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2 July 2008 : Column 909

Anne Main (St. Albans) (Con): Does my hon. Friend know whether the Government have done any calculations of the amount of value that will be wiped off numerous second-hand cars owned by lower-income families? What does she expect will happen to those older cars in that changed car market?

Justine Greening: A number of Members are expressing their concerns. My hon. Friend is absolutely right that it is unacceptable to introduce a retrospective tax in the Budget that people will be unable to avoid paying.

I have tried to find out the real impact of the VED changes announced in this year’s Budget. I have tried to do so by tabling numerous parliamentary questions and I have even gone so far as to write to Ministers on two occasions. Everyone is concerned to understand the impact of those changes throughout the country, but to this day no details have been released from the Treasury to the public to help them understand that impact. I have 18 outstanding parliamentary questions asking about which people will be affected and to what extent. I await answers from the Treasury. Many questions relate to the impact on low-income families and some are getting on for two months’ old. I tabled them almost immediately after the Budget and the start of debates on the Finance Bill. I have written letters to the Financial Secretary, but I have received no replies whatever. Disagreement on policy is one thing—it is part of the political process—but for Ministers to hold back the facts, bury their heads in the sand, exhibit a complete lack of transparency at every stage of the process and refuse to engage in a reasoned and informed discussion of the impacts of crucial policy decisions affecting millions of people is quite another and is simply unacceptable. It is a failure of the Government’s duty to the House and to the people of this country.

The problems with the VED proposals are clear. They mean huge tax rises; they offer virtually no benefit to the environment; they are unfair in backdating retrospectively; and they will hit families and people on low incomes. The proposed changes cannot be allowed to stand. That is why I tabled new clause 3. It is designed to send a simple, clear and strong message to Ministers that although green tax on cars can be imposed, it cannot be right to punish people with tax rises in respect of decisions they made in good faith up to seven years ago. The issues in the clause go beyond party politics.

Adam Price (Carmarthen, East and Dinefwr) (PC): Does the hon. Lady agree that even from an environmental perspective, this retrospective policy makes no sense whatever, particularly if its purpose is meant to be carbon reduction? It ignores the huge carbon cost involved in the purchase of a new car. It has been estimated that even a Toyota Prius has to run for 100,000 miles before it pays for the carbon cost of swapping an older car for a new car. It makes no sense.

Justine Greening: The hon. Gentleman makes a very fair point, and the Treasury has admitted that this proposal will have virtually no impact on CO2 emissions from motor vehicles in the coming years. What we need to do today is to put aside our political differences and do the right thing for the people most hurt by the Government’s VED proposals—namely, the public, families and particularly low-income families.


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Nigel Griffiths: Will the hon. Lady give way?

Justine Greening: I have given way enough to the hon. Gentleman.

I am asking Labour Members to do the right thing. What is more important to them—stopping families and people on low incomes from going under financially in the coming months and years, or toeing the party line? That is what the decision on new clause 3 comes down to.

If Members see no problem with the effects of the Government’s policy of unfairly taxing people who cannot afford to pay, that is fine. If they can tell concerned constituents who speak of the pressures imposed by increases in tax and the cost of living that the Government’s proposal went ahead and they voted for it, that too is fine. But if they cannot do those things, I think it worth remembering that our job here as Members of Parliament is to represent our constituents, and to give those people a vote. We have a chance today to send a message to Ministers that this proposal is wrong, and that they need to think again. We know from what followed the other great error of the Budget, the 10p tax rate fiasco, that they will listen if enough of us tell them that this simply is not good enough.

We have been trying to make Ministers listen. Early-day motion 1464, tabled by the hon. Member for Blyth Valley (Mr. Campbell) and signed so far by 68 Members—50 of them Labour—expresses concerns about retrospective increases in vehicle excise duty. Along with my colleagues who were members of the Committee, I have raised the issue again and again as the Bill has progressed through its parliamentary process. That process is nearing an end: the end will come today. We have all listened to the Government’s explanations and excuses, and they do not stack up. The Government have not made their case, because there is no case to make. The time to correct this error is now.

Of course, there is an alternative. I did not have to table new clause 3. I could have let the issue drag on, and it could have remained high on the political agenda until next year’s Budget. That is what I will do if we cannot address this falsehood of tax rises now, but in the meantime I have tabled new clause 3 in a genuine attempt to correct the mistake sooner rather than later. It is better for everyone—including, I believe, the Government, but obviously the British people most of all—if we can find a solution to this important problem now. Families need to plan for tomorrow, now more than ever. They need certainty in regard to what costs and financial constraints they are likely to face in the years to come.

Mark Fisher (Stoke-on-Trent, Central) (Lab): I agree with the hon. Lady’s criticism that a retrospective tax would be both unfair and ineffective, in that it cannot change a decision made four, five, six or seven years ago. It is an extremely unsatisfactory form of taxation. Any retrospective taxation is, per se, a very bad form of taxation, and I think the House should have no truck with it. But will the hon. Lady say something more about her solution? If retrospective taxation is, as I believe, an unacceptable way of levying taxes, so are statutory instruments, which are unamendable and are dealt with outside the Chamber.


