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Mr. Browne:
I simply do not know what provoked that intervention. I did not mention an election. In fact, far from being partisan, I acknowledged that there were
particular concerns about petrol and diesel prices in rural communities, and that as large areas of Scotland are rural, those concerns must be felt keenly there. I could not have been less partisan; I was making an entirely conciliatory point. However, if the hon. Member for Dundee, East (Stewart Hosie) invites me to be partisan, I will be a little more partisan. Cutting 2p off pump prices costs the Government about £1 billion, so if the Scottish National party wishes to send the electorate in Scotland—or the motorists of Scotland; let us take elections out of it altogether—the message that the party wants lower prices at the pump, it needs to answer the question: how will it fund those cuts? To be fair, that is a question that all parties in the House have to answer. I read in the newspapers yesterday that, behind the scenes, the Secretary of State for Business, Enterprise and Regulatory Reform is lobbying the Government to defer the 2p increase in petrol duty that is planned for the autumn.
Mr. MacNeil: Will the hon. Gentleman give way?
Mr. Browne: I will in a moment. The Conservative party seems to be facing both ways on the issue; the shadow Chancellor supports The Daily Telegraph campaign to defer the 2p increase, but the party has not yet announced how it will make up the £1 billion shortfall that will result from that cut. The Conservative party has said that the proceeds of all its environmental proposals will go towards a family fund. As a result of the shadow Chancellor’s intervention, that fund would already be £1 billion in deficit. That would have severe implications for families across the United Kingdom, if they were unwise enough to give the Conservative party a position of responsibility.
Mr. Redwood: Will the hon. Gentleman give way?
Mr. Browne: I will, shortly. [Interruption.] I will, but let me make some progress.
The more charitable explanation is that the Scottish National party is seeking to devise a mechanism that will address spikes in oil prices—a laudable objective. However, in their new clauses, SNP Members do not address the issue of what would happen if prices were to fall. If they were being more straightforward, they might say, “Here is a mechanism for artificially inflating petrol prices in the event of prices falling”. If they are not willing to say that, all that they are saying is that the mechanism is about cutting prices. They have not yet said how they will address the issue of a price shortfall, but they may do so later.
Mr. Redwood: Will the hon. Gentleman give way?
Mr. Browne: I will, in a second.
SNP Members are considering the issue of oil revenue as though it were in a silo. About four hours ago, the Prime Minister made the point in the House that in any economy there will be revenue streams that go up and are higher than the Treasury anticipates, and revenue streams that fall, or go up by less than the Treasury had anticipated. The Treasury has to consider the public finances as a whole. If a Government ring-fence every area where revenue has risen by more than was anticipated, and say, “We must artificially reduce that,” but do not seek to ring-fence any areas where the revenue is less than expected, they will end up with an overall revenue shortfall.
The Exchequer Secretary to the Treasury (Angela Eagle) indicated assent.
Mr. Browne: I see the Minister nodding; it is an obvious point to nod at. Anyone who can add up will work out that what I am saying has to be true. I do not see how anyone could regard it as anything other than a statement of the obvious, and if I have detained people by stating something transparent and obvious, I apologise.
Mr. MacNeil: Is the hon. Gentleman aware that fuel is 30p a litre cheaper in the Republic of Ireland, which has a budget surplus?
Mr. Browne: I have mentioned countries where the price of petrol is higher than it is in the United Kingdom; I could also mention countries where the price is lower. That is a choice that Governments have to make. If the SNP does not want to cut public spending—I have not heard it make any proposals for such a cut—it needs to try to raise the revenue elsewhere. However—surprise, surprise—I have not heard any proposals on how that revenue would be raised.
My final point on the Scottish Nationalist party amendments is that the Government have this mechanism in a rather cruder form already. One of the issues in this debate is whether the Government wish to implement, further defer or cancel altogether the 2p duty rise that is planned for the autumn. One of the considerations that they are presumably taking into account is the overall price of oil and the effects on businesses and private individuals. The Government already have the ability, if they so wish, to vary upwards or downwards the total amount of duty on petrol and diesel depending on wider economic considerations and the price of oil, without having to introduce a mechanism of this sort.
Mr. Redwood: Will the hon. Gentleman give way?
Mr. Browne: When I have finished this point.
Mr. Redwood: In a second, I suppose.
Mr. Browne: Honestly, nobody has spent more time in Finance Bill discussions this year than I have, and there are some Members here who I have not even seen so far. However, I am more than happy to give way to all of them.
The motivations behind new clauses 8 and 9 are in many ways laudable, and I share many of them, but there are all kinds of practical problems that would be insurmountable.
Mr. Redwood: The hon. Gentleman’s comment was clearly not directed at me, because we were debating together yesterday in this very Chamber. His memory is obviously very short.
Will the hon. Gentleman withdraw the idea that we would be short of £1 billion of revenue if we made this adjustment? Is he not aware that there was a £500 million increase in oil and petrol revenues in the first six weeks of this financial year alone thanks to the increased price, increased VAT and increased oil revenues? Surely it would be right to try to get back to the Budget estimate.
