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“(1AA) In every Budget Statement and pre-Budget Statement the Chancellor of the Exchequer must provide a forecast for oil prices and set out anticipated yield from fuel duty and VAT on fuel for that price and for a range of prices up to 50 per cent. above his forecast.
(1AB) The Treasury must, following each such statement, by regulations made by statutory instrument reduce the rates of duty specified in subsection (1A) in direct proportion to the increase in the costs accounted for by VAT.
(1AC) Whenever international oil prices rise above the level estimated by the forecast made in accordance with subsection (1AA), indexed fuel duty increases shall not take effect until the international oil prices return to the forecast level or the forecast price is amended by the next Budget or pre-Budget Statement.”’.
New clause 9— Fuel duties: rates and rebates: road hauliers and remote rural areas—
‘(1) HODA 1979 is amended as follows.
(2) In section 6 (excise duty on hydrocarbon oil) after subsection (1A) (as substituted by section 11 of this Act) insert—
“(1AA) In every Budget Statement and pre-Budget Statement the Chancellor of the Exchequer must provide a forecast for oil prices and set out anticipated yield from fuel duty and VAT on fuel for that price and for a range of prices up to 50 per cent. above his forecast.
(a) following each such statement, by regulations made by statutory instrument reduce the rates of duty specified in subsection (1A) in direct proportion to the increase in the cost accounted for by VAT;
(b) provide a mechanism to pay the reduction directly to road hauliers with an ‘O’ licence including a restricted licence, a standard licence or a standard international licence;
(c) bring forward proposals not later than the pre-Budget Statement 2008 to provide specific fuel duty reductions targeted at fuel sold in remote rural areas.
(1AC) Whenever international oil prices rise above the level estimated by the forecast made in accordance with subsection (1AA), indexed fuel duty increases shall not take effect until the international oil prices return to the forecast level or the forecast price is amended by the next Budget or pre-Budget Statement.”’.
New clause 14— Remote rural fuel discount scheme—
‘(1) The Treasury shall by regulations provide for the introduction, by no later than 1 April 2009, of a remote rural fuel discount scheme.
(2) The purpose of the scheme is to provide a rebate on road fuel duty at qualifying retail outlets in qualifying areas to reduce the premium paid for fuel in such areas over the national average.
(3) Qualifying retail outlets under subsection (2) are outlets located in qualifying areas meeting any criteria as defined under subsection (4).
(4) Qualifying areas are remote rural areas as may be defined by regulations under subsection (4).
(5) Regulations under subsection (1) may—
(a) specify the amount of the fuel duty rebate;
(b) define “remote rural areas”;
(c) define qualifying retail outlets, including any restriction;
(d) specify how the rebate is to be applied, including—
(i) authorising HMRC to define procedures and conduct audits, and
(ii) how any administrative costs are to be defrayed;
(e) provide for it to be an offence for a person fraudulently to supply or sell rebated fuel other than as proscribed by these regulations;
(f) provide for a system of registration of eligible retail outlets;
(g) provide for the scheme to be administered in Scotland by the Scottish Executive and in Wales by the Welsh Ministers.’.
Amendment No. 9, in clause 15, page 8, line 9, at end insert—
‘(3A) In paragraph 1C (the reduced rate)—
(a) in sub-paragraph (1) for “or C” substitute “C or D”;
(b) after sub-paragraph (4) insert—
“(4A) Condition D is that the vehicle is an off-road working vehicle.”;
(c) in sub-paragraph (6) insert at the appropriate place—
““off-road working vehicle” means, subject to any provision which may be made by the Treasury in regulations made by statutory instrument, any vehicle which is used primarily for business purposes off adopted roads,”.’.
Amendment No. 7, page 8, line 21, leave out from ‘to’ to end of line 22 and insert
‘any licence taken out in respect of a vehicle first acquired on or after 13 March 2008.
(7) In this section “first acquired”, in relation to a vehicle means acquisition when it has not previously been owned.’.