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The hon. Lady understands these matters. I agree with her criticism, but her suggestion of a statutory instrument is an extraordinary and, I think, a very poor parliamentary solution. We never create serious taxation through statutory instruments, and in my opinion doing so constitutes an offence against Parliament.

Justine Greening: I understand what the hon. Gentleman has said. I tabled new clause 3 because I felt that it was better for us to debate the matter this year, and the new clause was the best way of enabling us to do that.

I think we would all much prefer the Government to say today that they will not proceed with the retrospective element. What I am keenest to do, however, is give the House a voice, so that we can send a message to Ministers that we do not want their proposal to progress and we do not want to wait until next year’s pre-Budget report to find out that it will be ditched. If that is to happen, we need it to happen now for the sake of the families who will be affected. I accept that my new clause may not be the most elegant, but it does give us a chance to have our say in this Parliament sooner rather than later. It would not be a complex matter to reverse the decision. It is not like the 10p tax rate fiasco. We know exactly what we need to do, and we can do it now—and we know how to do it, too, which is by voting for new clause 3. We agree with green taxes, but not with punishing people for decisions they made years ago and they are in no position to change.

There have been two big problems with this year’s Budget: the 10p tax rate fiasco and vehicle excise duty. We have corrected one—we know the Government will listen when forced to do so—and we now need to correct the second.

Richard Burden (Birmingham, Northfield) (Lab): I believe that the Government do have some thinking to do in relation to VED, and I will explain some of the reasons why shortly, but there is absolutely no way I will vote for this new clause. It is incoherent. The hon. Member for Putney (Justine Greening) says that this is a simple matter, but it is anything but simple to work out the relationships between taxation on cars based on their performance and their contribution to combating climate change and the influence of those factors on customer behaviour.

Even though I have some problems with the Government’s proposals, I question the concept that what is being proposed—regardless of whether it is good or bad or somewhere in between—is retrospective. It is not retrospective. Why do I say that? We first have to ask why it is thought to be retrospective. The concept of retrospection is to do with time. Are we saying that any taxation levied on an existing vehicle is by its nature retrospective? We may agree or disagree with, let us say, either a flat rate or a graduated increase in VED, but they are not retrospective. From the point of view of the headlines, it is great to talk about this being retrospective taxation, but it simply is not.

Justine Greening: When the Government introduced new band G, they did so only for cars registered from the given date onwards. That is the difference between that change and the change and the new bands proposed
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now, which kick in not for cars registered from now on but for those that have already been bought, and bought by people who could never have known that they would fall into these higher tax bands.

Richard Burden: What the hon. Lady says about the introduction of that new band is absolutely true, but that does not make a different kind of increase that applies to existing vehicles retrospective. She may agree or disagree, but that does not alter whether or not it is retrospective.

Anne Main: To the public, this is semantics. Someone who bought a car seven years ago based their decision on how much it cost and whether they could afford to run it. Regardless of how the hon. Gentleman might wish to describe this, to introduce an additional cost seven years down the line—to cars that might be the family run-around, and which those families might be finding difficult to afford to run at all—will be seen by many people as retrospective, because those purchasers did not make the choice at the time to buy a higher-cost-to-run car.

Richard Burden: I have some issues with the proposed scheme, but although the hon. Lady is right in that the public will not go through the fine detail of what we are saying, it is important that we are straight with them, and that includes not calling something retrospective when it simply is not.

Mr. David Chaytor (Bury, North) (Lab): Is it not the case that in every previous move towards variable emissions-based road tax, the changes have been levied on existing vehicles? That happened in the Budgets of 1999, 2002, 2003 and 2006. I do not recall the Opposition using the word “retrospective”, incorrectly, to apply to any of those previous Budget decisions.

3.45 pm

Richard Burden: My hon. Friend is right, and that is why the hon. Lady was being very selective when she chose to refer only to the change that introduced band G.

Mr. MacNeil: Is this tax a retrospective decision or not?

Richard Burden: No. Obviously, I am not making myself clear, because I am arguing that this is not a retrospective change.

The key issue that we have to face is whether vehicle excise duty can be a useful way to combat rises in CO2 emissions. Given the interest in this debate, I am sorry that more hon. Members were not present yesterday when Julia King, of the King review, spoke to the all-party motor group and covered some of these issues. Some of the issues that arose were very interesting. The King review says that if people drive more efficiently, they can probably reduce their carbon emissions by about 15 per cent. It also says that if people choose the most appropriate car for their use, they could probably reduce their carbon emissions from transport by another 15 per cent. If they choose the most fuel-efficient car in the class of car that they use— whether they drive a hatchback or a 4x4—they can reduce their emissions by 25 per cent.


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Most cars in this country are not the biggest or most expensive. The volume is in the middle and small ranges, so if we want to have an impact on the contribution of road transport, especially cars, on CO2 emissions, we must do something about the middle and lower ranges.

