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The reality for many poorer families is very far from the Whitehall theory of the Chancellor’s Budget statement that the new VED structure will encourage drivers to choose the least polluting car. Many Labour Members and, indeed, many Conservative Members will recognise how divorced that concept is from the reality of the everyday lives of many of their constituents. “Oh, my car tax has just doubled, so I’ll get rid of the car and nip out and buy a nice little economy model from the showroom”—that is not how people’s lives work. The Government will tell us, I am sure, that this is all about encouraging green behaviour. Perhaps they would like us to take a more strategic view. We know, after all, that this Government are prepared to take tough, long-term decisions and accept the short-term political pain that they get from
ignoring the anger of the poorest when they lose out from Government policies. The Government have clearly demonstrated that when they say that a line in the sand has been drawn, that line in the sand has been drawn. Perhaps they would argue that a little bit of pain is worth while—even, perhaps, if 1 million or so owners of older vehicles are placed in the impossible position of being unable to trade up to a more environmentally friendly car, or if 80 per cent. of motorists are faced with higher VED alongside the higher costs of petrol, food, household energy and everything else. Perhaps the Government will say that it is all worth while in order to reduce the impact of vehicle-based emissions on our environment—that it is the right thing to do.
Unfortunately, however, that generous interpretation —that image of a resolute, principled Government determined to press on with what they know to be right in the face of short-sighted opposition—is fatally undermined not only by the short-term political manoeuvring that we have become used to as the Prime Minister twists and turns to try to save his own skin, but by the Government’s own figures on the impact of the measure. In a written parliamentary answer to my hon. Friend the Member for Putney on 21 April 2008, the Treasury first claims that the 2008 Budget reforms of vehicle excise duty are forecast to result in a rising carbon saving over time, and then admits that the changes are forecast to deliver a reduction of just 0.16 million tonnes of CO2 by 2020. To put that into context, total vehicle-based emissions of CO2 were estimated at 120.3 million tonnes in 2006—the last year for which figures were available. The expected benefit of this measure, as set out in the Treasury’s written answer, is a less than one seventh of 1 per cent. reduction in vehicle-based carbon emissions over a 10-year period. Even taking into account not all vehicle emissions but car emissions alone, the saving is less than one quarter of 1 per cent. The Chancellor’s claim that Budget 2008 reformed VED to strengthen the environmental incentive to develop and purchase fuel efficient cars is blown away by his own figures predicting almost no positive environmental impact at all.
Mr. MacNeil: Is not the whole global argument shown to be bunkum when we cross the Irish sea, and see that in the Republic of Ireland it costs £20 to fill the tank of the average family car? The current price of fuel per litre in the Republic of Ireland is lower than it was here a year ago. I would like to ask the Conservatives whether, if they were in power, they would revoke the proposals of the current Labour Government on vehicle excise duty.
Mr. Hammond: On vehicle excise duty, we believe that the Government must go back to the drawing board. They must go back to square one, take a blank sheet of paper and think the proposals through again. This is not the way to go forward.
Mark Lazarowicz: The hon. Gentleman’s argument as to why the increase in VED has little environmental benefit is remarkably similar to the argument we sometimes hear from Government Front Benchers as to why a few airport extensions are no bad thing because the effect is only minimal.
Leaving that aside, I suggest to the hon. Gentleman that he raises important points, but if he is wants people to accept that his party is not just trying to jump on the bandwagon, he should at least make suggestions as to how we can bring down vehicle omissions more substantially. It is only fair to ask him to do that because if he just simply attacks this policy, while at the same time attacking congestion charging, car park charges and so on, we return to the point that politicians talk green in general, but when it comes to the particular, they oppose any specific policies.
Mr. Hammond: What we have to do if we want to carry the public with us is show that any green tax proposal has an environmental benefit. There must be a correlation between the burden that we are imposing on taxpayers and the benefit that we are generating for the environment. The restructuring of vehicle excise duty fails that test, suggesting that it will save 160,000 tonnes of CO2 by 2020 in exchange for the imposition of a huge increase in vehicle excise duty on ordinary families throughout the country.
Ultimately, the Chancellor’s fig leaf has been blown away, exposing yet another plain, old-fashioned stealth tax. The vehicle excise duty structure will leave most drivers worse off; it is dressed up and presented as a green measure and presented with all the self-righteous pompousness that the Government reserve for such matters. It is a tax hike that, according to the Government’s figures, will have virtually no impact on CO2 emissions, it will undermine further the public’s confidence in the principle of green taxes and it will reinforce cynicism about the real motives of politicians talking about the green agenda. In other words, it is a measure that will damage, not enhance, the environmental agenda in this country, which is why we have made the pledge to ring-fence the proceeds of additional green taxes in order to reassure the public that green taxes are just that, not eco-stealth taxes.
We have long known that the Government do not care about rural Britain. The 10p tax fiasco confirmed that the Prime Minister does not care about low-earning families. This cynical tax hike hits poorer families and rural areas hardest; it is a metaphor for new Labour’s tax policy. At a time when families—and not just families on the lowest incomes—are feeling the squeeze, when earnings are stagnant and prices are soaring, and when people are looking to the Government for a helping hand, the Government’s response has been to kick hard-working lower and middle-income families through another major stealth tax rise that is set with a delayed fuse, timed to go off next April, with an aftershock the following April when the final increase for older cars kicks in.