Government amendments Nos. 22 and 23.
Justine Greening: Today’s debate on the cost of motoring relates to issues that have relevance to the lives of millions of people, so the need to get the policies right is paramount. The Government announced in the Budget and have begun to deliver through the Bill a vehicle excise duty policy that is unfair and ineffective, and will make life harder for large numbers of people in this country.
Nigel Griffiths (Edinburgh, South) (Lab): If the policy is so unfair, why have five Conservative MPs on the Environmental Audit Committee stressed that it is a necessity?
Justine Greening: The hon. Gentleman has asked an interesting question. The answer is that we do not have a problem with graduated VED linked to the level of pollution of cars in principle. What we have a problem with is ineffective green taxation that is nothing to do with the environment and everything to do with eco-stealth taxes. If he is willing to stay in his place and listen to the remainder of what I have to say, I will carefully run through just how much the Government’s policy on vehicle excise duty will affect the environment by 2020. If he thinks that that is not enough, I am sure that he will be happy to jump up and challenge the Government.
New clause 3, which, among other new clauses, is what we are all here to debate this afternoon, aims to get the rising impact of motoring costs out into the public domain. New clause 3 seeks to protect people from the serious consequences of the Government’s planned retrospective changes to vehicle excise duty. I shall outline a number of concerns about the effects that the Government’s vehicle excise duty changes will have, many of which new clause 3 attempts to tackle.
3.15 pm
Kate Hoey (Vauxhall) (Lab): I very much support what the hon. Lady is saying about the retrospective taxation of people who bought their cars expecting to pay just the normal increase. Will she say what the Government would have to say for her to withdraw her new clause?
Justine Greening: I will not be withdrawing my new clause, because it is the best insurance policy we all have to ensure that the Government tackle the situation. I will say later why it is important to resolve the issue today, rather than finding ourselves, this time next year, in another situation like the 10p tax rate fiasco, which we got rid of yesterday, only this time with vehicle excise duty.
Richard Burden (Birmingham, Northfield) (Lab): The hon. Lady used the word “retrospective”. I should like to be clear what she means by that. Is she saying that any increase in vehicle excise duty that applies to existing cars is retrospective?
Justine Greening: What I am saying is that the hon. Gentleman’s Government should take the same approach that they took when they introduced band G. When they introduced a higher band for vehicle excise duty based on pollution, they said that it should apply only to vehicles already registered going forward. That was a fair way of ensuring that people would not be taxed for past behaviour that they could not possibly change. I am happy to explain in more detail why I think the Government’s proposal is so bad and why so many of the hon. Gentleman’s colleagues agree with us.
There is no doubt that the proposed increase in vehicle excise duty will lead to a massive tax rise. The Treasury has admitted that its take from graduated VED will increase by more than 100 per cent. over the next few years. Figures released by the Treasury to me reveal that the take from graduated VED will increase from £1.9 billion in 2006 to £4.4 billion in 2010. I repeat: green taxes have to be offset by decreases in taxes elsewhere, precisely to ensure that families are not overburdened by tax at this time of economic hardship.
I use the term “green taxes” loosely when describing the vehicle excise duty changes announced by the Government. One would hope that a tax increase of several billions of pounds would lead to some impressive vehicle emissions savings, but that is not the case. The argument that the changes will help the environment is simply not true. The Government have admitted that minimal emissions savings will result from the changes to vehicle excise duty rates. According to the figure that I have been given by Ministers, they expect annual emissions from motor vehicles to reduce by 160,000 tonnes a year by 2020. That is a fraction of 1 per cent. of total transport CO2 emissions, which were 120 million tonnes back in 2006, just one year.