In the Opposition day debate on 14 May, I asked the Opposition spokesman if he believed that, in principle, vehicle excise duty should have a role in incentivising customer choice. He said that it should, but only in respect of cars not yet purchased. That is incoherent: it has not been the case before, and it is not the case now. VED rates already in existence apply to cars that people already own, not just those that they buy in the future.

When people buy cars, they do not, by and large, buy new cars. Fleets do, but private customers tend to buy second-hand cars. Therefore, the decisions about the rate of vehicle excise duty should apply to existing cars—those that people own already—and not just to new ones.

VED rates can incentivise people to embrace greener motoring in two ways. First, the incentive can be to buy a car with lower CO2 emissions. The second way is by influencing the decisions whether and when to change vehicle. The problem with the new clause is that it contains no incentive for people who already have cars with the highest emissions to change them. That is illogical, because the environmental performance of cars in all segments of the market is improving year on year. If, as some people suggest, taxation is weighted on to new vehicles and second-hand cars are exempted, people will be incentivised to keep vehicles that are less fuel-efficient, instead of changing to newer ones in the same class that are more fuel-efficient. As I said, the King review said that if consumers chose the lowest emission car in their class, they could reduce their carbon emissions by 25 per cent.

Do such incentives work in practice? I would like to think that exhortations to save the planet would get us somewhere. In fact, some surveys suggest that it is not as simple as that. What Car? did a survey on the impact of this year’s Budget on whether people would choose a greener car next time they buy. The bad news is that 34 per cent. of people said no, the Budget would have no impact at all. However, of those who said yes 19 per cent. said that they would be incentivised to buy a greener new car because they felt that they were being encouraged to save the planet, while 47 per cent. of people said that they would buy a greener car because it would save them money. The economic aspects have an impact.

Of course, there is a balance to be struck with affordability, and that is why I have some problems with the Government’s proposal. The problem with what the Government have been doing does not lie in the principle, and Conservative Members are wrong to say that it does. There are problems with the detail and the phasing of the change. It is right to increase the number of vehicle excise duty bands to equate better with the environmental performance of vehicles, but there can be a Catch-22 for low-income families if the increases and the way in which they are phased are too steep. Someone cannot get rid of an existing vehicle and move to a more fuel-efficient vehicle if, as an Opposition Member mentioned earlier, the second-hand value of their vehicle is reduced to such an extent that they
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cannot sell it and buy a different one. However, if they do not sell their original car, they are still hit by the increase.

There are issues with affordability and people’s ability to pay. We must take on board the impact on families with children, who require bigger vehicles, on the disabled and so on. At a time where we have a difficult economic situation, with fuel prices making people think more carefully about the cost of motoring, the precise way in which the change is made needs to be rethought. However, the right way to do that is to think about the subject properly between now and the pre-Budget report and to consider the best way of achieving the objectives that we want to achieve, rather than having a knee-jerk reaction today.

We need to look at how the economic circumstances of the time relate to what we need to do with vehicle excise duty. We need to look at whether we can tax things better, particularly when fuel prices are fluctuating as much as they are at the moment. We could consider some forms of incentives to stimulate more fuel-efficient driving. We could consider, for instance, doing something about reducing the motoring taxation of people who go on eco-driving courses, which exist these days. We could look at incentivising the fitting of dashboard displays that remind people how much fuel they are using and, if possible, what that costs. We could provide more obvious customer information, and the King review has proposed a number of examples of how we could do that. People need to understand what is being proposed, and when taxes are raised through motoring they need to be clearly hypothecated towards road transport and the kind of objectives that we want, such as improving the fuel efficiency of cars.

Finally, we need to consider whether in the current climate it makes a lot of sense to maintain the price differential between diesel and petrol when diesel vehicles, by and large, are a lot more fuel-efficient than petrol vehicles. We need to think about how we can incentivise research and development into more fuel-efficient vehicles and put more money into investment in that R and D. That is why we need more thorough thinking on that matter and we need to take time to do it. That is why we have to do it in the pre-Budget report. It is completely wrong to try to bounce the view of the House and the public in an over-simplistic way, as the Opposition are doing today.

Mr. Jeremy Browne: I shall take the opportunity to discuss the full string of amendments and new clauses that all come under the title of “Cost of motoring”. So far we have had a narrowly confined discussion on vehicle excise duty, and although that is an extremely important issue—it is probably the most high profile of the amendments and new clauses before us—it is by no means the only one.

I am talking about the cost of motoring as a whole. I suppose that the reasons it has become such a contentious political area and aroused so much public interest are threefold. First, there has been a dramatic increase in oil prices in recent months. Secondly, there is the issue of environmental taxation and whether the Government are applying it fairly, and thirdly there is a squeeze on household income, so people are inevitably more price-sensitive than at times when wages increase faster. To set the scene before I turn to the new clauses, I shall quickly go through each of those factors in turn.


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