Julia
Goldsworthy: The point that I was making was that we are
talking about a very blunt instrument. If the Government are serious
about changing behaviour—and their stated intention is that they
are—this is not an appropriate structure; hence my call for the
Government to consider other mechanisms and structures, such as
road-user pricing, which is being investigated by the Department for
Transport.
John
Healey: Interestingly, my right hon. Friend the
Paymaster General has just told me that the Liberals opposed road-user
charging in Bristol, which is my right hon. Friend’s area. That
is an interesting contradiction between the views that the party seems
to take nationally and locally, but perhaps that is not terribly new. I
say to the hon. Lady that, in the end, there is not one, single policy
solution to the challenges that we face. Road-user charging may well
help on one front, but it is not the single solution—the silver
bullet—in policy
terms.
Sir
George Young: The Financial Secretary made an interesting
point a moment ago. Should we therefore assume that if the petrol price
goes up by more than 6p between Budget day and 1 September, the
Government will once again defer the
increase?
John
Healey: No, I was explaining the situation that we faced
in 2005. I explained, in response to the hon. Member for Braintree, the
difficult and complex balance of factors that we had to take into
account and the judgment that we arrived at.
Finally, on the concerns raised
by the hon. Members for Ludlow and for Wycombe about those sectors of
the economy that are heavy users of red diesel or rebated fuel, I
understand the concerns of the National Farmers Union, which I met
before the Budget. We will examine the impact of the oil strategy with
the NFU, as we will with other heavy using sectors. During the
discussions, the NFU will have the opportunity, which I encourage it to
use, to help us assess the strategy’s impact and put forward its
view on what consideration the Government should give to future policy
in the agricultural sector.
By way of warning, though, I say
that it is not just the agricultural sector that is asking for
preferential treatment. It is quite difficult to see a unique case for
treating any of the sectors that make heavy use of rebated oil in a way
that differentiates them significantly from other
sectors. Question
put and agreed
to. Clause 7
ordered to stand part of the Bill.
Clause
8Road
vehicles Question
proposed, That the clause stand part ofthe
Bill.
John
Healey: The Hydrocarbon Oil Duties Act 1979 requires road
vehicles to use fuel on which the full rate of duty is charged.
However, schedule 1 to the Act describes excepted vehicles, which are
entitled to run on rebated gas oil, popularly known as red diesel. This
clause will introduce a power to enable Her Majesty’s Treasury
to amend schedule 1 by statutory
instrument. The
schedule for excepted vehicles was first introduced in 1935. It has
failed since then to keep pace with changes in technology and
commercial practice. As far as we can tell, the last serious review of
that policy took place in the 1960s. Vehicle technology and design
continue to evolve, creating new types of vehicles that were simply not
envisaged when the framework for schedule 1 and the excepted vehicle
status were first drawn up. For that reason, vehicle owners,
enforcement agencies, tribunals and the High Court have interpreted the
schedule on a case-by-case basis, which has resulted in some
inconsistency of approach. Consequently, it has become increasingly
unclear why some types of vehicle should benefit from excepted vehicle
status and others should not.
In December 2004, the
Government issued a consultation document on changes to the excepted
vehicles schedule. A summary of responses to that consultation was
published in December 2005 alongside proposals for changing the
schedule against a set of principles for establishing greater clarity
and consistency. The
reasons for the powers in clause 8 to amend the schedule by Treasury
order are threefold. First, they will make it easier to keep the
schedule up to date so that we do not stifle developments in new engine
design and technology. Secondly, they will enable the Government to
respond more quickly when loopholes are identified to ensure the degree
of consistency and fairness that we seek in the system. Thirdly, they
will give the industry the opportunity to contribute fully to ensuring
that changes in definitions fit their industry and do not have
unintended regulatory consequences and
impacts. Industry
associations with particular interests inthe matter have
welcomed our approach almost unanimously. The Agricultural Engineers
Association commented that it considers it a practical
solution.The International Powered Access Federation, the
Construction Plant-hire Association and others have also backed our
approach. We have published in draft the Treasury order to amend the
schedule, together
with a partial regulatory impact assessment. Those have been circulated
to Committee members and to associations and groups representing
interests in the
field. 6.45
pm In the long
run, this valuable relief can remain viable only if it has clear rules
based on consistent principles. The changes we have announced are aimed
at restoring clarity and consistency to the schedule, and the power to
add, amend or delete categories by Treasury order set out in clause 8
will ensure that the schedule continues to provide that clarity and
consistency and continues to keep pace with modern
developments.
