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10 Mar 2010 : Column 367

Department for Transport

Road Users (Taxes and Charges)

[Relevant Documents: The Sixth Report from the Transport Committee, Session 2008-09, on Taxes and charges on road users, HC 103, and the Government response, HC 995, Session 2008-09 .]

Motion made, and Question proposed,

Mr. Deputy Speaker (Sir Michael Lord): With this we will consider the following estimate:

HM Revenue and Customs

4.52 pm

Mrs. Louise Ellman (Liverpool, Riverside) (Lab/Co-op): I am pleased to open this debate. I shall focus on the key issues identified in the report of the Select Committee on Transport, which considers the impact that road charges have on mobility, congestion and sustainability. By focusing on issues that are as yet unresolved, the report draws attention to key areas that deserve more debate.

The report and its topic come under the remit of the Department for Transport, but the report's content also involves the Treasury Department. I thank the Minister for Pensions and the Ageing Society for her important contribution to the Committee's deliberations. I understand that the Under-Secretary of State for Transport, my hon. Friend the Member for Gillingham (Paul Clark), will reply today on behalf of the Government as a whole, so I hope that he is able to deal with Treasury-related issues as well as those that are the direct responsibility of the DFT. One of the report's key conclusions was that the two Departments need to work much more closely on matters of this nature.

There is no doubt that road transport is critical to our economy. There are 34 million motor vehicles driving on 250,000 miles of road in Great Britain, and 67 per cent. of freight is carried by road, so it is not possible to consider transport policy properly without considering the great importance of roads. However, there are clear environmental consequences. The transport sector is responsible for 23 per cent. of the UK's carbon dioxide emissions, and roads account for 93 per cent. of those. The Climate Change Act 2008 requires the Government to reduce CO2 emissions by 80 per cent. by 2050. That means that very significant changes are required in the
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transport sector as a whole, and particularly in road transport. Those changes need to be very wide ranging, and must relate to issues such as new technology, alternative fuels, and investment in a much more integrated public transport system.

A key element of our report is the confirmation that taxation and charges on motorists engender a high level of mistrust between drivers and the Government. It is very unclear what the cost of motoring is, and there are unanswered questions about exactly how much is raised from motor taxation and how it is applied. Our inquiry looked at that specifically, because up to now it is an area about which the Government have not made the information explicit. We found that we could identify £48 billion per annum that is raised by taxes and charges on motorists, £30 billion of which comes from specific motor taxes such as fuel duty and vehicle excise duty. It is a matter of regret that that information has not been made available previously in any simple form. Moreover, the Government have not made clear exactly how the money raised is spent. Indeed, the various claims that have been made at different times have only added to the confusion and misunderstanding about how the money is spent.

For example, it has been claimed that fuel duty is at once a tool to reduce carbon emissions, a source of general revenue, and a means to fund transport investment. The Government's attempts to increase VED bands retrospectively by describing the duty as a green tax brought environmental taxes into disrepute. We call for much greater transparency about exactly what is raised and how the money is applied.

What is the real cost of motoring? Every year, £9 billion is spent on maintaining and improving the road system. That amounts to 41 per cent. of total transport expenditure, yet it is clearly much less than the amount raised by taxation and charges on motorists. The actual cost of motoring must include externalities such as the cost of policing on the roads, as well as health costs and environmental impacts. Some of those items can have financial amounts attached to them so that we can see exactly what the costs are, or at least make an assessment of them. However, financial costs cannot be applied to other items, including some of the environmental impacts.

These externalities add up to a great deal more than what motorists believe them to cost. The Department for Transport considers that congestion costs £20 billion per annum, and the Eddington report suggested that that amount could rise by £22 billion in 2025 unless major changes are made. The Campaign for Better Transport puts the overall costs of driving at between £70 billion and £95 billion a year, so it is clear that there is a very wide variation in the assessments of exactly what the costs of motoring are. Whichever way we choose to assess them, however, it is certain that to reach a reasonable assessment of the cost of motoring we have to consider the externalities-the extra costs-that motoring imposes on communities and taxpayers as a whole.

In its inquiry, the Committee supported the calls from most motoring organisations that a fair way to raise revenue was to base the process on miles driven rather than on car ownership. For example, people pay more fuel duty the more miles that they drive, although
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we could not agree with some of the representations made to us that road taxation should come exclusively from that source.

We also found in our assessment of the costs and charges imposed on motorists in other European countries that UK drivers are not taxed overall more than their continental counterparts, but we recognised that there will always be limits on what taxation and charges can reasonably be raised at any time.

