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Jane Kennedy: Will the right hon. Gentleman allow me to return to the main point?
As I have said, 40 per cent. of low-income households that own cars bought since 1 March 2001 have tended to buy vehicles in the current band C. Those car owners will see their vehicle excise duty fall from the current £120.
Mr. Redwood: Will the Minister give way on that specific point?
Jane Kennedy: I have reached the same point again. I will give way to the right hon. Gentleman, but then I am going to make some progress.
Mr. Redwood: Does not the Minister recognise that if the emissions are between 141 g and 150 g in band C, there will be no reduction at all? She should not imply that there will be any reduction.
Jane Kennedy: I am not giving way to the right hon. Gentleman again. He really should let me get to the point that will specifically address his comment. Many drivers of family cars will be better off as a result of these changes. That applies to 24 of the most popular 30 models of cars in the country, including popular versions of the Ford Focus, Renault Clio, Vauxhall Astra and the Citroen Xsara Picasso. It is true that drivers of other versions of those models could pay more. The point of these changes is that motorists can reduce their VED by choosing a cleaner version of their preferred model, or a cleaner car of the same class, if they do not want to change to a cleaner class of car altogether. Encouraging a market in which drivers can exercise their choice does not mean that they must purchase a different type of car. According to the King review, the average driver could reduce his emissions, and of course his fuel bills, by 25 per cent. simply by choosing the most efficient car in his preferred class.
Over the years, since coming to office in 1997, the Government have been responding to the genuine concern expressed by the driving public as well as the travelling public about the damage that motor vehicles do to the environment. Human, social and economic costs arise from unmitigated climate change. Before the debate, I discussed with my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) the flood damage that regions such as his have experienced, and the imperative necessity for revenues to build flood defences.
Justine Greening (Putney) (Con): May I briefly return the Minister to her comments about band C cars? The parliamentary figures that she gave me suggest that by 2009-10 most cars that are currently in Band C will move to band F rather than bands D and E. Owners of cars in bands D and E will pay the same or less, while those with cars in band F will pay more. That means that most band C drivers will pay more.
Jane Kennedy: I do not accept the hon. Lady’s point, forensic though she may be. Most drivers will not be worse off in 2009-10. In fact, we expect about a third of drivers to be better off. The point of our proposals is that they will influence drivers’ behaviour and choice of car.
Martin Salter: Will my right hon. Friend give way?
Jane Kennedy: If my hon. Friend will allow me, I will give way to the hon. Member for Brecon and Radnorshire (Mr. Williams) first.
Mr. Williams: The Minister has made a good case for a graduated system of vehicle excise duty, particularly for people who can choose which vehicle to drive, but people in some categories—especially small business people—need a vehicle of a specific size in order to carry on their trade, and the retrospective part of the Government’s proposals will be particularly damaging to them. Does the Minister not recognise that this is really an attack on small businesses, and on people who are trying to start and build on their businesses?
Jane Kennedy: Perhaps I could respond to the hon. Gentleman’s point together with that made by my hon. Friend the Member for Reading, West.
Martin Salter: I haven’t made it yet.
Jane Kennedy: I was about to invite my hon. Friend to do so.
Martin Salter: I thank the Minister. It is a similar point. The Minister rightly spoke of allowing people to make choices in order to cut their vehicle excise duty by 2010, but that was predicated on the assumption that people would have enough money in their family budgets to change their cars before 2010. Many of the people whom the Minister and I represent do not have that disposable income. That is the nub of the problem.
Jane Kennedy: My hon. Friend and others are presenting a strong argument, and I hear what they say. The package that we presented in the Budget, and which I am explaining today—in defence against the attack by the hon. Member for Runnymede and Weybridge, who claims that the Opposition are the motorist’s friend—specifically seeks to influence purchase choices when they are made. We already know that that is the way in which the market is moving.
Rob Marris: May I gently suggest that a better way of changing behaviour would be to introduce a prospective rather than a retrospective tax change, and to introduce not a “showroom tax” but something which I must say in all humility that I suggested three years ago—a three-year lead-in for new vehicles and the most gas-guzzling and vehicle excise duty of, say, £2,000 a year, so that people thinking of buying a car of that kind would know what they were doing? Furthermore, such a level of vehicle excise duty would substantially hit its resale value and influence prospective purchasers of new vehicles, whereas a showroom tax is such a small proportion of the price of those gas guzzlers that it is unlikely to have much effect on the purchase decision.
