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6.33 pm
Andrew Selous (South-West Bedfordshire) (Con): I rise to speak on behalf of my constituents, a number of whom have been eagle-eyed and spotted the changes that will hit them next April and the April afterwards. They are pretty horrified by the retrospective nature of the changes that the Government have introduced. Hon. Members in all parts of the Chamber have spoken of their horror of retrospective changes. They are not fair, do not enable people to plan properly for the future, and should be avoided.
Three quarters of my constituents live in the three towns in my constituency. The issue affects not just the rural areas of our country but our urban areas. The employment base in my area has virtually disappeared over the past 15 to 20 years, so many of my constituents need their cars to get to work and to get their children to school. The car is not a luxury item for them. I can think of people who are out of work and who might be offered a job. If the bus could not get them to work on time, they would need a car, and we might prevent people like that from getting into jobs if we set the price of motoring too high.
There are many good works being done in my constituency, often by pensioners on very modest incomes. There are also people who cook for the over-60s’ lunches. They might have to go and get the food and ferry people back and forth in a car that they can only just afford to run. They might not be able to afford to run a car next year or the year after, which could affect those good works.
I am pleased that disabled drivers have been mentioned in the debate. My own mother had multiple sclerosis, and had to use a rather elderly Renault Trafic van to enable her to get around. I saw the real difference that that made to her quality of life. What a disgrace it would be if our disabled fellow citizens were unable to enjoy that degree of freedom and mobility in the years to come, because of these increases.
As has already been said, many of us are in favour of the principle of green taxes. We have to change people’s behaviour, because climate change is really happening and we need to reduce carbon emissions. However, this is a lousy green tax. By the Government’s own admission, it will lead to a reduction in carbon emissions of less than 1 per cent. That will simply store up a lack of credibility with a sceptical public. We know that at least 1 million drivers are going to be forced to pay the higher vehicle excise duty charges.
Many of them will not be able to afford to change their car, and some might have to get rid of their car altogether.
We have said that we want to see much lower carbon emissions from cars. I gather that we want to see a target of 100 g per km by 2030, with graduated reductions up until then, which is excellent. We also need to see more progress being made on technology. I saw in one of the newspapers today that a British company, Modec, is going to manufacture up to 5,000 electric cars in Coventry. Those cars will attract no VED at all. We need more companies like that to lead the technological charge in this country.
Edmund King of the AA has said that motorists are to be taxed at a higher rate than champagne drinkers. That is a disgrace, when people need their cars. We know that by 2010, 81 per cent. of motorists will be losers as a result of these measures, which have been roundly criticised by the Society of Motor Manufacturers and others.
Retrospective taxation is not a fair way to proceed. There is broad support across the House for environmental taxation, given the threat of climate change facing the world, but this is not the way to arrange it. There are other ways to raise the revenue that would be forgone by getting rid of these retrospective changes, but this is neither the time nor the place to deal with that issue— [ Interruption. ] My point is valid; Labour Members have said that that could be done.
6.38 pm
Sammy Wilson (East Antrim) (DUP): I shall support the motion tonight for two reasons. First, the Minister has said that this is a green tax designed to change behaviour, yet if we look at how it was introduced, we see that it happened without any warning. Furthermore, the Chancellor suggested that the increase in VED would affect hardly anyone, that the majority of people would be unaffected and that there would be nothing to worry about. We now know, of course, that more than 16 million motorists will be affected by 2010.
If the Government are to introduce measures to change people’s behaviour, surely the first thing that they should do is spell out those measures, and their consequences. They should then seek to persuade people to do something different. They should not do that by stealth. We were told that these were taxes to change behaviour—but the way in which they were introduced makes it clear that, rather than behaviour-changing taxes, they were simply a cynical attempt to exploit the hysteria about the role of CO2 emissions in climate change.
Secondly, the Minister told us that even when these taxes have been made, the impact on CO2 emissions will be very little—less than a fraction of 1 per cent. That is based on the assumption that people will sell their CO2-emitting cars and opt for cars that emit less. That assumption, of course, as hon. Members have pointed out, is based on a false premise—that many of those who own those cars have the ability to sell them and buy a different car. It is quite clear from what hon.
