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"Motoring taxes are primarily revenue-raising instruments, whose principal purpose is to support the public finances and raise funds for public services. Motoring taxes do also have an environmental aspect too...Where possible and appropriate, it is right for the structure of revenue-raising taxes to support environmental objectives."
We sometimes hear from the motoring lobby that motorists pay a huge amount in motoring taxes and get very little back, and the Chair of the Committee dealt with that to some degree. Suffice it to say that if there were an exact in-and-out financial arrangement, there would not be enough money for other services such as schools and hospitals, and it is difficult to see how the money could be raised for those purposes. We cannot charge directly-at least, I hope we cannot-for schools and hospitals, so some elements of the economy have to provide a net income stream for those aspects that are for the general good.
It is also fair to say, as the Chair of the Committee did when she referred to the answer to my written question, that the relative cost of motoring has decreased by 14 per cent. since 1997, and that the cost of travelling by train and by bus has increased over that period. The cost of air travel has also decreased, so we have the rather odd arrangement whereby the more carbon one emits, the cheaper it becomes to travel, and the less carbon one emits, the more expensive it becomes to travel. That is somewhat out of line with the Government's strategy on carbon reduction.
Mr. Redwood: Will the hon. Gentleman confirm that motorists have to pay not only all the costs of the road systems that they use but all the costs and subsidies of the rail system, which have gone up massively under this Government? The main reason for the huge regional imbalance between London and the rest of the country is that London has such a big rail network that is so heavily subsidised. That is not true of the south-east, which gets less, with a smaller increase, than the north-west.
Norman Baker: There are two separate issues, one of which is the regional imbalance. I have some sympathy-as does the Select Committee, I think-with the view that there has been a regional imbalance as regards how much is spent on London, in particular, compared with other parts of the country. However, the thrust of the right hon. Gentleman's argument-that motorists are paying for the rail network-fails to take account of other factors such as the need to reduce carbon emissions, the social benefits of investing in rail, and wider Government policies of social inclusion. Moreover, investment in the rail network encourages people to shift from road to rail, thereby freeing up the roads for those who are obliged to use them, so the motorist also benefits from investment in the rail network. There has to be a sensible balance.
Mr. Philip Hollobone (Kettering) (Con): The hon. Gentleman said that the cost of motoring had gone down by 14 per cent., although I missed the period that he was citing. In that context, is it a good or a bad thing that the proportion of the petrol price taken as tax has fallen from 75 per cent. in 1997 to 67 per cent. today?
Norman Baker: The period in question was from 1997; I was citing a parliamentary answer, as was the Chair of the Select Committee. To be fair to the Government, however, a previous answer that I have received demonstrates that this trend has been ongoing for 30 years: it is not a new trend that the Government have created, but a long-term trend. I shall talk about fuel duty shortly, when I will be able to reply to the hon. Gentleman in some detail.
"Fuel duty has proven to be an effective way to reduce CO2 emissions from road vehicles. It influences the amount of fuel purchased, the types of vehicles purchased and, to a lesser extent, mileage driven."
That may be true to some extent, but there are significant downsides to using fuel duty as an environmental tax, and as a surrogate for any other measure. Those problems need to be taken into account if we are to come up with an equitable transport policy that is fair to the motorist and to society as a whole. First, many people have no choice but to use their car. Such a tax is therefore a crude mechanism to force up the price of fuel for people, particularly those in rural areas of Scotland, Wales and England, who have no bus service-or perhaps one bus on a Thursday afternoon, if it turns up-and no railway station, and therefore have to use their cars. An environmental tax, if we are to apply it sensibly, has to secure a change of behaviour. If no such change is possible, it becomes not an environmental tax but a stealth tax that is inequitable for many people.
Secondly, fuel is more expensive, by and large, in areas where there is no public transport. It is almost as if a mark-up mechanism is working whereby fuel is kept at a lower price in places where people can switch to public transport. London, in particular, is among the cheapest places to buy fuel. For fuel bought in the highlands-my hon. Friends the Members for Orkney and Shetland (Mr. Carmichael) and for Caithness, Sutherland and Easter Ross (John Thurso) recently drew attention to this in an Adjournment debate in Westminster Hall-there is a premium of up to 13p to 15p per litre. Pushing up the cost of fuel adversely affects those who are most dependent on it, and have to pay the most for it.
A further issue is that we are, of course, in the European Union-we are in a free market in that sense-and there is the opportunity for fuel tourism if we push prices up too far. The Chair of the Select Committee and the Minister will know of the concern among those in the haulage industry about the practice of vehicles loading up vast amounts of fuel before they come into the country, thereby gaining an unfair advantage over our own domestic hauliers.
Mr. Hollobone: The hon. Gentleman makes an important point. The evidence from the Freight Transport Association is that the costs of operating a 40-tonne articulated vehicle are 8 per cent. higher in Great Britain than in our near continental neighbours, and 21 per cent. higher than in east European countries, whose carriers now regularly use the UK road network for that reason.
