Clause
44
Company
cars: lower threshold for CO2 emissions
figure
Question
proposed, That the clause stand part of the
Bill.
Justine
Greening (Putney) (Con): It is a pleasure to serve under
your chairmanship, Mr. Hood. I have one brief question on
the clause. I understand what the clause seeks to achieve, but I want
to ask about the new tax regime for qualifying low CO 2
emission cars, which has been introduced from April this year.
From that date, cars with CO 2 emissions of under 120g/kg are
subject to an appropriate percentage of 10 per cent., which will be
increased by 3 per cent. if the car has a diesel engine.
What
assessment has the Treasury made of the number of cars that are likely
to take advantage of that tax regime over the next three years? What
amount of tax giveaway will be provided as part of that regime, to
encourage those who have company cars, and companies that have company
cars as a taxable benefit, to choose qualifying low CO2
emission cars, rather than going for the more traditional company
car models that people have chosen in the past? That is the main
question that I wanted to ask, to obtain more information about the
qualifying low CO2 emission cars, and I would be grateful
for any light that the Minister can shed on the Treasury’s
expectations of how the scheme will work.
The
Exchequer Secretary to the Treasury (Angela Eagle):
As the
hon. Lady will know, the whole approach to company car taxation since
it was reformed in 2002 has been to base it on carbon emissions, which
encourages the take-up and development of more fuel-efficient cars in
company fleets.
The clause
promotes more environmentally efficient business travel and the take-up
of cleaner cars because it will reduce the lower threshold from 135g/kg
to 130g/kg of emissions. The lower threshold rate relates to an
appropriate percentage of 15 per cent., which will have the effect of
reducing each of the 21 company car tax bands by 5g/kg. The new rules
will apply from 6 April 2010.
In terms of
the 120g/kg category at the very low end, about which the hon. Member
for Putney asked, we anticipate that over 100 different cars in the
next three years would qualify on those emissions bases. This is set
within the context of the forthcoming EU regulatory requirements, which
will ratchet down the emissions that are allowable under EU law. We
believe that manufacturers are already responding to the challenge of
populating that area of the company car tax threshold rate, and the
hon. Lady should also bear in mind the fact that fleet car sales are
about half of all new car sales per year. It is therefore particularly
important to send these messages to manufacturers who are aiming at the
fleet car market. It is a very influential market—half of all
new car sales—and it presents a way of achieving quite a rapid
turnover and an improvement in CO2 emissions from new cars
on the
road.
6.30
pm
Justine
Greening:
I wish to ask a brief question for clarity. When
the Minister talked about 100 different cars, did she mean 100
different models or 100 different versions within models? I fully
accept her point about
signalling to encourage new cars acquired through company car schemes to
be more environmentally friendly, and we welcome the fact that the
Government have set out, three years in advance, their plans for
company car taxation. That will encourage people who perhaps have had
company cars for three or four years to make those
choices.
Angela
Eagle:
I meant 100 different types of car. Clearly, there
are now increasing signals and incentives for manufacturers to populate
that part of the car taxation rate—they and companies are
rewarded financially. In fact, everyone will gain, if we manage to make
emissions savings that way. I hope that with that clarification, the
hon. Lady will support clause
44.
Question
agreed
to.
Clause
44 ordered to stand part of the Bill.
Clause
45
Van
fuel
benefit
Question
proposed, That the clause stand part of the
Bill.
Mr.
Breed:
I have no intention of opposing the clause, as its
fairness is obvious. I just wanted to point out the unintended
consequences that might be visited on hon. Members. We are seeing an
explosion of vans on housing estates, which is causing havoc, because
they cannot go into garages or, very often, on to driveways, so they
end up on the road. A significant number of people now use their
company and, indeed, local authority vans. I do not know what is
happening elsewhere, but it is certainly a major problem in my part of
the
world.
Angela
Eagle:
The clause clarifies the tax and national insurance
contribution treatment of van fuel, and it mirrors, for van fuel
benefit, the signposts in the relevant legislation for company car fuel
benefit. I am not sure quite how directly that impacts on the number of
vans—white or otherwise—in the hon. Gentleman’s
constituency. Does he wish to ban
them?
Mr.
Breed:
I am saying that company cars are much easier to
cope with, but company vans are certainly not easy to cope
with.
Angela
Eagle:
The hon. Gentleman has expressed an opinion and put
it on the record—I shall leave it to his van-driving
constituents to express theirs. I hope that the Committee will allow
clause 45 to stand part of the
Bill.
Question
agreed
to.
Clause
45 ordered to stand part of the
Bill.
Clauses
46 to 47 ordered to stand part of the
Bill.
Clause
48
Armed
forces: the Council Tax
Relief
Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke:
Clause 48 exempts from tax payments to certain
members of Her Majesty’s forces under the Ministry of Defence
new armed forces council tax relief scheme. The Opposition welcome
attempts to assist our armed services. I think that the Committee will
not disagree that our armed services do a fantastic job for this
country and, indeed, for the rest of the world. It is right that they
should be treated well. Today is not the
time to debate at greater length the military covenant and the
relationship between the Government and the armed forces. The armed
forces council tax relief scheme is an attempt to cover a certain
amount of lost ground for the Government, but it is welcome none the
less. It is quite right that it should be exempt from
tax.
