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“do generate greater receipts from North Sea Corporation Tax and PRT.”
Lembit Öpik (Montgomeryshire) (LD): The inelasticity can be explained for rural areas because there is no other way to travel. Does the hon. Gentleman agree that it is that very dependence on diesel and petrol-powered vehicles in rural areas that makes people feel impotent in the face of these increases? Faced with a choice between driving less or reducing their expenditure on other things, they are forced to choose the latter.
Stewart Hosie: The hon. Gentleman is right and his comments mirror those of his colleague in the Scottish Parliament, Tavish Scott, who explained that people are questioning whether they can afford to go to work. Perhaps the hon. Gentleman should have a word with his Front Benchers, as his sensible approach runs counter to some of the comments that we heard earlier.
Mr. Russell Brown: Further to the point made by the hon. Member for Montgomeryshire (Lembit Öpik), households generally have a finite amount of money to spend. The argument may come from the Front Bench this evening that although additional income for the Treasury could be achieved through the increase in VAT, other sources of income are falling. There is great support on both sides of the House for the fuel duty regulator, but can the hon. Member for Dundee, East (Stewart Hosie) tell the House honestly that the figures add up, because that is vital?
Stewart Hosie: I agree, and I used the figures from the Department for Business, Enterprise and Regulatory Reform deliberately to show that over the first three quarters of 2007—the most up-to-date information that I have—there was a net increase in motor fuel sales across the board, notwithstanding the transfer from petrol to diesel, at a time when the price went up by twice the annual rate of inflation. Whether the fuel duty reduction comes from the onshore VAT windfall or the offshore North sea windfall, we can be certain that, in terms of total tax yield, this proposal is fiscally neutral.
The final criticism which the Government may make is that this is a one-way regulator. In the current climate, and with the very real fear of a “super-spike” in fuel costs, it is only right that my new clause addresses that. But there is nothing in new clause 8 to stop this Government introducing a claw-back measure to guarantee a minimum level of duty yield as per their forecast. They could do that in the pre-Budget report in the autumn at the same time as the first forecast required by the new clause.
There is no good reason why the principle of a fuel duty regulator should not apply, and very many reasons why it should. It would help the hard-pressed families who are paying £30 or £40 a month more for fuel for their cars. It would help remote and rural communities and the fishing and farming sectors, and protect the haulage industry, which keeps this country moving. It would also act as a measure to tackle inflation. Diverse sectors across the UK—not only from Scotland—have come together to back this measure, and I urge the House to do the same.
Nigel Griffiths:
I rise to oppose new clause 3. I am afraid to say that it is all too typical of the unprincipled politicking of the modern Conservative party, which has abandoned all its pretences at trying to claim the green agenda. Indeed, it repudiates the Conservative Chairman of the Select Committee on Environmental
Audit, under whose chairmanship it produced a report in February that begged the Treasury to increase taxes on motoring. It stated clearly:
“Some motoring organisations have begun calling for the next planned increase in fuel duty to be scrapped”
“must not defer its planned rises in fuel duty.”
The report gives the rationale behind its criticism of the Government and the Treasury. On page 11, it states:
“By 2009—10, main fuel duty rates will...remain 11 per cent. lower in real terms than they were in 1999.”
Lower down that page, in paragraph 19, it warns that
“road traffic emissions in England went up by 12 per cent. between 1997 and 2006”,
and it links those emissions to that previous statement. And, as the report makes very clear on page 12:
“The forthcoming Budget is a test of the Treasury’s environmental credibility: it must not defer its planned rises in fuel duty.”
It might have been a test of the Treasury’s environmental credibility, and my colleagues passed with flying colours. As a test of the credibility of Conservative policies, it showed them to be woefully inadequate.
In a previous report, the Committee stated:
“The Government should increase the differentials within Vehicle Excise Duty between the most and least efficient cars”.
I think that that is what the hon. Member for Putney (Justine Greening) would call eco-stealth taxes. The Conservative MPs on the Committee, who are notable for their absence today, included the hon. Members for Ruislip-Northwood (Mr. Hurd), for The Wrekin (Mark Pritchard), for Beverley and Holderness (Mr. Stuart), for Wantage (Mr. Vaizey), for Bridgwater (Mr. Liddell-Grainger) and for Bexhill and Battle (Gregory Barker) and, of course, the Chairman, the hon. Member for South Suffolk (Mr. Yeo). All those Conservative MPs signed up and, to embellish the green credentials of their party, ensured that that unanimous report argued strongly for higher fuel duties.
The first report that I referred to made an interesting point that reflects on the debate when it asked the Treasury to consider ways to put the formulation of environmental issues outside the arena of electoral politics to some degree. Why, I wonder? Was it because the 2007 report of the quality of life policy group, co-chaired by Zac Goldsmith and the right hon. Member for Suffolk, Coastal (Mr. Gummer), stated their proposals on vehicle excise duty very clearly? Their report said that
“we propose increasing the VED differential between the top and bottom bands of emissions performance”
“aimed primarily at influencing the used car market”.
