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3.45 pm
The hon. Member for South-West Hertfordshire talked about scrappage—a term that also passed the lips of the hon. Member for Taunton. The point of the scrappage scheme is not to reap environmental benefits, except in a secondary way, and we have not argued for it as an environmental measure. It is designed
to try to put some confidence back into the new car market in a timely and temporary way. That is why it is time-limited—it ends in March next year—and its cost is capped at £300 million. The scheme is explicitly designed to kick-start, from a confidence point of view, the new car market.
The environmental gains, if there are such, will be secondary and consist of the fact that new cars are more energy-efficient than older cars. Therefore, by definition, if an older car is scrapped and replaced with a new, more efficient car, there will be some minor gains. However, I shall not stand at this Dispatch Box and argue that the scrappage scheme is primarily an environmental measure, because it is not designed in that way.
Mr. Gauke: Again, I am grateful to the Exchequer Secretary; she has been very clear with the Committee, which will appreciate the point that she makes. Taking her pointers to the environmental benefit of the scrappage scheme, I should be grateful to know whether there has been any assessment of its environmental downside, in that more cars will be bought. I appreciate that the Government have not presented the measure as principally environmental, but will she examine the environmental minuses as well as the pluses?
Angela Eagle: We may be able to discuss scrappage in more detail at another stage of the Bill. To answer the hon. Gentleman’s question, however, the point of the scrappage scheme is that to qualify, a car must be scrapped, so we are talking about replacing existing cars with newer, more energy-efficient cars. Clearly, on the issue of whole-life costs, there would have to be an assessment of whether we save on the environmental costs of making new cars, and some work is being done in that area. However, I would not want the hon. Gentleman to run away with the idea that the primary aim of the scheme is anything other than to try to give a temporary, and I think much-needed, boost to a great British manufacturing sector that is in great need of support. That is the point of scrappage.
I shall now deal with the points that my right hon. Friend the Member for Birkenhead made. His argument was hung on an amendment that has not been selected, so we shall not talk about that, except to say that it would definitely be retrospective to try to go back to engine size rather than CO2 emissions as a basis for VED. We were the first country to base vehicle excise duties on CO2 emissions, and six more European countries now do so. We have achieved major reductions in emissions from our car fleet as a result—partially, at least—of that change. It sends good signals to consumers, but we need to improve on and even increase those signals if we are to hit our very demanding targets for averting dangerous climate change. Clearly, that is something in which we all have a direct interest.
My right hon. Friend was right, however, to focus on the distributional aspects of progress in new, greener technology, because, as the Committee on Climate Change, which the House tasked with taking a closer look at these matters, said in no uncertain terms in its report to Parliament, there are often distributional effects when we switch to lower-carbon activities. As a country and as a society, we will not be able to persuade our electorate that we need to make progress and avert climate change if we cannot also demonstrate that we have a fairness agenda. In other words, if there is no fairness for those
who are poor and least able to buy new, or shift from existing goods to newer, more energy-efficient ones, we will not get public support for the changes that we need.
My right hon. Friend is therefore right to worry about some of those issues. We have some data that hint at connections, but not in the sort of detail that he would like. Some data suggest that low-income households are more likely to own cars with smaller engines. However, the hon. Member for Taunton was right in his analysis that the poorest do not own cars, so the distributional shape of the tax is not the same as that of, for example, tobacco duties.
We also have data to suggest that the majority of the cars that emit the most carbon are owned by higher-income households. Again, the data are not geographically well represented or spread in the way that my right hon. Friend wanted. I am happy to talk to him to ascertain whether we can analyse the distributional impact of the shift from high to low CO2 emitting cars on the engine pool, and particularly on his constituents and many of mine, who are not always known for going to the latest car showroom and getting the latest model.
My right hon. Friend may also like to correspond with the Committee on Climate Change, which is developing some expertise in the matter, to ascertain whether it can study the issue.
Mr. Frank Field: I shall take up the Exchequer Secretary’s offer and her suggestion about others with whom I might make contact. I think that our poorer constituents accept that the Government need to raise revenue, and that they raise it from drivers in different ways. However, their plea is that we take account of the total impact of all the levies that we impose on drivers when we consider the distributional effect. We hope that we will not have a Government who are not green-minded, as my hon. Friend describes this Government to be.
Angela Eagle: We try to bear the big picture in mind throughout the budgeting process. We do not consider vehicle excise duties in isolation, but alongside other duties. We then examine their distributional impact, so I hope that we can make my right hon. Friend pleased with our fair approach.