Congestion is a key road traffic issue. The CBI repeats the concern in its most recent report that congestion harms business because of delays and a lack of reliability. Clearly, congestion also harms the environment. It must be tackled by the Government's smarter choices agenda, which must include better and more integrated public transport and active road management, but it is also true that direct road charges could be an important part of the package if the difficulties associated with such charges could be resolved. The Transport Committee considered that issue previously, and we returned to it briefly in this report.

Mr. John Redwood (Wokingham) (Con): The Select Committee looked at the Dutch scheme for road charging, which will be introduced over the next few years. Was the hon. Lady attracted to that, and would it solve the problem?

Mrs. Ellman: Yes, the Committee looked at the Dutch scheme in our deliberations, and we found that there seemed to be an almost national agreement for a road-charging scheme in Holland. We saw that that was accepted, which was very encouraging, and that the Dutch equivalent of the AA was actively involved in the development of the scheme from its beginning, which seemed to be a way to make real progress. However, we registered differences in how taxation on motoring is levied in Holland. For example, there is a very large charge on the purchase of vehicles in Holland, but its proposed charging scheme would do away with that major charge and put a charge on the use of vehicles instead. We recognise not only the great progress made in Holland and want similar progress to be made here, but the significant difference between that country and the United Kingdom.

Norman Baker (Lewes) (LD): I am interested in that observation. There is indeed some support for road pricing in Holland-hon. Members might find that surprising-but given the large charge on vehicles at purchase, one would expect motorists to oppose road pricing because they have already purchased their cars. Support for road pricing might be even higher therefore in those countries where there is no such purchase tax.

Mrs. Ellman: The introduction of a charging scheme must always relate to the taxation system in the country concerned. One of the key aspects of the Dutch scheme was that motorists would consider the fact that they might pay the same, or even less, for the motoring that they undertake than the fixed charges that they were paying previously. So it is always important to consider such things in the round and to involve, as the Dutch did, the major motoring organisations in developing the tax proposals.

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As I have mentioned, the Committee has considered impediments to a direct charging scheme-we refer to them in our report-and they must certainly be addressed before major progress can be made. It is clear that road pricing and, indeed, local congestion schemes cannot be implemented without public support. If we were ever in any doubt about that, it became clear when we saw the Government's reaction to the 1.7 million signatures on the Downing street website in opposition to a road-pricing scheme.

Norman Baker: Just to be clear on that point, the public seemed to oppose a road-pricing scheme that would take more money from the motorist. If motorists had been asked whether they were prepared to accept a revenue-neutral switch of taxation, the response may have been entirely different.

Mrs. Ellman: The hon. Gentleman is right. The question put on the Downing street website was very simplistic and, indeed, misleading one, but it is also true that the public response was so strong that it seems to have produced the reaction of the Government stating that they would not proceed further with plans for road charging. Our Committee felt that the Government should be much clearer about what they intend to do about road charging, if they look at all the aspects that we identified in our sixth report and previous ones.

Looking at local congestion charges, decided on locally by local authorities, the decisive rejection of the Manchester congestion charge scheme, which was part of a much broader scheme involving massive investment in public transport in the Greater Manchester area, seems to have deterred local authorities from introducing their own scheme. London may well continue to be the only major city with a significant congestion charge, but although the scheme operated in central London has made that a more pleasant place to be by reducing the number of vehicles entering the central zone, it is worrying that the costs of the scheme account for almost 50 per cent. of its revenue. The costs of implementation would have to be borne in mind by any other local authority considering introducing a scheme of its own.

One way forward might be to consider voluntary pricing schemes, such as the one trialled in Oregon in the USA, where motorists could agree voluntarily to move from paying road taxation to paying according to how much they travelled, with access to entertainment, information and other services linked to participation in the scheme. Perhaps the Government or other organisations could consider that way forward.

The transport innovation fund was introduced by the Government as an important way to deal with congestion and, in its other strand, to improve productivity, but one of the problems in the fund's congestion strand was the requirement on a local authority to impose a congestion charge before it could access the fund. Our Committee stated that we wanted the funds made available for public transport through the TIF to remain available-indeed, we were worried that because of non-take-up of that fund, the money would go back to the Treasury, which we certainly did not want to happen-but we wanted the Government to change the rules, so that local authorities could use the scheme to reduce congestion and to bring innovative new ideas into play without being forced to impose a congestion charge scheme.

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The Government have responded, albeit perhaps a little belatedly-in the past couple of weeks, in fact-by announcing that they will now phase out the TIF and replace it with a much broader urban challenge fund, which would be implemented after the next comprehensive spending review and would not require local authorities to impose a congestion charge to access the funds available. We do not yet know the full details of that fund or exactly how it would operate, but it looks very promising.

Mr. Greg Knight (East Yorkshire) (Con): Is it not the case that the Government are still arm-twisting local authorities? For example, the council in Nottingham has been told that it will not get access to certain funds unless it introduces a workplace parking levy. Is not that to be deplored?