Mr. Browne: That is not the position of those on the right hon. Gentleman’s Front Bench, but he has a long record of having different positions from his Front Bench, even when he was sitting on it, so I will not criticise him on this occasion. The Conservatives’ position, as I understand it—it is hard to understand—is that they would introduce additional environmental taxes over and above those being implemented by the Government, so the starting point is where the Government are. From that starting point, the Conservatives are seeking to put a £1 billion annual hole in their budget for families, so that is the initial deficit that they need to overcome.
Finally—I have been speaking for longer than I wished to because I have been so generous in taking interventions—I want to discuss amendment No. 7 and new clauses 3 and 7, tabled by the Conservatives. My party takes climate change extremely seriously and always has, and we wish to achieve reductions in emissions from transport. Environmental taxation clearly has a vital role to play because transport contributes to a large degree to the total amount of CO2 emissions. Tax can make a contribution to changing behaviour. That is surely the Government’s motivation, in addition to revenue-raising motives, in increasing tobacco taxation so that the taxation component is a high percentage of the overall price that the consumer pays when buying cigarettes and tobacco products. We support vehicle excise differentials and would support their being at a higher level so that consumers are even more incentivised to buy more fuel-efficient cars.
I agree that environmental taxation has, to a sizeable degree, been discredited by the approach that the Government have taken. They have used public concern about the environment and climate change as a way of raising additional revenue. I do not doubt that they are concerned about climate change, as are politicians in all parties. However, people are understandably cynical when the Government see an opportunity to raise additional revenue based on those concerns without that money then being used to offset and reduce other areas of taxation so that the overall effect is neutral but the environmental taxes form a greater overall component of the total Government tax take. That would be a responsible way for the Government to progress, but I am afraid that it has not always been their approach.
Mr. Mark Harper (Forest of Dean) (Con): The hon. Gentleman was talking about the overall impact. Have he and his party reassessed their views about the correct level of vehicle excise duty, and taken into account the fact that because of the significant rise in oil prices and the subsequent rise in petrol and diesel prices, motorists have changed their behaviour, reflecting those costs? To have the same increase in VED without taking into account fuel prices does not seem sensible.
4.30 pm
Mr. Browne:
That was a helpful intervention. The position of my party is one of greater vehicle excise duty differentials, so that people who choose to drive very fuel efficient cars, or moderately fuel efficient cars, will benefit financially. Those who choose—and it is entirely their choice, which is why we are against the retrospective aspect of the Government’s proposals—to drive more fuel inefficient cars will have to pay a higher premium. But the additional revenue that we raise from
that would be used to reduce taxes on individuals, specifically income tax. People would be paying more through environmental taxation, but less through income tax. The overall impact would be zero—it would be entirely revenue neutral. We believe that the proportion of taxation raised through environmental taxes ought to be higher and that the proportion of taxation raised on income ought to be lower.
I shall broaden that point momentarily. Our long-term objective is to abolish vehicle excise duty altogether. Ultimately, we want a system of motorway and trunk road pricing, where people pay for their use of major highways. That would be particularly beneficial for rural communities, which typically do not have motorways and trunk roads, and would allow us to reduce other, rather cruder forms of taxation on cars. However, given the nature of the current system, we favour greater differentials.
I shall conclude by talking about retrospectivity. People with older cars will be hit by the retrospective element of the proposals. It has been said by others that those people cannot easily sell their cars, and because it is harder to sell those cars, the market has corrected itself and the price of those cars is coming down, meaning that their problems are compounded further. Green taxes should incentivise people to make environmentally friendly choices, and people cannot be incentivised to make a different decision from the one that they have already made.
My party does not wish to get into the territory that the Conservatives have sought to occupy, which is to talk green but always vote against the green option. I want to make it absolutely clear that the Liberal Democrats are committed to changing behaviour and mitigating the effects of climate change by introducing environmental taxes that form a greater component of Britain’s overall tax take. But we will not increase taxes overall; we will reduce them on income, and the overall effect will be absolutely neutral. We do not favour retrospective VED, but we do favour greater VED differentials. On that basis, we will support amendment No. 7—
Mr. Chaytor: Will the hon. Gentleman give way?
Mark Fisher: Will the hon. Gentleman give way?
Mr. Browne: I am bringing my remarks to a close.
We support amendment No. 7, which stands in my name. If new clause 3 is pushed to a vote, we would be willing to support it, although it is deficient, particularly in the introduction of the element of a statutory instrument mentioned by the hon. Member for Stoke-on-Trent, Central (Mark Fisher). Although it is badly drafted, it is better than the Government’s current position.
Madam Deputy Speaker: Order. Several hon. Members are hoping to catch my eye, but apart from this important group of amendments, further groups of new clauses and amendments are to be debated today.
Mr. Ronnie Campbell (Blyth Valley) (Lab):
The debate has been pretty good up until now, and the retrospective bit is interesting. It is a good argument to say that if a car is 10 years’ old, it should be taxed the same as one
that is one year old. That is fair—if we tax a car, it does not matter how old it is, it should be taxed. In that respect, the argument is a good one.