Norman Baker: I am grateful for that intervention, which underlines my point. I say to the Minister in passing that along with the differential in the price of fuel-which, to be fair, I must add has narrowed in recent times-there is a safety consideration as to whether it is sensible to have lorries crossing through the tunnel or on ferries carrying vast amounts of inflammable material. We should consider that from a safety point of view, and see whether we can impose a limit on the amount of fuel that is brought into this country.
Another of the motoring taxes is vehicle excise duty. The Government have made changes to it this year, with the introduction of a first-year VED band-in other words, a showroom tax. They have also expanded VED from seven to 13 bands. I welcome that, because more sophistication of the bands is correct, but I think that VED as a concept ought to be time-limited. I say that because I firmly believe that we should tax elements of our activity as a society that are undesirable, rather than those that are neutral or desirable. In my view, owning a vehicle is not undesirable. Having been made, it causes no particular damage. There is a carbon implication in its manufacture, but there is no further carbon implication if it sits in the garage. The damage to the environment comes from the use, not the ownership, of the car. It therefore seems quite wrong that the ownership of the car should be taxed, rather than its usage. Indeed, the Select Committee refers obliquely in its report to the need to tax the use of a vehicle. I should like to see VED effectively removed at some stage. The enemy is not the car but the carbon, and the Government should bear that in mind.
I am conscious that cars themselves are becoming much cleaner. A recent report by the Society of Motor Manufacturers and Traders, which I visited the other day with the hon. Member for Scarborough and Whitby (Mr. Goodwill), demonstrated the significant progress that the industry has made in recent years in reducing carbon emissions. That is perhaps partly driven by EU targets, but it is also driven by significant innovation and good practice in the industry. From memory, I think that there has been a 21 per cent. reduction in emissions per car since 1997. The industry is doing its bit to make cars cleaner.
The hon. Member for Liverpool, Riverside mentioned the congestion charge in London. I agree with some of her comments and wish to associate myself with them. In particular, it is concerning that such a high level of the revenue received is spent on the administration of the scheme itself. That is not efficient or necessary, and it is a matter for Transport for London to sort out. Personally, I do not find TfL a terribly responsive organisation-it tends to be rather arrogant and self-satisfied on occasions. Another organisation might well have acted quicker to reduce administrative costs, and I hope that TfL will do so, spurred on by the Transport Committee's report.
I now turn to road pricing, because the logic of the Select Committee's position is that it wants such a scheme. Pay-as-you-use-or pay-as-you-pollute, if we prefer to put it in those terms-seems entirely equitable. I want to ensure that there is no confusion in the public mind, as there sometimes is, between congestion charging and national road pricing. They are different things. A congestion charge is over a local area, takes money from the motorist and, typically, invests it in public
transport schemes. As the name suggests, it is designed to reduce congestion in a tight urban area. I happen to think that the scheme in London has worked quite well by and large, even if the administration of it is not particularly brilliant. National road pricing seems to have a different objective, at least to my mind. It is intended first to be more equitable to the motorist-I will talk later about how that will work-and secondly to reduce carbon emissions from the transport sector. That is one of the key challenges that the DFT faces, and it has singularly failed to match up to it so far.
Mr. Greg Knight: The hon. Gentleman is making an interesting point. Does he accept that a road pricing scheme does not necessarily have to charge everyone who uses the road? It would be perfectly feasible and workable to have a scheme that set the charge at zero for those who chose to drive at unsociable times of the evening.
Norman Baker: That would indeed be possible. The parameters of the road-pricing scheme are interesting. I attended a conference on intelligent transport systems this morning, at which some of the things that could be achieved by such a scheme were discussed. One of the beauties of the new technology being introduced is that it enables Governments to make more sophisticated policy choices than hitherto. The option that the right hon. Gentleman describes is certainly one of them.
I believe that there is a case for introducing a road pricing scheme that charges for the use of motorways and dual carriageways only, and that charges should vary according to emissions-it could also vary by time of day, for the reasons that the right hon. Gentleman gave. It is very important that such a scheme is revenue-neutral for the average motorist. If the scheme is seen as a stealth tax, it will be rejected, just as we saw happen in relation to the petition on the No. 10 website. As the hon. Member for Liverpool, Riverside said, that was a misleading petition, but if the scheme were revenue-neutral, it might not be rejected.
Mr. Robert Goodwill (Scarborough and Whitby) (Con): Does the hon. Gentleman think that motorists will consider such a scheme as revenue-neutral if it is combined with the 90 per cent. reduction in the roads budget that he is also suggesting?
Norman Baker: I will happily deal with that subject in a moment, because the elements are linked. The traditional policy of Conservative Governments, and to some extent of the current Government, has been to use scarce public money to build our way out of congestion. That is an attempt to wash away the waves on the beach: it simply will not work, as evidenced by the increasing congestion throughout the country. Therefore, we must find a different way to deal with congestion.