According to the Ministers sat in front of me, the long-term effect of the policy will be to change vehicle emissions by 160,000 tonnes a year by 2020. Did the Treasury concede that that is not a meaningful reduction? Did it promise to take a fresh look at the tax, to make it really work for the environment? No. Having released this statistic to me, its response was simply to repackage it. Instead of saying that it would involve a minimal amount each year, the Treasury tried to make it sound larger by saying that it would be 1.3 million tonnes by 2020. Actually, that is the total amount of emissions that will have been saved by the policy by 2020, yet, in every single year, there are 120 million tonnes of carbon dioxide emissions from motor vehicles.
Nigel Griffiths: The hon. Lady makes an excellent point, and it is reinforced by the latest report from the Environmental Audit Committee, which has been signed by, I think, a different five Conservative Members from those to whom I have already referred, although there might be some overlap. The Committee is ably chaired by the hon. Member for South Suffolk (Mr. Yeo). The report’s overview warns of the danger of abolishing the fuel duty escalator and other issues. It also warns that, unless more drastic action is taken, the reduction that is being sought will not be achieved. What drastic action is the hon. Lady suggesting should be taken? Does she endorse what her five colleagues have said?
Justine Greening: I endorse what nearly 50 Labour Members have done, which is to sign an early-day motion saying that these retrospective tax rises are deeply unfair. The hon. Gentleman does a disservice to green taxation by supporting a green tax that is so unfair. How can we possibly change people’s behaviour on the environment in relation to something that has already happened?
David Taylor (North-West Leicestershire) (Lab/Co-op): I should like to correct the hon. Lady. The early-day motion to which she referred does not say that several Labour Members believe that the retrospection is “deeply unfair”. It states:
“That this House is concerned at the retrospective effect of the vehicle excise duty changes announced in Budget 2008 to take effect from 2009; and asks the Government to reconsider.”
I am a signatory to the motion. The hon. Lady is wrong to say that it used the words “deeply unfair”, as they were not in the motion.
Justine Greening: The spirit in which the hon. Gentleman and I both believe that it is unfair to tax people because of the choices they have made in relation to motoring, in order to try to reduce emissions, is the same. There are clear similarities between us.
Mr. Peter Atkinson (Hexham) (Con): May I give the House a practical illustration of the unfairness of the proposal? Many of my constituents drive second-hand cars, and the value of those vehicles has now been reduced by several thousand pounds because of this retrospective taxation. Those living in rural areas depend on their cars and have already been hit by higher fuel prices. They have also been hit at home by the escalating cost of domestic heating oil.
Justine Greening: My hon. Friend is right. The result of this change will be more dramatic for taxpayers than the result of the 10p tax rate fiasco. About 1.2 million drivers will experience a tax rise of either £220 or £245, which they could not possibly have foreseen when they bought their cars up to seven years ago. A further 1.1 million will see retrospective increases of up to £100, and possibly more, between 2008 and 2010. That will mean that twice as many people will be worse off by twice as much money as we were talking about yesterday in relation to the 10p tax rate fiasco.
Mr. Greg Knight (East Yorkshire) (Con):
On the issue of fairness, has my hon. Friend seen the report by Professor David Newbery of Cambridge university, which I believe succeeds the report from Environmental Audit Committee that has just been mentioned? In it, he
concludes that if motorists were to pay a full contribution towards the effect that their vehicles had on the environment, they would be paying fuel tax at a rate of 20p a litre. Is my hon. Friend aware that fuel tax is currently 60p a litre? Motorists are therefore already paying far more than their fair share towards the environment, without having to pay these increases in vehicle excise duty, which are clearly not a green tax but a stealth tax.
Justine Greening: My right hon. Friend makes an interesting point. If we are to reduce motor vehicle emissions, we clearly need more effective tools than the one that the Government have proposed in this year’s Budget on the change to vehicle excise duty. Those who will be affected by the proposals are people with older cars, people with family cars and people on low incomes who simply cannot afford to upgrade to a less polluting car. What kind of policy creates a situation in which the owner of a new Porsche will face a smaller tax increase than a family with an older family car? It is clear that we need to revisit this decision.