Members have said in the debate that many of the people involved are from low-income families and have bought old cars because those are all that they can afford, and large cars because they have families.
Mr. Jeremy Browne (Taunton) (LD) rose—
Sammy Wilson: I would give way, but I have to finish quickly.
Those people buy large cars because they require them for their work or their families, so they will not be able to change their behaviour in that way even if they wanted to, and even if they had the economic incentive to do so.
When we look into the environmental credentials of this tax, it becomes quite clear that it is not about changing behaviour or dealing with climate change; it is about raising revenue. If people believe in high taxation, that is fine, but surely that is not true of regressive taxation that hits the poor—poor or disabled families, poor families living in rural areas, poor families with low incomes who can only afford old cars. For those two reasons—because the tax is regressive and because it does not and will not achieve what it is designed to achieve—I will support the Opposition motion tonight.
6.42 pm
Justine Greening (Putney) (Con): It is a pleasure to conclude the debate on behalf of the Opposition. We called this debate because the Government have been caught out yet again. They are now planning to pickpocket from the purses of millions of people in our country—and this time that means motorists, many of whom are the least able to afford it. Much of the discussion about who has lost out from this year’s Budget has focused on the 10p tax rate fiasco and the 5.3 million households that the Prime Minister was happy to target last year—until he was found out.
Today we have the chance to voice the concerns of millions of other Budget losers—the millions of motorists who are paying graduated vehicle excise duty on cars bought after March 2001. Many of them will see their car tax rise by up to £245 a year by 2010-11. In fact, they may well be some of the people from the 5.3 million households that the Prime Minister and Chancellor stung for more income tax—before yesterday’s spectacular U-turn.
The story of those motorists and their experience of this Government and tax is almost a case study of Government policy at its worst. It is ineffective, it is, as my right hon. Friend the Member for Wokingham (Mr. Redwood) said, cynical, and it is also, I think, underhand. The Government’s approach to vehicle excise duty was, as ever, “What can we get away with?” We have seen it in so many areas, but especially in tax. In fact, VED was not really a major part of this year’s Budget speech. It would not have been, because it was a tax rise. We were assured by the Chancellor, however, that
“the road tax system should do more to support the use of more carbon-efficiency”,
“an incentive to encourage drivers to choose the least polluting car.”—[ Official Report, 12 March 2008; Vol. 473, c. 297.]
Those were the Chancellor’s words in this year’s Budget speech.
Behind the rhetoric, however, the Government’s real approach to vehicle excise duty is characteristic of their approach to environmental taxation in general, providing another chance to tax people more. I can tell the Minister on behalf of my constituents and the public who have contacted me after seeing stories in various newspapers—we heard about one constituent earlier—that they feel this is a disgraceful way to treat the British public. It is claimed, of course, that this tax will help save the environment. The VED changes can be found in the “Protecting the environment” part of the Red Book. However, we now know that Treasury officials told the Government that they could expect the policy to reduce motor vehicle emissions by only a fraction of 1 per cent. by 2020. This policy is not about tackling climate change.
Of the 4 million extra cars that the Government assume will pay graduated VED by 2010-11, guess how many they assume will be in band A? Just 11. The number will rise from 395 in 2008-09 to 406 by 2010-11. I thought the hon. Member for Twickenham (Dr. Cable) put it very well when he said that it would be helpful to understand the assumptions on which the Government have come up with such amazingly and shockingly low figures in describing the impact of the policy on the environment. But, as we know, ultimately the policy was not intended to have an impact on the environment; it was intended to have an impact on Exchequer revenues. These measures were all about bringing in more tax.
According to page 89 of the Red Book,
“As a result of these changes the majority of drivers will be better or no worse off”.
