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5.45 pm

The provision must be seen in the context of the wider range of measures for tackling the problem of abandoned vehicles announced by my right hon. Friend the Secretary of State for Transport, Local Government and the Regions on 10 April. They include powers to remove vehicles abandoned on the street anywhere in England after 24 hours, instead of the present seven days; increased opportunities to work with the DVLA to remove unlicensed cars; powers to dispose more quickly of unlicensed vehicles removed under DVLA powers after seven rather than 35 days; and easier tracing and clarification of vehicle ownership through additional funding from the invest to save Budget. That will be seen as a comprehensive response to the menace.

I want to reassure the hon. Member for Arundel and South Downs (Mr. Flight) and the right hon. Member for East Yorkshire (Mr. Knight) that the new measures in no way affect current policy on vehicles that are exempt, for whatever reason, from payment of vehicle excise duty. That includes classic cars manufactured before 1973. The right hon. Gentleman has a distinguished track record as regards his interest in the preservation of historic cars. Keepers of classic cars who want to take their vehicles off the road, thus paying no duty, will continue to be able to do so, provided that they make a statutory off-road notification, as required at present. There is no intention to bring classic cars into taxation. I hope that reassurance sets minds at rest.

The hon. Member for Arundel and South Downs suggested that DVLA systems might not be capable of handling the proposed change. The DVLA makes strenuous efforts to ensure that the information on its vehicle record is as up to date and accurate as possible. However, we are all fallible; there is always the risk of mistakes at the DVLA, as there is in every human institution. Most vehicles are relicensed at post offices and errors might also be made there. We are taking steps, including the piloting of measures such as the use of bar codes on licensing reminder forms, to ensure that the vehicle record can be updated instantly when the vehicle is relicensed.

We have no intention of hitting the honest trader or dealer. If the vehicle is taxed, or if the DVLA has been notified of changed circumstances that mean that tax is no longer due, there is no risk that an offence will be committed. I do not accept the charge that this is a motorist-bashing measure, although, to be fair, I do not think that the hon. Member for Arundel and South Downs was making that claim.

The measure is certainly not designed to catch people who have genuine reasons for licensing their vehicle a few days late. We are not out to hit the honest motorist, but we believe that the motorist who plays by the rules has everything to gain when those who abuse the system

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are brought to book. Honest motorists will welcome the reforms. Motorists are citizens, too, and they are affected by that abuse.

The hon. Member for Arundel and South Downs asked what would happen to vehicles currently wrongly recorded, and said that it was unfair to go after the keepers. It is not our intention to act against keepers who have acted in good faith. We shall need to consult with motorists' organisations and others on the best and fairest way to implement clause 19. It is our intention to consult. We shall focus our attention on ensuring that vehicles that are correctly recorded do not become incorrectly recorded.

The hon. Member for Kingston and Surbiton asked about issuing receipts; that suggestion could certainly be considered as part of our further consultation. I repeat that we recognise the need to protect the keeper who acts in good faith.

Mr. Flight: In addition to vintage cars, I raised the issue of cars that are used on farms. May I also ask what would be the position of firms whose business is dealing in second-hand cars? I understand that, under the measures, in future they would need to pay VED while such cars were on their forecourt pending sale.

Mr. Boateng: I will certainly write to the hon. Gentleman on the latter issue. I believe that in his speech he referred to vehicles that have lived on farms all their lives, which raised the spectre of Chitty Chitty Bang Bang. I am sure that, with this measure, it is not our intention to bring into the arena those vehicles that were previously outside it, but we must ensure that we have an effective regime, whose integrity is respected. I will write to the hon. Gentleman on those points to ensure that we get things absolutely right.

Bearing in mind our intention to ensure that we get the clause right and to consult with the motoring organisations and others on the detail of its implementation, I am sure that, on reflection, hon. Members will find that it has much to commend it. Before finalising the details of the system and bringing it into effect, we will consult on the implementation of a supplementary penalty for late renewal or non-renewal, and the levels of that penalty. Those will be subject to affirmative resolution, and the House will have an opportunity to debate them in due course.