Mr.
Goodman: As the Financial Secretary has just intimated,
this is an important clause because it introduces a new power for the
Treasury to amend the list of vehicles permitted to use red diesel.
Those are clearly considerable powers so this debate is rather like the
one we had on the provisions in clause 2 that gave the Treasury
similarly considerable powers.
At that time, I asked the
Minister about consultation because I wanted to be sure that it had
occurred. He has just said that a consultation document has already
been published and that groups with which the Treasury has held
consultations are satisfied. That is important because it is quite a
wide-ranging power and we shall not have the opportunity to add to or
subtract from the list in primary legislation. None the less, we shall
not oppose the clause, but I have a question for the Financial
Secretary. This
morning, he sent round a draft of the statutory instrument in question,
which is quite detailed, and it defines agricultural tractors,
agricultural machine handlers, mobile cranes and road resurfacing
vehicles. It will clearly be an important statutory instrument. In the
letter to my hon. Friend the Member for Chipping Barnet (Mrs. Villiers)
that accompanied it, the Financial Secretary said that he enclosed a
partial regulatory impact assessment for the Committee. We would like
to know when the regulatory impact assessment will be complete and when
others will be able to see
it.
Rob
Marris: I have a brief question based on the draft
regulations to which the hon. Gentleman referred. Why are road
surfacing vehicles included? It seems to me that most roads built in
the UK are built directly or indirectly at the behest of the Government
and financed by them. It appears cursorily that there is a swings and
roundabouts effect in this case. Either those vehicles are not exempt,
and therefore the cost of building the road is higher because they have
to pay more for fuel, or they are exempt, and the costs of building
roads are somewhat
lower. In the first
case, of course, the Government will be getting the money back through
taxation because of higher fuel prices. However, that removes an
incentive for operators and constructors of road surfacing vehicles to
make them more fuel efficient because they get to run them on cheaper
fuel. It may appear to be a matter of swings and roundabouts in the
context of total Government expenditure, but whether it comes through a
lower bid price for a road with lower fuel
costs or a higher bid price with higher costs, environmentally it is not
a good idea to lessen the incentive for those building and operating
road surfacing vehicles by allowing them to pay red diesel prices
rather than full
prices. Julia
Goldsworthy: We welcome the proposals in principle as a
way of overcoming abuse with regard to exempted vehicles and as a way
of keeping up with the change in build, specification and technology of
vehicles without referring back to primary legislation. They are also a
way of overcoming adverse tribunal rulings that have highlighted the
lack of clarity and ambiguity that exists in the current
legislation. Although
I welcome the consultation that has taken place and I thank the
Financial Secretary for the draft regulations, I am afraid that I did
not receive the updated partial regulatory impact assessment and I
wonder whether that is because it was not enclosed in the letter that I
had, or because it went astray more widely. On that basis, I would like
to ask the Minister how much of the annual fraud of £0.5 billion
a year will be overcome by the changes, and will any additional
resources be committed to enforcement measures to ensure that the level
of fraud is
reduced?
Mr.
Gauke: I merely have a brief question for the Financial
Secretary. I notice that clause 8 is entitled “Road
vehicles”, but my question is about the application of red
diesel in respect of canal boats. The issue is of particular concern in
my constituency because a major canal runs through it. Constituents
have contacted me about the ongoing issue of red diesel, which I
believe will no longer be available for canal boats. I seek further
clarification, because there is nothing in the draft statutory
instrument to which he referred in respect of that matter. It might be
that as far as pleasure boats are concerned it is dealt with in a
different regime, but I would be grateful for further
clarification.
