by both Houses and is on the statute book it will enable us to make progress towards our carbon accounting, which we have discussed in relation to more than one amendment this evening.
UK vehicle excise duty rates are set at their current rates for good reasons—to raise revenue to fund essential services, and to help to achieve our environmental obligations and objectives. The changes to vehicle excise duty in 2008-09, which were announced in Budget 2007, further sharpen the environmental signal to motorists to purchase more fuel-efficient vehicles and continue to support the development of the low-carbon market. The rate for the most polluting cars in band G increases by £100 to £400 in 2008-09, whereas the rate for low-carbon band B cars is frozen.
In deciding VED rates the Government take account of all relevant economic, social and environmental factors, including proportionality and fairness to motorists to ensure that there are appropriate signals across the entire system. The vehicle excise duty system is designed to signal, at purchase, that the more polluting the vehicle, the more VED will be payable and the higher its fuel costs will be. As my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) pointed out, table 7.2 of the 2007 Budget sets out the environmental effect of the VED changes announced in that Budget. However, the climate change committee’s role is not to audit Government policy, but to advise on technical issues, such as setting carbon budgets and the level of the 2050 carbon emissions target, which will be needed if we are to stabilise climate change.
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Although the carbon savings from VED changes are initially small, they will increase over time as the number of low-carbon cars is forecast to increase significantly.
In addition, VED is part of a package of measures that support the European Union 2012 proposal to reduce average new car CO2 emissions to 130 g per kilometre, which could save as much as an additional 800 tonnes [Official Report, 30 April 2008, Vol. 475, c. 6MC.] of CO2 per year by 2020. Estimating the amounts of CO2 saved merely through VED rates is a tiny part of the entire picture. It is easy to argue that increases in tax achieve only tiny savings in CO2 emissions, but that is not the whole story, although some Conservative Members are trying to make out that it is.
The change in respect of CO2 emissions and engine technology was pointed out by Professor Julia King in her important report, which was published alongside this year’s Budget. She said that a 100 g target was achievable by 2020. In the 2008 Budget, the Government confirmed that they will push the EU Commission to include a longer-term target of 100 g per kilometre by 2020 in its proposals for reducing vehicle emissions.
Professor King has also concluded that a typical driver can reduce their fuel bills and CO2 emissions by 25 per cent. by choosing the most efficient vehicle in the preferred class. That is why this year’s Budget contained announcements that further increase the VED signals that aim to encourage people to move from high-emission to low-emission cars; confusingly, however, they are not in this Finance Bill, but for debate in next year’s Finance Bill.
My hon. Friend the Member for Wolverhampton, South-West also read out some of the increases planned not for 2008-09, but for 2009-10 and 2010-11. I suppose that he is entitled to consider the very high emitting levels in the top bands, including the six new bands that have been created. However, in the interests of fairness he should also have pointed out that 55 per cent. of drivers will be better off or no worse off as a result of the changes announced in this year’s Budget. Their VED bands will be frozen or go down.
The changes to the VED bands are designed to strengthen the signals so that people move from the top-emitting class of car to lower-emitting cars. I am thinking first of purchasers, but the changes are also designed to give those who design and produce new cars further incentives to produce more cars that qualify for the lower bands of VED.
Mr. Russell Brown (Dumfries and Galloway) (Lab): I appreciate that there has been much discussion of working vehicles during the debate on a previous amendment. However, may I draw the Minister’s attention to a group that has not been mentioned this evening? I am thinking of disabled people and those who have great difficulty with mobility. A saloon car is extremely difficult for them to access, so they must use a four-wheel drive vehicle. Will she encourage car manufacturers to look hard at the possibility of developing more small-engined, low-emission vehicles to meet the needs of that group of people?
Angela Eagle: I agree that our signals through the VED rates are for those designing and putting new cars on the market, as well as for purchasers. We want to see more accessible vehicles in lower-emission bands. That is why these signals have been sent through the tax system.
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