However, the argument that I want to put up is for the working-class man or woman who drives a car. The tax is heavy, no matter how we put it—environmentally or in any other way. It means £250 to £300 on second-hand cars, which are bought, in the main, by working-class people—people who work—because they cannot afford new cars. Only Labour Members of Parliament can buy new cars—I am sure that Liberals and Tories buy them, too—and we can afford to pay the tax.
Mr. MacNeil: The purchase is not usually based on the model, but on the cost of the car to the purchasers at that point, after which they can be hammered by vehicle excise duty.
Mr. Campbell: I accept that point. However, let us get down to the nitty-gritty. The decision is similar to that on the 10p tax rate—I do not want to go on about that too much—because it was a tax on the poor. It was a tax on pensioners and working people and it had to be taken away quickly because all hell was let loose. Again, we are considering a tax on working-class people. If we get into the same position as we were on the 10p rate and there is another mighty fiasco, we might have to withdraw it. It does not apply till April, so we, as a Government, have a chance to put it right.
As I have said, we are considering a heavy tax on working people—and not only those in rural areas—who need the car to get to work because our transport system is not that good. It is a retrospective tax, if people want to call it that, on working people. We should look at the matter carefully. The Government argue that they will examine it—I hope that they do. I will vote with the Government, with a heavy heart, in the hope that they come up with something in the autumn statement that will give the working-class people of this country a bit of a break.
Mr. Alan Reid (Argyll and Bute) (LD): I apologise to hon. Members for rushing off after my brief speech, but I have an Adjournment debate in Westminster Hall at 4.45 pm.
I want to concentrate on amendment No. 9, which would allow a lower rate of vehicle excise duty for vehicles that are used primarily for business purposes off-road. Although I fully support giving people incentives to buy less powerful cars through higher rates of VED, there should be an exception for people who need to use the car off-road. I am thinking especially of farmers, gamekeepers, crofters and people who work in forestry. They use the car off-road and need a powerful vehicle to drive on muddy tracks to go about their business. They obviously cannot afford two cars—one for work and one to take the children to school, go to the village for shopping or tow loads on the public roads. It is therefore important to charge people in that position a lower rate of duty.
Amendment No. 9 builds on an amendment that the hon. Member for Dundee, East (Stewart Hosie) tabled in Committee, and I believe that it deals with much of the criticism that was made of the latter by restricting the exemption more to vehicles whose primary purpose is to be used off-road for business. Vehicles that are used purely for agricultural purposes are exempt from VED,
but we are considering those that are also used on public roads and are therefore not exempt. The new class of exemption should be included.
Let me deal with the proposals of the hon. Member for Dundee, East. Two issues need to be tackled. The first is the need for a lower rate of fuel duty to be charged in rural areas and the second is benefits for the haulage industry. Although I would happily support a proposal that was targeted more at the haulage industry to give it help and allow it to compete on level terms with Europe, new clause 9 is too widely drawn. To help people in rural areas, we should support new clause 14, which my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) tabled. It is targeted at charging a lower rate for fuel in remote rural areas. To give an example, I recently paid a visit to Port Ellen on the Isle of Islay in my constituency, where fuel was selling at 15p a litre more than at Glasgow airport. Indeed, on some of the smaller islands there is always a greater difference.
Those additional costs work their way through the whole economy. We know that the price of fuel adds to the price of all other goods. High fuel prices make it more difficult to run and sustain a business in remote areas. People in those areas suffer from a triple whammy. Fuel prices are much higher than in urban areas; they have no alternative forms of public transport; and they have much further distances to travel. It would simply not be sensible for councils to subsidise bus services as an alternative, as buses would be running round with one or two passengers.
The cost to the Treasury of new clause 14 would be very small—much smaller than the cost of the amendment proposed by the hon. Member for Dundee, East—because it would apply only to a small part of the country. Cutting the price of fuel would not encourage people to drive more. People do not drive dozens of miles along twisting single-track roads because they enjoy it. They make such journeys because they have to. The car in such areas is not a luxury; it is essential. We had a meeting with the Exchequer Secretary in which she was sympathetic, and I know that the Chancellor is sympathetic, too. I urge the Government to accept our new clause.
Mark Fisher: I hope that not a single Member of the House would dispute the need to increase vehicle excise duty on engines of such a size. To that extent, the Government ought to be congratulated on listening to the Environmental Audit Committee and on increasing the VED on such vehicles. It is interesting that that is the dog that has not barked in this debate. Nobody has congratulated the Government on raising VED on future purchases, but they ought to be congratulated, because that is the right way for this country to go.
However, the hon. Member for Putney (Justine Greening), speaking for the Opposition, was completely right to say that the change is retrospective. We can have a semantic argument about exactly what that change is, but she was right that although the increase is right for decisions made going forward, it is not right that a decision someone made five or seven years ago should also be subject to such an increase. That is unfair and retrospective, as well as being ineffective, because it does not change behaviour by making anybody who is considering buying a larger vehicle think twice before they do so. That is what the increase in duty is meant to do.
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