Stewart
Hosie: I welcome the clause, not least, as the Financial
Secretary said, because it will allow the Treasury to keep up to date,
identify and close loopholes and allow the industry to engage to avoid
unintended consequences. As I said, it might provide a mechanism to
provide relief to certain other sectors and geographic areas. I am sure
that that will be examined in the months and years
ahead. Like the hon.
Member for Falmouth and Camborne, I think my partial regulatory impact
assessment was put in a different envelope that has gone walkies. I
would like to read it.
Mr.
Breed: Like the hon. Member for South-West Hertfordshire,
who alluded to pleasure boats, I have received representations from a
wider series of people who use red diesel in fishing boats and in boats
where training is undertaken on one part and pleasure on another. Some
activities qualify for red diesel and some do not and there are
difficulties in trying to swap between the two. I am not sure whether
certain things happened as part of that consultation exercise.
Certainly pleasure craft, fishing boats and the marine industry as a
whole have not been mentioned in the
statutory instrument. Are the Government still considering that matter
or have they reached a decision?
Mr.
Newmark: In considering clause 8, I wanted briefly to
reflect the concern of the road hauliers in my constituency. The issue
is about a level playing field. The Freight Transport
Association’s chief economist, Simon Chapman, said:
“Whether it is the cost
of the diesel itself or the duty, every lp per litre on the price of
diesel adds £140 million to industry’s overall operating
costs. The Chancellor already takes £4.2 billion per year in
diesel duty and lorry VED from heavy goods vehicles out of a total of
£43.5 billion from all road
users.” Duty on diesel in
the UK is 47p a litre, which contrasts with a European average of just
22p a litre.
The
Chairman: Order. I think that the hon. Gentleman is
discussing the wrong clause. Clause 8 is about excepted
vehicles.
Mr.
Newmark: I am referring to
duties.
The
Chairman: Order. If the hon. Gentleman would square the
circle, I should be very pleased.
Mr.
Newmark: I am attempting to do so. Substantial problems
are generated for the domestic industry, which is in competition
against foreign vehicles that are working in the UK using cheap
European fuel. About one in eight of the heaviest vehicles on UK roads
now comes from overseas. The level playing
field—
The
Chairman: Order. The hon. Gentleman is out of order.
Clause 8 is about excepted
vehicles.
Mr.
Newmark: I accept the Chairman’s
charter.
John
Healey: I am glad that we have had the opportunity to hear
several contributions to this debate, because the provision is
important. The excepted vehicles schedule and scheme is
important. I am
grateful for the welcome that the hon. Member for Falmouth and Camborne
gave to the clause. The partial RIA will be posted shortly on the HMRC
website. I will make sure that members of the Committee receive a copy
and that it is available in the Vote Office for other hon. Members to
consult. The full regulatory impact assessment, about which the hon.
Member for Wycombe asked me, is a draft order out for consultation in
order to help us finalise the provision. It will be published alongside
the instrument, in the summer.
I shall tackle the question of
my hon. Friend the Member for Wolverhampton, South-West by referring
back to the purpose of the clause, which is to reintroduce a clearer
set of principles to underpin the eligibility set out in the schedule.
Whether or not different categories of vehicle qualify for excepted
vehicle status would be made clearer and more consistent.
The principle derives from the
fact that the duty on oil raises funds for the Government. We spend
that revenue in various ways, including the upkeep of the road network.
It has long been accepted, and was behind the original introduction of
the scheme, that vehicles used in areas, such as agriculture and
construction, that make only incidental use of public roads that are
maintained in that way, should not make the same contribution to the
upkeep of that road infrastructure. For that reason, categories of
vehicle that only incidentally use the main road network are classified
as executive vehicles and therefore eligible to use red diesel at the
heavily discounted duty rate in comparison with main road
fuels.
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