We are adding this measure to the series of practical measures that are being taken to address a menace that, we have all agreed, can be the bane of our constituents' lives. It degrades the quality of life in all too many communities and is a spur to crime, including arson and vandalism. Action in this area is long overdue and I commend the clause to the Committee.

Mr. Davey: I am grateful for the Financial Secretary's reply, which has reassured me on many points. I am glad to hear that he is consulting. When he and his colleagues and officials consult, will they particularly look at retrospection, which he was not able to deal with in his reply?

Will the Financial Secretary deal with another issue? I have been told by people in the AA that it is an increasing practice for people to register vehicles at an address that they do not live at. The solution is not

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legislative change but tighter practices governing registration at post offices or by post to the DVLA to ensure that identity is checked more rigorously. I hope that the Financial Secretary will ensure that that point is also covered in the consultation.

Question put and agreed to.

Clause 19 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clause 23

Flat-rate scheme

Question proposed, That the clause stand part of the Bill.

Mr. Boateng: The clause represents the latest and, I believe, the most significant step that we have taken to simplify the administration of VAT for hundreds of thousands of small businesses.

Since VAT was introduced, the vast majority of registered firms have been obliged to keep a record of the VAT charged on each individual purchase and sale, and go through the often laborious process of totting up their inputs and outputs when filling out their VAT return. The flat rate that is being introduced on 25 April does away with that requirement for more than 500,000 small businesses with turnovers of up to £100,000. Instead, those businesses will have the option to work out their VAT liabilities as a simple percentage of their total turnover. Instead of making hundreds of calculations each quarter, they will simply have to make one. Instead of spending hours sorting through old receipts, they will be able to concentrate on running their business.

Mr. Chope: Will the right hon. Gentleman give way?

Mr. Boateng: May I just develop the argument a little? We estimate that, by reducing the time that those businesses spend filling in forms and reducing their reliance on accountancy services, the scheme will cut compliance costs for the average business by up to £1,000 per year.

Mr. Chope: Does this scheme already apply beyond the 32,000 small manufacturers, 15,000 small agricultural firms, 11,000 small pubs and 22,000 transport companies that, I have been informed, are the only beneficiaries of the scheme at the moment?

Mr. Boateng: I do not quite follow the point. The scheme, which I should have thought anyone would welcome, reduces for 500,000 small businesses with turnovers up to £100,000 the burden of making those calculations and digging out old receipts. If the hon. Gentleman suggests that we should be doing more, he is of course entitled to say that, but to him must go the question, "What did you do when you had the opportunity to make a difference by relieving this burden on small businesses?" and answer comes there back, "Not very much." I do not think, therefore, that at this stage it would be right for the hon. Gentleman to cavil at what the Chancellor announced in the Budget, because what—

Mr. Chope rose

Mr. Boateng: The hon. Gentleman will have his opportunity.

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What the Chancellor made clear in his Budget—in response, in some sense, I suppose, to the point that the hon. Gentleman makes—is that we intend to go further next year, extending the scheme to a further 200,000 businesses with turnovers of up to £150,000. Therefore, from next April the scheme will be available to some 700,000 small firms in total: more than 40 per cent. of all VAT-registered businesses.

This is one issue on which it should be possible for the whole House to say, "Good; there is something here that is of benefit to small and medium-sized businesses and not something to cavil about." Anyway, we shall find out when we hear Opposition Members' speeches.

Let me give the Committee a sample of the reactions that the Budget announcement has received from individual businesses. Jamie Rowland, who set up a bike repair shop in Gwynedd in Wales—he did so last year, so he is still wrestling with the issues—said:

Joanna Marshall, who runs a business designing and making ties in Nottingham, said:

This valuable and radical measure has been much welcomed by small businesses and their representative groups. It will remove a compliance burden that has been in place for the past three decades. In that spirit, I commend it to the Committee.

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