I
want, however, to make one or two points. Paragraph 4 of the
explanatory notes to the clause
states:
“Following
an announcement by the Secretary of State for Defence on 25 October
2007, payments under the Ministry of Defence’s new Armed Forces
Council Tax Relief scheme are due to start from 1 April
2008.”
I
checked that and there is an inaccuracy. The announcement was made on
25 September, not 25 October. I am sure that that is an entirely
innocent mistake, but the context of the original announcement on 25
September was the Labour party conference in Bournemouth. The speech
was made by the Secretary of State for Defence in what was believed to
be a pre-election conference. How long ago that
seems.
One
or two points in that announcement attracted some criticism. First, the
original proposal related only to members of the armed forces serving
in Iraq and Afghanistan. On 28 January, the scheme was extended to
include other places in the world such as the Balkans. It also appeared
that the scheme was to be funded entirely from the existing MOD budget.
Although it provided a happy announcement for the Government at their
party conference, it was going to be funded by cuts elsewhere in the
MOD
budget.
The
proposal in September was somewhat hurried. Will the Minister explain
when the Treasury first became aware that it might result in a tax
liability for members of the armed forces? The measures before us were
proposed to ensure that the council tax relief scheme would be exempt
from tax payments. Will the Minister also clarify the position for
national insurance contributions? Again, the explanatory notes
state:
“Secondary
legislation will introduce a parallel disregard for National Insurance
Contributions
purposes.”
Clearly,
under the clause, the council tax relief scheme will be exempt for
income tax purposes from April 2008. From the passage of the National
Insurance Contributions Bill earlier this year, my understanding of
national insurance contributions is that they are determined by a
forward-looking process. It is therefore necessary to pass secondary
legislation for the next year. I may well be wrong on this, but will
the Minister confirm that the disregard for national insurance
contributions will not start until April 2009, so there will be an
additional national contributions liability for members of the armed
services benefiting from the armed forces council tax relief
scheme?
The
Financial Secretary to the Treasury (Jane Kennedy):
First,
it is a pleasure to be in Committee this afternoon under your
chairmanship, Mr. Hood. I have enjoyed listening to the
discussions.
I
do not believe that the national insurance effect will take exactly the
form that the hon. Member for South-West Hertfordshire suggested. I
will make a few general comments. I understand from my advice that the
announcement was made in October, but I will double-check in the light
of what he said.
Mr.
Gauke:
I have among my notes the report from the
BBC’s website, which gives the date as 25
September.
Jane
Kennedy:
I apologise. I acknowledge that it was September
when my right hon. Friend the Secretary of State for Defence announced
the introduction of the new scheme of tax-free council tax relief for
members of the armed forces who are deployed on operations overseas. I
do not want to go into the history, but it is clear that from 1 October
2007, the areas that attract operational allowance, namely Afghanistan
and Iraq, will give rise to council tax relief, but from 1 February,
service in other operational zones has been specified—that is,
as I understand it, overseas operations, including British Forces South
Atlantic Islands, Bahrain, Bosnia, Diego Garcia, Kosovo, Kuwait, Oman,
Qatar, and deployed Royal Navy ships in receipt of the overseas
deployment welfare package, and UN operations. The Ministry of Defence
has the power to amend the specified areas from time to
time.
The
NICs changes will take effect from April this year, and secondary
legislation was introduced with that effect to ensure that the relief
is disregarded for NICs. I do not agree with the hon.
Gentleman’s description of the reasons why the proposal was
introduced. We have a compact with the British Army, and certainly
British soldiers whom I meet from my constituency acknowledge the
genuine commitment that the Government have made to British armed
forces. They believe to some degree that we do not receive fair
acknowledgement for our work to ensure that our armed forces are
supported in every
way.
The
payment of the council tax relief and what we are discussing today are
important steps to ensure that our armed forces receive council tax
relief as intended. Many of them endure danger in difficult
circumstances, and we believe that the relief should not be taxed,
thereby ensuring that they receive the maximum benefit. The clause will
cover all payments of council tax relief to the armed forces from April
this year, and I hope that the clause will stand part of the
Bill.
Mr.
Gauke:
I am grateful for that clarification, although I
stand by my point that the matter has been hurried. The Minister did
not confirm the time at which the Treasury was first aware of council
tax relief being potentially taxable, but none the less we welcome the
clause.
Question
put and agreed
to.
Clause
48 ordered to stand part of the
Bill.
Mr.
Bob Blizzard (Waveney) (Lab): Before I move the motion to
adjourn, may I point out that we are in the third week of this
Committee? When we came into this room, the clock was five minutes
ahead of the time on the monitor. I understand that we are using the
time on the monitor, but it is confusing to have two time references in
the same room, and I wonder whether I could look to you, Mr.
Hood, to ensure that the clock is put right before we meet
again.
The
Chairman:
Before I put the Question on the motion to
adjourn, may I say that I noticed that and mentioned it to the Clerk
this
morning?
Further
consideration adjourned.—
[Bob
Blizzard.]
Adjourned
accordingly at sixteen minutes to Seven o’clock till Thursday 22
May at Nine
o’clock.
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