I want to focus for a moment on the most serious aspect of the retrospective part of this tax hike—namely, the impact on people on low incomes. From statements made by Ministers, and from the minuscule amount of data that I have received in answer to parliamentary questions, I understand that about 1.3 million people earning less than £15,000 a year will be hit by above-inflation increases in vehicle excise duty. Some of them will face rises of £245 a year. That is a week’s take-home pay that the Government are going to take out of their pockets through this proposal. We believe that up to 750,000 of them will face increases that are triple the rate of inflation. It is completely unacceptable that these changes to vehicle excise duty should have a greater impact on those on the lowest incomes.
Whatever hon. Members’ view of graduated vehicle excise duty might be, we would all have hoped that the Government would be honest about what was being proposed. That was not the case, however. They have proved to be disingenuous about the facts from the word go. The retrospective element of the changes to vehicle excise duty were buried in the fine print of the Red Book. I am not sure how many families the Chancellor imagines read the Red Book, but I think that it would have been courteous, respectful and decent of him to tell them about these changes in his Budget speech. At the very least, he could have clearly described the change in the Red Book for what it was—a retrospective tax. But he did not have the decency to do that either. Instead, it was left up to readers of the Red Book to infer from table headings and dates that changes to road tax levels had been put into the Budget in this way.
Another thing that was not mentioned in the Red Book was the transition period over two years for those worst affected by the changes announced in this year’s Budget. I cannot help but think that that was introduced as an afterthought.
John Thurso (Caithness, Sutherland and Easter Ross) (LD):
Does the hon. Lady agree that the primary objective of a truly green tax should be to change behaviour? Does she further agree that it is an essential principle of fairness in such a case that the people involved should
be able to change their behaviour, and that the people whom she is talking about have no option and cannot change their behaviour?
Justine Greening: The hon. Gentleman is right. This goes to the heart of new clause 3. In spite of the fact that the Liberal Democrats voted for clause 15 of the Bill—which contained these proposals when we originally debated them—I am pleased to see that cross-party consensus is now emerging on this issue, because it is important.
I was talking about the fact that the retrospective element of the vehicle excise duty proposals had not been fully disclosed in the Red Book. Additionally, the Government have repeatedly claimed that the majority of motorists would be unaffected or no worse off because of these changes. That claim has been made on numerous occasions by the Chief Secretary to the Treasury, the Chancellor and even the Prime Minister, as well as by Treasury Ministers who are sitting in front of me today. They continue to make that claim to this very day, despite it being demonstrated again and again that it is simply wrong. In fact, by 2010, 80 per cent. of motorists paying graduated VED will pay more as a result of these changes. A total of 18 million motorists will face above-inflation rises.
Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): Of course, one point of the vehicle excise duty is to change people’s behaviour, but as the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) pointed out, a change of behaviour cannot occur in every circumstance—and I am thinking particularly of crofters and farmers. Could the Government use the single farm payment as a mechanism for exempting crofters and farmers from this retrospective tax?
Justine Greening: The hon. Gentleman raises an interesting point. What I am trying to do—I hope he will be pleased—is to ensure that nobody is hit by the retrospective element of the proposed tax rise. The reality is that the change will impact seriously on large numbers—literally millions—of people. Trying to hide it with a statistical sleight of hand, which is what Ministers have sought to do, is simply unacceptable.
Mr. Redwood: Has my hon. Friend, like me, received many representations from people who simply cannot believe that this huge extra tax will be imposed on those with so little money to pay it? People are also worried that their older cars will plunge in value, making it difficult for them to sell and buy the newer sort of car that the Government want them to buy. Is it not surprising that we do not hear more from Members from all parties who should be representing the real anger that people are expressing?
Justine Greening: Like my right hon. Friend, I have received many representations. People up and down the country are, frankly, furious about being confronted with a tax rise that they have no way of avoiding. They will face it not just for one year; they will be locked into it for several years. As my right hon. Friend said, many people will be unable to afford to buy a new car because the value of their current car will have plummeted as a result of these tax changes.
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