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The combination would completely undermine the clarity of the carbon dioxide signal that the Government successfully introduced and that was supported by both Opposition parties, as well as creating a severe and costly administrative headache for the DVLA. In addition,
none of the changes would affect the VED reforms announced in the 2008 Budget, which are due to be legislated for and to take effect in next years Finance Bill.
These amendments serve one useful purpose, however: they highlight the inconsistencies in the arguments that have been advanced against the application of Budget 2008 changes to existing cars. Following the Committee of the whole House, the House voted on clause 15, which introduced new rates of VED for 2008-09, and these rates are currently in effect. They include an inflation-based uprating of most VED bands, and an increase of £100 on the most-polluting cars, and these changes apply to cars that were registered prior to the Budget this year. This is in line with standard Government practice: for example, when the Government introduced a new VED band for cars emitting less than 120 g/km in 2002, and a new band for cars emitting less than 100 g/km in 2003, these were applied to existing cars, giving them significant tax cuts, even though the owners had already acquired those cars.
Of course, on every occasion that the Conservative party increased VED between 1979 and 1997, it applied it to all existing cars. If the logic of the so-called retrospection had been applied to VED rates since 1979, we would currently have a system whereby those who purchased cars in 1980 would pay £60, those who purchased them in 1981 would still pay £70, and so on ad infinitum. Thus, vehicles that emitted more carbon dioxide but that were older would have lower VED rates. Where is the environmental signal in that?
It is entirely usual that the VED reforms announced at Budget 2008 will also apply to post-2001 cars that have already been registered. This is in no way retrospective. It is simply the way in which VED has always worked. As the debate on these new clauses and amendments has clearly shown, if it were decided to apply new VED rates only to cars registered after a certain date, it would not only be difficult to determine what that date should be, but it would be administratively complex, and, most importantly, would seriously undermine the environmental signal that is provided through the VED system, creating confusion, in particular in the second-hand car market.
New clauses 8 and 9 relate to fuel duty. If agreed to, they would introduce a mechanism that could lead to fuel duty reductions when international oil prices exceeded their forecast prices. This mechanism would, however, be very complex, involving very expensive changes to the road fuel duty and VAT systems with no guarantee of actually reducing prices at the pumps. These new clauses rely on the idea that higher fuel prices lead to higher overall receipts for the Treasury. This is simply not the case. As fuel duty is a fixed rate, increases in fuel prices will not lead to increases in revenue. Thus while petrol prices at the pump have risen 20 per cent. since the last fuel duty increase, fuel duty itself has not gone up. As it is expected that demand for fuel will fall as a result of higher prices, the Governments revenues from fuel duty are, in fact, likely to fall as a result of the current conditions in the international oil market.
Although it is right that the duty is constant, I am sure the hon. Lady will concede that the VAT receipts increase as the price rises. Notwithstanding whether or not there is a VAT windfallI explained, rather well I think, why I believe there isthere is most certainly an offshore windfall, as confirmed by the
Chancellor in a letter to my right hon. Friend the Member for Banff and Buchan (Mr. Salmond). That could be used to offset some of the increase in the price at the pump.
Angela Eagle: There may well not be a VAT windfall, because when people spend more money on one good or service, they tend to spend less on others. They have only a certain amount of disposable income.
On the hon. Gentlemans point about offshore oil, we do not yet have the out-turn for this years oil receiptsthe Treasury will not receive them until Julyand he needs to remember that oil company profits can be offset against investment decisions in the North sea. We will not have proper knowledge of North sea oil receipts until the pre-Budget report.
Overall, the wider VAT effects mean that there may be no windfall, and that is the difficulty with the proposed amendments. I understand and sympathise with the worries that are driving Scottish Members on both sides of the House to suggest mechanisms that would provide relief. I have met some of them to discuss those ideas and we will examine them. However, those Members must understand and acknowledge the difficulties with their ideas. There are no easy solutions to the pressure that families everywhere are feeling because of the huge rises in the price of oil and the knock-on effects on family budgets and business profits.
The difficulty with the new clauses and amendments is that they seek to redistribute a tax windfall that does not exist. New clause 9 also suggests that reductions in fuel duty as a result of the proposed fuel duty regulator should be paid directly to road hauliers. I have great sympathy for road hauliers, especially the smaller companies that find it much harder to pass on their increased costs. I have spoken to many hauliers and their representatives, and I am not unsympathetic, but why should the provision apply to hauliers and not to other equally deserving essential road users? Who would be in the scheme and how would we decide? The Government recognise the road haulage industrys concerns, and those of other businesses, over the current cost of fuel, and we continue to examine the position.
Requests for reduced duty rates for road haulage operators are often associated with the relative competitiveness of the industry compared with foreign operators. Studies have shown that European duty differentials are in many cases offset by other costs such as lower labour rates and other employer costs. Furthermore, a scheme would require the introduction of an administrative mechanism, with potentially high costs. Also any system would create significant compliance and fraud risks.
The Government have continued to support the industry through other policy measures such as the halving of, and subsequent freezes to, HGV vehicle excise duty rates, and the reduced pollution certificate scheme. Also the Government recently announced £24 million of funding for enforcement, in particular aimed at those conducting international trips. That will mean a 50 per cent. increase in the number of HGV checks carried out, including two new enforcement sites at key points on the road network.
I listened to the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) outlining his ingenious scheme, and he helpfully sent an explanation to the
Chancellor. We continue to look at the detail of his proposals, but I hope that he will acknowledge that it would cause practical difficulties that are not easily solved. However, I am not unsympathetic to his case, and I commend him on his ingenuity.
Amendment No. 9 deals with VED for off-road vehicles and also relates to rural areas. It proposes that existing alternative fuel discounts should be extended to cover off-road working vehicles. Those used in agriculture are already exempt from VED and authorised to use red diesel. The VED exemption permits vehicles to travel on public roads for a distance of 1.5 km in order to travel between different land areas. To have any effect, therefore, this amendment would require the Treasury to make, and the DVLA to enforce, a new definition of off-road working vehicle that encompassed a broader range of vehicles. However, it is unclear how that could be achieved, and the new clause does not help with the definition. It is difficult to imagine how that could be done without providing an incentive to fraud, and therefore the need for a costly enforcement regime. However, I am happy to keep talking about those ideas.
Finally, let me turn briefly to Government amendments Nos. 22 and 23, which make minor amendments to clause 75. The clause extends for a further five years the 100 per cent. capital allowances scheme for businesses that invest in the cleanest cars. The clause updates the carbon dioxide emissions threshold to maintain the focus on the cleanest cars and rewards people appropriately. The Government amendments are required because two small consequential changes were initially overlooked. They are needed to effect the transitional provisions and to exempt businesses that buy or lease the cleanest cars. I therefore commend the Government amendments and urge the House to reject the Opposition new clauses and amendments.
Justine Greening: We have had an interesting debate. The hon. Member for Stoke-on-Trent, Central (Mark Fisher) talked about his hope and trust that his Government would remedy this unfair retrospective road tax in the the pre-Budget report, but we have had no indication from the Minister that that will happen. I do not share his confidence and I am sure that the public will not share it when they listen to the debate tonight and read about it in the papers tomorrow. The public will find it extremely difficult to understand how Labour MPs, who were so rightly concerned about the 10p tax rate fiasco, can dither tonight when it comes to tackling the vehicle excise duty that will hit twice as many people for up to twice as much money. The tax will hit older cars and lower income families, is deeply unfair and will not have any substantial impact on CO2 emissions. We should use new clause 3 to vote against that tax right now.
(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.. [Stewart Hosie.]
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