Charging in a sophisticated way for the road network is a good way of tackling congestion. It is interesting to note that business organisations, including the CBI and the British Chambers of Commerce, support the idea of road pricing if it is introduced in a way that is fair to the motorist. That is what I am suggesting. In return for the introduction of road pricing on motorways and dual carriageways, I suggest that the fair, equitable response for the motorist would first be to abolish VED, which is a tax on the ownership of vehicles and therefore unjustified, and secondly to reduce fuel duty.
There would be no net take from the motorist in the scheme that I propose, but the motorist would be encouraged first to make a modal shift to rail, because by and large, the motorway and trunk road network will parallel the rail network-not exactly, but there is a close fit. Secondly, motorists would be encouraged to shift from dirtier to cleaner vehicles, because they could save money by doing so. Thirdly and most importantly-this is a concern to rural Members and, although there are none in the Chamber now, to the Scottish nationalists-such a scheme would be rural-proofed, because those in remote rural areas where there are no motorways or dual carriageways simply would not pay, but they would benefit from the abolition of VED and the reduction in fuel duty.
That would be an equitable policy. It would allow people to choose their mode of transport and the car they drive, and to save money if they wished. Interestingly, as I said, if such a scheme were revenue-neutral, it would be supported by business organisations. I believe that a British Chambers of Commerce report due out shortly will reaffirm that.
As the hon. Member for Liverpool, Riverside will be aware, Sir Rod Eddington told the Transport Committee in 2009 that road pricing was, for him, "an economic no-brainer." In answer to the hon. Member for Scarborough and Whitby, the Conservative spokesman, he said that he thought road pricing could reduce new road building by 80 per cent., so there are other advantages of such a scheme for the public purse. I stress that that is not the only policy that the Liberal Democrats wish to introduce to benefit the motorist. I was taken by the references in the Committee's report to the proposals in the Netherlands, which are similar to mine, although they are made on a slightly different basis.
The Government response on the question of road pricing has been vacillating. They have said that they do not want to say very much about the matter for the time being-no doubt until they get past the election-and they are like a rabbit caught in the headlights. They did start a research programme and demonstration project in February 2009, and in their response to the Committee they say that they are working to further their understanding of the scheme. It would be helpful if the Minister could say exactly what progress has been made by the demonstration project, what issues have been raised, and when they expect to make a more detailed response to the Committee and to Members.
It is very important to use taxes and charges not simply to raise money for the public purse for good causes such as schools and hospitals-although they must be used for that, too-but to achieve environmental ends. I do not believe that the present arrangements for VED, tax and ownership, with a fuel duty that discriminates against rural areas, achieve those ends. A road pricing scheme could achieve those ends, and I encourage the Government and others to move in that direction.
Sir Peter Soulsby (Leicester, South) (Lab):
My hon. Friend, the Member for Liverpool, Riverside (Mrs. Ellman), the Chair of the Committee, has given a clear exposition of the report, and it was a pleasure to serve under her chairmanship. She spoke of the vital importance
of the road network, which was clear to us right from the start and from the evidence that we received. She also spoke about the high level of mistrust from motorists and more generally about the way in which charges and taxes are levied. I do not intend to cover the same ground as my hon. Friend, but I shall address three areas that the Committee considered.
The first was the issue of road pricing, whether by urban congestion charging or inter-urban road pricing. It was clear that although such road pricing has many attractions, it is by no means a panacea for the problems of congestion. We looked closely at the situation in London and saw the considerable success that congestion charging has had in the capital. However, as we considered the evidence, it was clear that London is very different from any other part of the UK. It is very different from other urban areas and, of course, that scheme shows us nothing about the prospects for inter-urban road pricing. London is very densely populated, it had pre-existing levels of congestion that were unacceptably high and the area chosen for congestion charging is one that enables those who do not need to go into the area to avoid it. The area is also served by high levels of public transport, which is not the case in many other urban areas-and certainly not public transport that is available for the hours that buses and tubes run in the capital. It is therefore not an especially good model for elsewhere, and it was evident from the experience in Manchester, where charging was considered, and the response to the No. 10 petition-misleading though it may have been-that the level of public support for road pricing is not sufficient to make it a politically realistic option nationwide or in any urban area in which it has so far been under consideration. That is not to say that it is not an attractive prospect, but its introduction would be politically fraught.
Mr. Greg Knight: The hon. Gentleman is a valuable member not only of the Transport Committee, but of the Procedure Committee, and he is speaking-so far, at any rate-sound common sense. May I take him back, however, to the question of congestion charging schemes? Does he, like me, think that the idea being discussed in Leicester of banning 4x4 vehicles from parts of the city centre-it has been publicised in the local paper, the Leicester Mercury-is bonkers because it would affect the wealth of people living in the city, and could deter tourists and affect businesses? Does he agree that it would not be a good idea to pursue that proposal?
Sir Peter Soulsby: May I begin by thanking the right hon. Gentleman for his comments about my service on the two Committees? I must say that it is not always easy to serve on both, given that both meet at 2.30 pm on the same day.
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