In my view, that was a real and possibly deliberate misrepresentation of the policy. We now know that when the Government referred to “the majority of drivers” they meant the majority of all drivers, irrespective of whether they were paying graduated VED. They lumped in all the 10 million extra drivers who do not pay it. They based their statement on the fact that 26 million drivers pay VED, but of those only 16 million pay graduated VED. They used sleight of hand to suggest that people would be unaffected, when that was not the case. That is a bit like the Government saying that they will raise inheritance tax but only 2 per cent. of people will be affected, simply because 98 per cent. of people will not have died by the end of the year.
When we look at the figures, the position is pretty straightforward. Of the 15.5 million motorists who pay graduated VED this year, more than 10 million will pay more, and 12.2 million will pay more by 2010-11. The people who are worse off include people with family cars such as Ford Mondeos or Renault Méganes, and even people with cars as small as the Nissan Micra. Perhaps most disgracefully of all—we have talked about this a great deal—the people who are worse off also include people who bought cars between March 2001 and March 2006. They never thought that they would be affected by the changes in VED and graduated VED. That is one of the reasons for the sharp rise in VED revenues from graduated VED over the next couple of years. It is due to the Government’s abolition of the 2006 exemption, which was obviously introduced specifically to exclude those people.
Did the Chancellor announce that in the Red Book? No. Did he explain it in the Red Book? No, it was buried in the fine print. As we have heard, a Treasury spokesman eventually admitted that it was not as clear
as it could have been. It was not explicitly spelt out that the drivers hit by the backdating of the policy, as my right hon. Friend the Member for Wokingham pointed out in a well-judged speech, would be people with older cars. We know that because those cars are now higher-tax cars, they are worth less second hand. That point was made by the hon. Member for Reading, West (Martin Salter). It is likely to affect people from lower-income families, the elderly and the young, who—unlike many others—may not be able to afford to buy new cars whenever they need them
The hon. Member for Birmingham, Northfield (Richard Burden) spoke of the impact on his constituents. The reality is that the Government are again hitting those who can least afford it, and can least afford to change their behaviour. Ministers know that, because it later came to light that the new backdating of graduated VED would happen over two years because of the transition from band K to band L. That transition was not even mentioned in the Red Book, and emerged only when the Treasury was questioned more explicitly about how the changes in graduated VED could possibly leave so many drivers unaffected. Millions of motorists are suffering a tax increase.
Having said in the 2007 Budget that band F drivers’ bills would increase by, say, £5 a year up to 2010, the Treasury has gone back on its promise and is raising graduated VED massively, in a way that was never explained to people in advance. So the Chancellor is going back on the Prime Minister’s word, giving people the mistaken impression that most will not have to pay more, and that they might even be better off, hiding this backdating of the tax from the new motorists paying it, and making no mention of Government efforts to spread the pain of these newly taxed motorists over two years.
The Government say that this policy is about the environment and motorists changing their behaviour, but as the hon. Member for East Antrim (Sammy Wilson) asked, how does the Exchequer Secretary expect the public to change their behaviour when she hides every aspect of these changes in VED from them? The answer is that people are not meant to be able to react to the changes, which is why the Government are not even pretending that emissions will drop as a result of these VED changes in the Budget. This is just another big fat tax hike perversely aimed at the people who can least afford it. It is a double whammy for the motorists captured by the backdating, because not only will they pay more tax, but their cars will be worth less if they try to get out of this tax trap by selling them. It is utterly deplorable to hit those people when their cost of living is rising so much.
One thing we and the British public know is that this Prime Minister and this Government are never straight with them, and he is not on their side. We are, which is why we are standing up for the public and against this eco-stealth tax brought forward by a Government who are simply out of touch—and when voters get given a chance, they will be out of office.
6.51 pm
The Exchequer Secretary to the Treasury (Angela Eagle):
I want to start by responding to the myths and distortions the Opposition have been peddling today—that
this is a hidden tax that hits low-income households and family cars. They are wrong on all those counts. The vehicle excise duty changes are not hidden; they are all there in the Red Book for all to see. The Red Book makes it clear that reform of the VED will mean some drivers paying more while others pay less. We have not heard the Opposition mention today that anyone will be paying less, but that is true. Page 121 paragraph A.97 of the Red Book contains the details of the retrospective aspect.