This is the worst kind of stealth tax introduced at a time when families are least able to absorb it, and it has been introduced in an underhand way. The Chancellor has shown that where the political cost of an ill-thought-out tax measure is high enough, he can and will reverse it without regard to the niceties of Budgets and pre-Budget reports. It is up to those of us on both sides of the House who see the unfairness of this swingeing, bogus green tax increase, which disproportionately affects the poorest and which will set back the cause of genuine environmental taxation, to get the Government back to the drawing board on
their plans for VED. On the evidence so far, the way to do that is not by quiet argument, rational analysis of the weakness of the proposals or an appeal to the long-term interests of the country, but by encouraging public awareness now of what will otherwise be next year’s 10p tax debacle. That is because short-term political cost and benefit seems to be the only currency that this short-term Prime Minister deals in.
Mr. Deputy Speaker (Sir Alan Haselhurst): I should announce to the House that the amendment in the name of the Prime Minister has not been selected.
5.10 pm
The Financial Secretary to the Treasury (Jane Kennedy): It is a pleasure to speak for the Government and to follow the hon. Member for Runnymede and Weybridge (Mr. Hammond) in this debate on vehicle excise duty. He presented a robust case for the prosecution, as is his wont, but I am delighted to have been invited to present the defence case.
I am responding as someone who has always enjoyed driving, appreciates the freedom that a car can bring and values the contribution that motor vehicles have made to our economy. However, I do not subscribe to the view that Labour is anti-motorist and that the Tories are the motorist’s friend. We have learned from the hon. Gentleman today that if the Tories took office, they would repeal the measure. We noted that they voted against the measure in the votes on the Budget. I also invite voters and drivers to be aware that he dismissed the policy document to which my hon. Friend the Member for Reading, West (Martin Salter) referred, to which I shall turn in a moment, as merely a policy discussion document, from which policies may be drawn at a future date, when a manifesto is drafted.
Mr. Redwood: Does the Financial Secretary not recognise that I also chaired a policy review that made a lot of proposals for lower taxes? Why does she not refer to those as Conservative policy? The truth is, of course, that my right hon. and hon. Friends will make their decisions near the election. However, she grossly misrepresents our policy work if she does not refer to my work in favour of lower taxes.
Jane Kennedy: I have not been able to refer to any policies yet, but the right hon. Gentleman merely confirms the point that I was making.
Martin Salter: Does my right hon. Friend agree that the right hon. Member for Wokingham (Mr. Redwood) is being unnecessarily bashful? We regularly refer to the excellent document that he produced denying climate change and trashing the green credentials of his party leader. He should be given a wider hearing, and it is my right hon. Friend’s job to ensure that he is.
Jane Kennedy: I could not have put it better myself.
Mr. Redwood:
I am grateful to the Financial Secretary for giving way, because I cannot allow what the hon. Member for Reading, West (Martin Salter) said to stand without comment. There has been
absolutely no trashing of either my party leader or the need to have greener and cleaner vehicles, but we want to encourage people, rather than clobber them.
Jane Kennedy: There we have it. I am always happy to give way to the right hon. Gentleman, but sometimes think that when he is in a hole, he should not dig any harder.
Overall, the Government’s policies have had a palpable effect on the manufacturing of cars and lorries. In 1997, there was only one flat rate of VED for all drivers. In 2000, we decided to graduate VED, ensuring that the drivers of the most polluting cars paid the most road tax. That was fair then and it is right to maintain that position now. It means that VED reflects the car’s emissions, as well as creating incentives for people to drive cleaner cars and supporting the development of such cars.
Manufacturers such as Jaguar and Land Rover, to name just two, which produce high quality cars at the excellent Halewood plant in the constituency of my hon. Friend the Member for Knowsley, South (Mr. O'Hara)—
Rob Marris: And the west midlands.
Jane Kennedy: And in the west midlands. Such manufacturers have responded to the pressure that purchasers are bringing to bear. They acknowledge that if they are to maintain their competitive edge, they have to continue to develop their product and engineer cars of high quality, but with an ever reducing impact on the environment. Just as technology has helped to achieve huge improvements in vehicle performance and safety, the motor industry is now addressing the greatest challenge yet—that of delivering environmental solutions.
Albert Owen: The Minister will know that I have made forceful arguments about giving manufacturers incentives to make their cars more energy efficient. Car use is absolutely essential for everyday living for many families in my constituency, and they are already burdened by paying extra fuel duty at the pump. The extra charge required for cars purchased between 2001 and 2006 will be yet another burden. Will the Minister reflect on the fact that certain areas of the country seem to suffer a double whammy when it comes to running cars?
Jane Kennedy: I acknowledge the force with which my hon. Friend makes his case today. Indeed, he has made that case consistently and we will listen to the points that he makes. I shall come to the question of fuel duty in a moment, if he will allow me to make some progress.