Mrs. Ellman: I thank the right hon. Gentleman for his comments. It is unfortunate if the Government put undue pressure on local authorities. I understand that that particular scheme, although controversial locally, was decided by the local authority. In our report we say that where a referendum or consultation is required, there should be more explicit rules about how that should be carried out.

Government investment in transport has increased dramatically in recent years. It has increased by 70 per cent. since 1997, which our Committee warmly welcomes. We are, however, concerned-our concern is reflected in a number of our recent reports-by the disparity in transport spending in different parts of the country. For example, the figures for 2007-08, which are the most recent transport spending figures available, show that £86 per annum per head was spent on transport in the north-west. That is a 16 per cent. increase in spending per head in the north-west on 2002-03. That might sound reasonable, until we look at the figures for London and the comparable figures for the south-east. In 2007-08 £1,658 per head was spent on transport in London-an 80 per cent. increase over 2002-03. We do not want transport investment in the capital to be reduced. We understand that there is a need for greater investment there, but we feel strongly that it is not in the interests of equity or of raising the GDP of Great Britain as a whole that there are such massive disparities in spending between London and the south-east, and other regions. We would like to see the Government look again at that and invest much more in the regions outside the south-east.

I said at the beginning of my remarks that the Treasury had important obligations and an important influence on transport policy. One of the issues is the cost of transport. We deal at length with the need to increase the movement of transport, to get cars off the road where that can be achieved, to encourage people to use cars less, and to encourage hauliers to use the road less where that can be achieved.

Cost and charges are important. According to a parliamentary answer in response to a question from the hon. Member for Lewes (Norman Baker), between 1997 and 2009 the real cost of motoring declined by 14 per cent., bus and coach fares increased by 24 per cent. and rail fares increased by 13 per cent. in real terms. That is hardly conducive to encouraging a significant change in car usage. That requires due consideration by the Treasury as well as the Department for Transport.

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Transport is essential for individuals and for our economy. How it is funded will be increasingly under the spotlight, particularly as all of us consider how we can best take our country out of recession without damaging the economy, damaging our services or creating unemployment. Addressing congestion and environmental issues in an equitable way, without damaging essential mobility, requires a closer link between transport and Treasury policies. That relates to incentives to produce more efficient vehicles and to develop alternative fuels, as well as to invest in integrated public transport.

Mr. William Cash (Stone) (Con): Will the hon. Lady comment on the proposal from Lord Adonis for extremely fast trains to go through the west midlands? Does she think the potential cost of that is within the framework of resources likely to be available as a consequence of the financial recession and the Budget deficit?

Mrs. Ellman: I thank the hon. Gentleman for his comments. I understand that a more detailed announcement about proposals for high-speed rail is imminent, and I hope that it contains more information about cost. However, I certainly support high-speed rail proposals, which are extremely important for the future economy of our country.

If the whole country is to be improved, high-speed rail must support the entire United Kingdom, and one advantage of high-speed rail is that it would allow existing track to be used more fully for other purposes: to develop more localised routes and more commuter routes; and to leave freight with more track access, which will be extremely important if we are to encourage rail freight. If the hon. Gentleman would care to look at the Committee's recent report on investing in rail, he would see that we want investment in the existing, classic, rail system, and support for high-speed rail.

I hope that the issues noted in the Committee's report will be helpful in identifying solutions to major issues: the importance of transport, financing it and ensuring that it continues to be important and equitable for the individual and for the economy of our country.

5.16 pm

Norman Baker (Lewes) (LD): I welcome the Transport Committee's report and the presentation given by the Chair, the hon. Member for Liverpool, Riverside (Mrs. Ellman). I agree with her about the economic and social importance of the road network, and I agree that motorists require a fair deal, involving intervention from the Government as appropriate. The Government's response to the challenge of the road network and the requirements of motorists is to look into congestion, emissions, road safety and any other small irritants that unduly affect motorists.

For example, the abhorrent behaviour of private sector wheel-clamping companies ought to be stopped. My hon. Friend the Member for Carshalton and Wallington (Tom Brake) made an attempt during proceedings on the Crime and Security Bill, which was recently before the Commons, to deal with that, but unfortunately, Conservative and Labour Members rejected it. There ought to be some agreement on that issue. I also acknowledge the Government's good record on road safety in recent years. There has been a significant decrease in the accident rate, and especially in deaths, which is very welcome.

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At the centre of the debate, as the Chair of the Committee said, are charges and taxes, the extent to which they should be used for purposes other than raising money for good causes, such as schools and hospitals, and the method by which they are levied. I agree with the Government, who in response to the Committee's report said:

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