The synthetic concern about backdating that we hear from Conservative Front Benchers is contradicted in the document that they paraded before Friends of the Earth and other green groups, which specifically said that the party had to aim primarily at the used car market. The document also proposed a new graded purchase tax, which would put 27.5 per cent. purchase tax and VAT on some larger cars, second hand or not.
Things have not changed so much since the Committee’s report, which was produced in February. It reflected a considerable increase in fuel prices, but since February those prices have gone up even further. Are the Conservatives rowing back to take account of those
prices, as some are urging? Far from it. This morning, on the BBC, the Chair of the Select Committee, the hon. Member for South Suffolk, was asked a direct question by Mr. Naughtie, who said:
“What about the back-dating which is very controversial”?
“It is controversial; it is not of course back-dating in the traditional sense”,
“3 times as many people buy a second hand car as buy a new car so if we are going to use bigger differentials in Vehicle Excise Duty to influence our purchasing decisions they have to apply to existing second hand cars as well as to new ones”.
5.15 pm
That has been the consistent policy of the Conservative Members who have a track record of championing green issues, but there are very few of them. The challenge is this: I expect to see the seven Members of the Conservative party who pressed the Treasury not to back-pedal on vehicle excise duty or fuel duty in the Lobby with us, voting against the new clause. This evening, we will see whether even some Conservatives are willing to repudiate their Front-Bench team or whether, as the hon. Member for Putney suggested earlier, they will toe the party line and betray the environment.
Mr. Atkinson: Over the years that I have been in the House, I have always known that the hon. Member for Edinburgh, South (Nigel Griffiths) will leap up at the last minute to defend the indefensible if he needs to do that to defend his party. That is what he tried to do tonight. I wonder where he has been. His argument about the views of individual Conservative Members is irrelevant to the anger that the backdating of vehicle excise duty rises has caused. Does he go to Edinburgh and listen to his constituents? Does he understand the anger that has been caused?
Ministers would be wise to accept the advice of my hon. Friend the Member for Putney (Justine Greening) and say today that they will not pursue the policy. There are certain trigger points that anger members of the public, our electorate. Sometimes they are irrelevant or extraordinary, but the backdating of the VED has caused anger. It is regressive, and many people who have decided to buy a particular car will lose thousands of pounds in the second-hand value of that car.
The hon. Member for Bury, North (Mr. Chaytor) mentioned stamp duty, but that was the wrong example. It would have worked as an example only if somebody had purchased a house and then the Government had said, “By the way, we’re backdating the stamp duty. You now owe us another £150,000 for the house that you have already bought.” People make decisions about what kind of car to buy on the basis of the cost at the time when they buy it. To change the ground rules is utterly wrong, which is why the vast majority of Labour Members, although not the hon. Member for Edinburgh, South, seem to agree with us on the spirit of the new clause, if not its details.
Mr. MacNeil: Does the hon. Gentleman agree that the vehicle excise duty is Labour’s poll tax on wheels? It is an annual charge, and it hits the poor hardest.
Mr. Atkinson: Absolutely. I agree entirely. It is not only regressive, but like all regressive taxation, it particularly hurts those who can least afford it.
My constituency is one of the most sparsely populated in England, and is on the Scottish border. Many of my constituents are not highly paid by any means, and they need their cars because there is virtually no public transport available. They have to travel many miles to find work, because work in agriculture and forestry has declined. It is common for people to drive 80 to 100 miles a day to get to and from work. Some work shifts, some are self-employed and some have to work weekends, so it would be totally impractical for them to use public transport.
People in my constituency are already taking a huge hit on fuel bills, and we have heard from hon. Members from Scotland that the situation is the same there, with fuel priced very highly. In addition, the decisions that those people must take about what kind of car to buy has been thrown into complete confusion because of the threatened change to VED. Some models of second-hand car that cost £10,000 a few months ago would be worth little more than scrap value now. People have little hope of part-exchanging a car like that for a new one of the type that the Government want them to buy.
People were encouraged to buy diesel cards because diesel was cheaper and gave more miles to the gallon. That was supposed to be a good thing to do, but it turns out that they would have been better advised to buy a petrol car.
The proposal affects women in particular, and I am surprised that the Exchequer Secretary to the Treasury is so unsympathetic to our arguments. Many women in my constituency work part time: they do 16 hours a week, or a few more, but many are having to give that up. They either cannot afford the fuel, or the need to sell one of the family vehicles means that they no longer have access to a car. Those women will then be trapped at home and possibly forced to live on benefits.
So far in the debate, there has been little discussion of another problem that people in rural areas suffer—the cost of kerosene heating oil. People in country areas do not get natural gas: we have electricity or oil, or we buy gas in cylinders. The prices of cylinder gas and kerosene have risen by more than the price of electricity and town or natural gas. The rises are huge: heating oil now costs more than 60p a litre, which means that 1,000 litres cost more than £600.
Those rises come on top of the Government’s VED decision. From the Exchequer Secretary’s demeanour, I do not think that she is inclined to listen to me, but I urge her to announce that she will not go ahead with the change. If she were to do so, she would reduce the anger that many people across the country feel.