Jane Kennedy:
I have been listening very carefully to the points that my hon. Friend and other Members have been making about retrospectivity. As Members
know, this will be legislated for in the Finance Bill of 2009, so there will be ample time for us to discuss the issue on many occasions before then.
The hon. Member for Brecon and Radnorshire made a point about small businesses. Small businesses using vehicles are no different from other users of such vehicles. I hear his point, but many families also have no choice in that they need a car to travel to work or to school. I do not believe that we ought to have a specific measure to help people in small businesses.
It has been claimed that moving existing cars bought after 1 March 2001 into the new VED bands in 2009 is some form of stealth tax. As has been pointed out, the Budget states—this quote comes from page 121 of the Red Book:
“With effect from 1 April 2009...VED for cars, registered on or after 1 March 2001, will be reformed to include six new bands.”
There is not a lot that is very stealthy about that. How stealthy can it be, given that we are debating it today and Members raised it during the debate on the Budget and in Committee of the whole House? Indeed, I heard my hon. Friend the Member for Wolverhampton, South-West make his point on the matter in his usual forceful and thoughtful way in that debate.
Mr. Philip Hammond: So what did the Treasury official quoted in The Times mean when she said that this could have been clearer?
Jane Kennedy: The Budget was very clear that the measure includes existing cars, as is normal for VED changes. What I agree could be clearer is that cars bought between 2001 and 2006 and emitting more than 225 g of CO2 per km will not be placed in higher bands straight away in 2009, but that change will be staggered over two years. That staging means less of a rise for drivers of existing polluting cars next year. This cannot by any means be described as a stealth tax.
Sammy Wilson (East Antrim) (DUP): Will the right hon. Lady accept that, although she says that the measure was made clear in the Budget, when the Chancellor referred to it he suggested that the majority of drivers would be no better or worse off, and did not mention the fact that millions of drivers would be paying between £50 and £90 per year more?
Jane Kennedy: My right hon. Friend the Chancellor was right to say that the majority of drivers would be no worse off, as I too have said in my speech this afternoon. The hon. Gentleman’s point is not valid, because my right hon. Friend was accurate.
Jane Kennedy: I want to make a few more points before the Liberal Democrat spokesman makes his contribution to the debate.
Jane Kennedy: I know that I have not given way to the hon. Gentleman, but this is a short debate and there must be time for Back-Bench speeches.
May I finally turn to the current costs of motoring? We understand, of course, the pressures that the current high petrol prices are putting on motorists.
Bob Spink: Will the right hon. Lady give way?
Bob Spink: I am grateful to the right hon. Lady for giving way; she is being characteristically charming. Does she agree that there is a competitive disadvantage for British hauliers compared with those from the European mainland, and has she considered making foreign lorries pay for using UK roads and for the environmental damage they cause, by means of what has been described as a “Brit disc”—another UK Independence party policy?
Jane Kennedy: No, I do not accept what the hon. Gentleman says, although he makes his point in his usual entertaining way.
We do, of course, understand the pressures that the current high petrol prices are putting on motorists. Those prices are being driven by high global oil prices. Fuel duty has fallen by 16 per cent. in real terms since 1999, and the cost of motoring has fallen in real terms by 11 per cent. since 1997 and by 13 per cent. since 1999. I understand, as representations are being made on the matter, that it might not feel like that to motorists, but we have to respond to the facts as they stand. I know that road transport underpins our way of life in the UK. It is a key enabler of the economy, and it helps families to make essential journeys to work and school. The key challenge that we face is to support increases in road transport use in a sustainable, environmentally responsible way.
At this point, I feel that I should say a word or two about the debate that took place last week on the Finance Bill. The hon. Member for Taunton (Mr. Browne) sought to explain how the Liberal Democrats would find £50 billion from environmental taxes—taxes on behaviour damaging to the environment—to fund a reduction in income tax from 20 to 16 per cent. The hon. Member for Runnymede and Weybridge was there, so he will remember that it was an entertaining sitting. The hon. Member for Taunton singularly failed, in half an hour of his contribution to the discussion, to explain how his party would raise that £50 billion, and the hon. Member for Runnymede and Weybridge did not challenge the figure.
What I find striking is the similarity between the position that the Liberal Democrats took in that debate and the position that the Conservatives have taken in today’s debate. These vehicle excise duty changes are forecast to save 1.3 million tonnes of CO2 by 2020. The incentives that they create will contribute to the projected increase in the total number of cars in bands A and B—the cleanest bands—by 650 per cent. by 2020. It is important for parties that come to this House to make a case such as the one that has been made today to demonstrate responsibility in their actions when considering such measures. As my hon.