The system of CO2 based vehicle excise duty applies to cars registered from 2001 onwards. Cars registered before then continue to pay the duty according to their engine size because we do not have comprehensive data on their CO2 emissions. Clearly, over time, the number of cars in that pool diminishes. Although engine size can act as a proxy for emissions, my hon. Friend the Member for Wolverhampton, South-West gave a few examples of perverse results. It does not, therefore, provide as accurate a measurement of emissions as that used in CO2 based VED: grams per kilometre.
I hope that hon. Members will join me in supporting the clause.
Clause 14 accordingly ordered to stand part of the Bill.
Stewart Hosie: I beg to move amendment 13, page 10, line 24, at end insert—
‘(2A) In section 6 (excise duty on hydrocarbon oil) after subsection (1A) (as amended by subsection (2) above), insert—
“(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.”’.
The Second Deputy Chairman of Ways and Means (Sir Michael Lord): With this it will be convenient to discuss amendment 11, page 10, line 40, at end add
‘, provided that before this date, the Chancellor has published a report examining the costs and benefits of the introduction of an automatic fuel duty stabiliser whereby the rates set out in HODA 1979 vary inversely in comparison to oil prices.’.Stewart Hosie: The arguments that I want to present have been reprised over many years. Indeed, I have the Hansards of all the debates going back to 2005 and will refer to some of them. On a number of occasions when I have tried to introduce a similar measure, there have been rather different circumstances, with modest, and sometimes significant, price spiking, the consequence of which we have seen.
In 2005, when I first attempted to introduce a similar measure, I pointed out that the price of a litre of unleaded petrol had risen by 6p over six months, to 86p a litre. By the time that we debated the issue in 2008, the price of fuel had gone up to between £1.10 and £1.30 a litre, and on some of the islands, as well as in the more remote rural areas, it was significantly more. Today the price is relatively stable at about 95p a litre and $50 a barrel. Just for hon. Members’ information, in 2008 the price crashed through the $140 a barrel level.
However, there is no certainty that prices will remain relatively low or relatively stable. Indeed, as the world comes out of recession, they might well rise. If India and China regain some of their impetus, there will be increased demand and inflationary pressures. If there is a cold European or north American winter, there will be demand on hydrocarbons and inflationary pressures. There might be supply-side shocks if there is war or terrorism in an oil-producing region, thereby causing the barrel price to rise. If we have natural disasters that take out refining capacity, which has happened before, there might be a significant price rise.
Even without any of those eventualities, which are risks that we can identify, some future prices—for next year’s delivery, for instance—are already 40 per cent. higher than those today. Indeed, I have seen delivery costs for 2015 that are more than 40 per cent. higher than those today. My judgment, which reflects comments made in previous debates, is that it is better to try to introduce a mechanism to smooth out price increases when prices are relatively low and we have relative stability than to wait until prices shoot up again. We must take cognisance of the eventualities that we can predict—we know what has happened in the past three
or four years—and take action to mitigate identifiable risks, not least because we know the impact of a prices spike on families and businesses, including the haulage sector and other communities.
In our 2005 debate on this subject, when there was a modest increase, the AA was quoted as saying that, because of the 6p increase over the previous six months,
“individual motorists have seen the monthly cost of petrol for a typical privately owned car rise from £87.43 in January to £94.02 in May. In households with two cars this represents a £13.18 hit on family expenditure each month”.
That was a modest rise, but it was none the less significant over the piece. In that debate, we also learned that bankruptcies among hauliers were running at twice the average for other industries at that time. We must avoid that in future. Hauliers’ average running costs then were 52p a mile and, as was pointed out:
“Competition from hauliers in Europe, driven by lower fuel prices elsewhere, have led to a massive reduction in the percentage share of cross-channel freight delivered and carried by UK hauliers. The industry and, indeed, domestic car users pay some of the highest fuel prices in Europe, driven by some of the highest taxes on fuel in Europe of 69 to 74 per cent.”—[ Official Report, 6 July 2005; Vol. 436, c. 361-62.]
We can therefore see the impact that even modest rises have, in terms of additional bankruptcies in the haulage sector.
Sir Robert Smith: On the crisis in the haulage sector, does the hon. Gentleman think that the Government’s failure to get to grips with the vignette scheme and ensure a level playing field with foreign hauliers was a contributory factor to the challenge facing hauliers?
4 pm
Stewart Hosie: It was, but that is wide of this issue, as is the cabotage issue, although I might refer to that later. The hon. Gentleman is absolutely right to say that although fuel costs form a massive part—more than a third—of the cost of running a haulage business, other issues can have an impact on a company’s competitiveness and ability to stay in business.