The changes raise revenue, but it is important to remember that transport spending has increased by 70 per cent. in real terms since 1997, while revenue from transport taxes has fallen by 13 per cent. in real terms since 1999. That is a result of this Government abolishing the fuel duty escalator, which was left to us as a legacy by the Conservative party, and not raising fuel duty every year. Drivers are switching to more efficient cars as well, which reduces revenue, and that is what we want them to do.
Myth two is that this is a tax rise for most motorists. The reality is that the majority of drivers will be better off, or no worse off, because of the Budget changes.
Andrew Selous: Will the Exchequer Secretary give way?
Angela Eagle: No, I have been left nine minutes in which to speak, so I cannot give way.
The hon. Member for Putney (Justine Greening) said that the figures for who is better or worse off were based on graduated VED alone. That is not correct; they are based on all motorists. These reforms incentivise people to drive cleaner cars, helping to protect the environment, and they reward people who decide to choose not necessarily a different class or model of car, but often just the cleanest version of the model that they wish to drive. As has been said, drivers of 24 of the 30 most popular cars in the UK will pay less, or no more VED, as a result of these changes. Popular versions of cars that will pay less include the Ford Focus, the Renault Clio, the Vauxhall Astra and the Citroen Xsara Picasso. This is not an attack on the family car.
Myth three is that the change will hit low-income families the hardest; that has been suggested by many Opposition Members. It will not. Lower-income families are less likely to own a car than the rest of the population; indeed, most of the poorest 20 per cent. of households do not own a car. Moreover, lower-income families who do own a car are more likely to own older cars, from before 2001, which are not affected by the new VED bands at all; that represents one third of all cars in the UK. Lower-income families are not the most likely to buy the most polluting cars because they tend to be the most expensive, because of their larger engines. The majority of low-income families will therefore be either unaffected or better off. This is not a tax rise for most motorists, or a tax rise that hits the poorest, nor is it a tax rise that hits the average family car.
The interesting thing about today’s debate was the announcement by the Conservative party that it will reverse the VED changes that we have outlined. The
Conservatives did not enlighten us by telling us how they would reverse the changes or what they would put in their place. That gives no environmental signal or certainty whatever. The Conservatives did say that there would be no environmental taxes from them that did not hypothecate the revenue into a special fund. It seems to me that their environmental credentials are falling apart.
Mark Lazarowicz: Would the Exchequer Secretary clarify the Government’s expectation of the CO2 savings from this measure over the period for which we have projections?
Angela Eagle: The Government’s expectation of CO2 savings from this measure in isolation is 1.3 million tonnes of carbon by 2020.
Angela Eagle: I am finishing my answer to my hon. Friend. Vehicle excise duty will contribute only part of achieving a much greater prize, which is what we can gain if we can manage, by regulation and agreement in the EU, to create a limit of 130 g of CO2 per kilometre for all new cars. If we could manage to do that, it would save as much as an additional 8 million tonnes of CO2 by 2020, which is a prize well worth having.
I presume that Zac Goldsmith’s quality of life paper, which the right hon. Member for Witney (Mr. Cameron) said was full of interesting ideas, many of which would end up in the manifesto, proposed a version of change in respect of graduated VED containing bigger environmental signals and higher top rates than the ones that the Government are promising to put in place from 2009 onwards.
Angela Eagle: I shall give way to the hon. Gentleman, because I know that he has a particular worry about rural issues.
Adam Price: I am grateful to the Minister. Will she say something about the disproportionate effect that the proposals will have on people in rural areas, many of whom need access to larger vehicles because of their employment in agriculture and other sectors? That point has been raised by a number of hon. Members on both sides of the House.
Angela Eagle: We have this debate often. It is very difficult to have a rural or regional view of VED, because it is difficult to define it, and it would be even more difficult to try to police it. As the hon. Gentleman knows, some vehicles are exempt and some vehicles use red diesel, which lowers the costs. We are sensitive to the issue, but there are no real easy answers.
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