Friend the Member for Wolverhampton, South-West has said on a number of occasions, they should not fail, whenever the responsible position is put, to support the need for green taxes.
Albert Owen: The Minister is right to point out the hypocrisy of the Conservatives’ motion, because they have not identified where they would tax elsewhere to fund the reductions that they propose to make. I do have a meeting with the Chancellor, and I have raised the issue of rural areas with him before. My area was crippled by the fuel escalator under the Conservatives, but now that there has been an increase at the pump, is it possible for the Treasury to examine ways of considering rurality when it deals with fuel duty and other such measures in future?
Jane Kennedy: The Exchequer Secretary to the Treasury, whose policy area this is, has greater oversight of the detail on the other ways in which the Government are working internationally to ensure that every step is taken and that the overall package of measures that seeks to reduce damage to the environment is a balanced one.
Adam Price (Carmarthen, East and Dinefwr) (PC) rose—
Jane Kennedy: I shall bring my remarks to a conclusion, because I have been speaking for a long time.
Jane Kennedy: On a point of fact, I shall give way one final time.
Mr. Philip Hammond: I am grateful to the Minister, because she did say that it was important for hon. Members to act responsibly on these matters, and she also told the House that these measures would produce a saving of 1.3 million tonnes of CO2. That is not a terribly large figure, but it is at odds with the answer that my hon. Friend the Member for Putney (Justine Greening) received from the Exchequer Secretary to the Treasury, which stated:
“Budget 2008 reformed the VED structure to strengthen the environmental incentive to develop and purchase fuel-efficient cars. The reforms take effect from 2009-10 and 2010-11. They are forecast to result in rising carbon savings over time as the number of low carbon cars significantly increases. In 2020 the changes are forecast to deliver carbon savings of 0.16 MtCO2.”—[ Official Report, 21 April 2008; Vol. 474, c. 1676W.]
Jane Kennedy: There is no difference whatever. The figure of 0.16 applies to 2020 only. The cumulative effect between 2009 and 2020, which is the figure that I referred to, will be 1.3. I believe that the package of measures that we have put forward will have the effect that the Government intend. Drivers will be incentivised to buy cleaner versions of their preferred model. As I have said, drivers of 24 of the 30 most popular cars in the UK will pay less or no more because of the Budget.
These are important changes for the environment. The Opposition motion distorts the position while remaining silent on their proposals for climate change, just as the hon. Member for Runnymede and Weybridge remained silent on that subject during his speech. Motorists should be wary of the Opposition’s words. The motion is not worthy of support today.
5.40 pm
Dr. Vincent Cable (Twickenham) (LD): I approached the Conservative motion in my usual constructive way and found things in it with which I could agree. I agree that the change for existing vehicles was not introduced with great clarity. I am sure that it is in the Red Book, but not too many British families sit around reading the Red Book in the evening to find out what will happen to their taxation. I also agree with the Conservatives that it is wrong, in terms of retrospectivity and the social consequences, to attack existing vehicles rather than new vehicles. That principle is clear. I also agree with the basic approach that such is the lack of faith in environmental taxes that any future changes have to be included within a package that is offset against other forms of tax. I agree with the motion on those three key points.
In parenthesis—since the Financial Secretary chose to have a go at my colleague, my hon. Friend the Member for Taunton (Mr. Browne), who is not here—I am not sure what she meant by the reference to a £50 billion package. The package that I crafted, which has gone through our party conferences and has been published, would cost about £20 billion. The basic principle behind it was that we would want to cut taxes on hard-working families—I think that that is the expression—and that it would be funded by a combination of environmental taxes, increased capital gains taxes and the removal of some of the reliefs on high earners. People might not like the politics of it, but the numbers were fully checked out by the Institute for Fiscal Studies. Indeed, I presented a copy to the Prime Minister, and since he proceeded with the cut in income tax, he may well have read part of it, although he did not follow up my advice on how to raise the revenue.
Jane Kennedy: Let me make it absolutely clear. The hon. Member for Dundee, East (Stewart Hosie) suggested that the cost would be £57.5 billion over the years and asked the hon. Member for Taunton (Mr. Browne) whether he could make it clear
“what environmentally damaging things he would tax to find £57.5 billion”.
The hon. Member for Taunton replied:
“I can indeed. Let me give the Committee a few examples”. ——[Official Report, Finance Public Bill Committee, 6 May 2008; c. 9.]
He then gave the example of removing higher rate tax relief on pension contributions, but failed singularly to bring forward any other measure.
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