Mr. MacNeil: Given that there have been U-turns in the Treasury recently, has consideration been given to the possibility of a U-turn on this issue?
Jane Kennedy:
I shall come in a moment to the point that was raised earlier, which was characterised as the burdens on motorists and the cost of fuel. I hope that the hon. Gentleman will allow me to make some progress so that I can reach that point, as I know that
my hon. Friend the Member for Ynys Môn (Albert Owen) would like me to address the point that he has raised.
Mr. Philip Hammond: I should like to follow up on the points that have just been raised. In the context of responses that the Minister and her colleagues have made in the past, will she confirm that the Treasury keeps all taxes constantly under review?
Jane Kennedy: I make that point so often that I felt that it hardly needed repeating, but the hon. Gentleman is absolutely right. I want to move on to the points that he and my hon. Friend the Member for Ynys Môn made about the costs that they described as a burden on rural drivers. I will come to that in a moment.
The Stern review concluded that urgent action was needed now to offset the most serious impacts of climate change. A challenge on this scale requires all sectors, including road transport, to make urgent and substantial progress in reducing CO2 emissions. In the long term, and possibly by 2050 in the developed world, almost complete decarbonisation of road transport is a possibility.
When I was elected in 1992, the Conservatives were in government. I took part in a debate at that time on a White Paper, promoted by the Government, entitled “New Opportunities for the Railways”. My hon. Friends will be interested to learn that that was a euphemism for privatisation. The debate was held on 29 October 1992, and in it I confessed to being a confirmed motorist, albeit
“a motorist with a very uneasy conscience; one who uses her car knowing full well what damage that causes to the environment and the congestion that it causes in cities.”—[ Official Report, 29 October 1992; Vol. 212, c. 1215.]
I have at least been consistent in the intervening years. Before I became an MP, and then a Minister, I was alive to the effect of cars on the environment. That is precisely the position that many motorists are in now, as they choose which car to purchase.
Mr. Roger Williams (Brecon and Radnorshire) (LD): Will the Minister give way?
Jane Kennedy: I should like to make some progress, as this is a short debate.
As I have said, VED was charged at a flat rate at that time. Everyone paid the same road tax, whether they drove a clean car or a polluting car. Indeed there was little choice, in many ways, as there was no such thing as clean diesel or cars capable of burning biofuels. The then Government put in place something called the fuel duty escalator. The right hon. Member for Witney (Mr. Cameron) was advising Chancellor Lamont on this matter at the time. The escalator delivered, year on year, a 3 per cent. increase in fuel duty above the rate of inflation. We abandoned it in 1999; as a result, current fuel duties have been raised. [Interruption.] This is part of the context of the debate and it is right and proper for me to reply to the questions I have been asked. We abandoned the fuel escalator in 1999 and, as a result, current fuel duty rates are 50.35p a litre. Had fuel duties gone up in line with inflation since 1999, they would be 61p a litre. Had they gone up in line with a 3
per cent. escalator, they would be 79p a litre. If we add in VAT, the average price of petrol would be 34p higher today.
The Conservatives are trying to sell the idea to voters in Crewe and Nantwich that they are on the side of the motorist, but the right hon. Member for Witney has not told those voters about the new Tory taxes, including the 10 per cent. showroom tax on new cars and up to £500 VED, as we have heard, on older cars. This is not yet rubber stamped as Tory party policy, as we have heard, but I believe that voters and drivers should take note. The man in charge of writing Tory transport policy, Stephen Norris, has said that under the Tories,
“you will pay more in green taxes, you will, for example, see the re-introduction of a fuel duty escalator, I’m quite sure.”
He said that on Radio 4’s “World at One” on 31 August 2006.
We have heard a great deal since the Budget about the impact of these changes, particularly the claim that low-income families will pay more. I would like to tackle that head-on. About 40 per cent. of low-income households that own cars bought since 1 March 2001—
Mr. Philip Hammond: Will the Minister give way?
Jane Kennedy: I will give way when I have finished my point. I am responding to a point that the hon. Gentleman made in the debate.
As I was saying, about 40 per cent. of low-income households that own cars bought since 1 March 2001 have tended to buy cars in the current band C. Those car owners will be better off as a result of this year’s Budget changes, as their VED will fall from the current £120 to either £90 or £110 in 2009.
Mr. Hammond: The Minister said that she wanted to tackle this issue of VED head-on, so why does the Government amendment not mention VED even once?
Jane Kennedy: We were disappointed that the amendment was not selected. We consulted the House authorities yesterday. What we tabled in the Prime Minister’s name last night took the views of the Table Office into account. The amendment was in order, and I am now responding—
Mr. Hammond: On a point of order, Mr. Deputy Speaker. Am I not right in thinking that if the amendment had been in order, it would have been selected?
Mr. Deputy Speaker: Not necessarily.
Jane Kennedy: I withdraw the comment about it being in order— [Interruption.] Well, let me return to the substance of the debate. Interested as we may be in those arcane arguments, I believe that the public are interested in the subject of the debate.
As I said, I reject the case of the hon. Member for Runnymede and Weybridge.
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