Our 2006 debate was held less than a year after the 2005 debate, but by that time the price of fuel at the pump had crashed through the £1 barrier in many parts of Scotland. There had been a 20 to 25 per cent. rise in the cost at the pump and that exacerbated the difficulties faced by families and businesses, and by the haulage sector in particular.
We tabled similar amendments for debate in 2008, at which time the reports were quite frightening. The Sunday Herald reported in April 2008 that, out of the average £37,000 a year that it cost to tank up a typical 44-tonne truck, the Government took £25,000 in tax. The same article confirmed that a 20-vehicle haulage business would have to make £30,000 more simply to meet its increased costs, and that was on top of the £30,000 that it had to find for increased fuel costs in the previous year. Within a few months of that report in April and our debate in July 2008, there was a price rise of more than 14p a litre, and the price of oil was expected to reach $140 a barrel.
We know that that had an impact. When Ramage, a haulage firm, went into administration, its administrator
cited the high cost of fuel as a contributory factor. Normal families running a single diesel car were facing additional costs of not £13 a month, which they had dealt with in 2006, but £30 a month. A family running two petrol cars was paying an extra £46 a month, or about £500 a year.
John Thurso (Caithness, Sutherland and Easter Ross) (LD): May I pick up the hon. Gentleman’s point about hauliers? A number of them have introduced a fuel surcharge and, rather like the airlines, they now add that surcharge to their normal bills. However, the surcharge has not always come down in line with the price of fuel. Has that been drawn to his attention?
Stewart Hosie: It has. The price might not always come down in line with the price of fuel, but I must point out to the hon. Gentleman that many of the surcharges were put in place when the price rises were expected to be modest. They were also capped, and as the cap could not be exceeded, when the price spiked dramatically, hauliers that I know of—I name no names—made a loss.
To bring us right up to date, we have heard about hauliers in difficulty and about bankruptcies. Ramage went bust, as did many others, and fuel costs were cited as a contributory factor. We know from previous debates that hauliers in Campbeltown were selling trucks and laying off drivers. The Freight Transport Association, citing figures released by the Office for National Statistics, tells us that the number of people seeking work as a heavy goods vehicle driver has risen from 3,280 in March 2008 to 15,000 this year. I suspect that that is because of the number of drivers who have been made redundant, rather than because a huge number are training to become hauliers at this very difficult time.
We need to take action. We cannot mitigate all the price rises, because they occur for all kinds of reasons, including because of costs of sale and delivery, but we need to militate against the worst rises, particularly when they are driven by the barrel price of oil. I therefore propose, as I have done before, a simple measure that would oblige the Government to lay out their forecasts and to introduce a statutory instrument to reduce the duty when the price rises. The reduction would be the equivalent of the amount of extra VAT that would be gained due to the increased price at the pump. That amount could come from the VAT windfall or the North sea windfall, because it would be directly related to the price of oil.
Mr. Alan Reid (Argyll and Bute) (LD): The hon. Gentleman has hit on a problem and proposed a solution, but will he enlighten us on one point? His proposed new subsection (1AB) states:
“The Treasury must... reduce the rates of duty”,
but it does not specify the times at which the Treasury must do that. Would it happen every month, every day, or every six months?
Stewart Hosie:
I left that open-ended and simply referred to a statutory instrument because I wanted the provision to be practical and workable. It has been argued that the reductions could not be made hourly or daily—or, I concede, perhaps not even weekly. None the less, there must be a mechanism, and the statutory
instrument would determine the most appropriate one. It must be responsive without being excessively bureaucratic—it is vital to get the balance right.
Proposed new subsection (1AC) would provide that when the oil price spiked, the normal indexed rises would be automatically cancelled. Decisions on whether to postpone or proceed with an indexed rise should be no longer left to a political whim, but based on the needs of the population, industry, families and the haulage sector.
According to the Federation of Small Businesses, which conducted a poll after the Budget, 80 per cent. of small business men whom it consulted estimated that even the 2p rise in fuel duty would have an adverse impact on their businesses. Its national policy chairman said:
“Small businesses...the engine room of the...economy...have been choked by the Budget...with increases in fuel”.
How much worse would it be for business if the price suddenly spiked above the 2p rise?
The chief executive of the Road Haulage Association has said:
“Many of Britain's road hauliers face being priced off the road by foreign competition benefiting from the new open market for haulage but fuelled with diesel hugely cheaper than can be bought in the UK.”
“We cannot understand why the Chancellor has turned a deaf ear to our industry’s pleas”.
The Road Haulage Association in Scotland has said:
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