Mr. Chaytor: We are all aware of the seriousness of the oil price crisis, which affects every individual, household and business sector in the country. I do not take that lightly, but some hon. Members do not appear to understand that the problem will not go away. We have reached a critical point in history, where global demand for oil exceeds supply. That is the background to this debate, but some hon. Members seem to want to ignore or forget that.
The only solution to all the complex issues with which we are grappling—such as variable VED and the fuel duty rise planned for October—is to increase the efficiency with which we use oil and all the other fossil fuels. Any political party that ignores that, or which rejects moves to increase that efficiency, is deceiving itself and the electorate.
I was delighted that my hon. Friend the Member for Edinburgh, South (Nigel Griffiths) was so critical of Opposition Front-Bench Members. Their amendment on VED has left them exposed as blatant opportunists. It has blown out of the water any shred of credibility that they might hope to gain in respect of their policies on the environment, transport and energy. I was also delighted to hear the hon. Member for Taunton (Mr. Browne) demolish the case put by the Opposition Front-Bench spokeswoman—at least until he admitted that he agreed that the VED change should not apply to the existing fleet of vehicles.
I turn now to the question of retrospectivity. The VED proposal is not a retrospective, as it will come into force for the first time next year. The changes to the bands are retrospective, but such changes have been implemented in exactly the same way since they were first introduced in 1999.
I accept that people are worried about the resale values of vehicles in the second-hand market. However, when motorists change their vehicles—as most do every two or three years—what matters to them is the difference in the cost of doing so. That means that if the value of a 1994 vehicle falls, so will the value of the 1996 vehicle that a person may wish to change up to. It is the cost of changing vehicles that really matters.
Of course, what has driven the fall in resale values already is nothing to do with the variable VED that the Government propose for next year; it is entirely to do with the quadrupling of the oil price over the past three years. That is concentrating the minds of motorists, and it is already changing their motoring habits and their choice of vehicle. So the principle that underlies the change to VED is absolutely right, and I congratulate the Government on having the courage to make such a radical change. My only criticism is that it would have been helpful both to have introduced the change before and if the Treasury had shown a little more urgency over the past 11 years in taking on board the need for such changes to environmental taxes.
It strikes me from listening to the debate and the debate outside the House that many of those who seem to be fundamentally opposed to both the principle and the detail have not looked at the detail of the proposals. They have not looked at the way in which the current bands will be transformed into the new range of 13 bands in 2009-10. It is absurd to say that this is a massive attack on the low-income households. Some 10 million vehicles will not be affected by the change, or 10 million vehicles will pay less tax, and the drivers of those 10 million vehicles are overwhelmingly people on the lowest incomes. Vehicles registered before March 2001, which are overwhelmingly owned by low-income families, will face no change at all, because they are not affected by the enhanced variable regime. I urge my Labour colleagues, some of whom ought to know better, to look at what the Government propose before making sweeping accusations about the impact of the changes.
The principle of variable excise duty is fair, efficient and beneficial to the environment. It concentrates our minds on our individual responsibility to respond to the challenges of climate change, on the cost of motoring and on the efficiency with which we use fossil fuels. Yes, the tax changes are about changing behaviour. They will change behaviour; they have already started to do so in a small way over the past nine years. Of course, all taxes are about changing behaviour. That is one of the key purposes the tax system.
Mr. James Paice (South-East Cambridgeshire) (Con): I am very interested to hear the hon. Gentleman refer to changing behaviour, but what will he say to the thousands of people who made their choice six or seven years ago? He is suggesting that they can somehow change their behaviour today when they made the decision seven years ago. We are simply saying that retrospective taxation should not be applied to something that relates to decisions that people have already taken and cannot change.
Mr. Chaytor: People might look at the figures that the Government have published in the Red Book, which tell them exactly the decrease or increase in the variable bands that will come into force next year. They will see that 10 million vehicles will either get a tax cut or face no change, and they will find that, for the overwhelming majority of the 7.7 million vehicles that will experience an increase, it will be absolutely marginal in respect of both the present rate of VED and the overall cost of running a vehicle.
I have discussed the issue with the Minister on a number of occasions and explained that I thought that she was doing absolutely the right thing, but I stressed that that some points of detail could be improved. I hope that those points of detail will be taken on board before we finalise the arrangements of next year’s Budget. Of course, if anyone takes the trouble to look at the table in the Red Book, it is pretty clear that the impact of next year’s VED increase is only really a matter of concern for two of the new bands: new band J and new band K. The 10 lowest bands will experience a tax reduction, no change or an increase of about £15 to £25—a comparatively modest percentage increase. There are, however, issues about the vehicles that will be in VED band J and K next year, because some of them will incur a one-year increase of £90, which is almost a 30 per cent. increase.
Rob Marris (Wolverhampton, South-West) (Lab): Fifty per cent.
Mr. Chaytor: Fifty per cent. I stand corrected.
That issue needs to be considered. Had the Treasury looked at the matter in more detail earlier, we might have phased in the increases year on year, and that would have given a stronger and more consistent signal to motorists.
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