I wish to make a little progress before I take any further interventions.
Let me cite an example to show the absurdity of the current proposals. Although I appreciate and agree that VED needs to be reformed as it is unsustainable in its present form, the current proposals create the obvious absurdity of a Mitsubishi Outlander plug-in hybrid owing as much VED as a BMW 5 series saloon from year 2. On top of that, many vehicles that harness the latest technological developments tend to be rather expensive and may be hit by the supplementary rates as well as by the higher flat rate. For instance, the Volvo V60 plug-in hybrid estate—a hybrid suitable for families—would have to pay a first-year rate of £320 and a supplementary rate of £450 for five years thereafter despite being at the forefront of low-emission technology.
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Although the Government’s proposals to make zero-emission cars completely exempt are certainly welcome, Labour Members question whether we are likely to see a radical shift towards completely zero-carbon vehicles in the near future. Indeed, my scouring of motor magazines and blog sites in preparation for this debate led me to one clear conclusion: although people travelling short distances might be happy to rely on an electric vehicle, plug-in hybrids still appear to be the main option considered by the more discerning green consumer who wants reliability and green credentials rolled into one. Members will no doubt be aware that hybrid cars have both a regular engine and an electric motor. The beauty of them is that a person can drive short distances and never use any fuel. An electric range of about 20 to 30 miles is common. When longer journeys are required, the petrol or diesel engine kicks in to provide comfort and security to the driver that they will not get caught short. Of course we are making amazing technological advances every day. Electric vehicles are becoming more and more efficient and suitable for longer journeys. As a result, I have no doubt that public opinion may change quickly in the years to come, but when assessing VED in the light of encouraging the purchase of more greener cars from 2017 onwards, I would be more inclined to trust current consumer viewpoints rather than a hypothetical chocolate box vision of the future where, simply as a result of zero-emissions vehicles being VED exempt, there is a sudden stampede of people going out to buy them.
Clearly, a more pragmatic approach is required and Labour Members have serious concerns that these changes, together with the freeze in fuel duty announced in the Budget—let me be clear though that that was a welcome announcement—will dissuade people from purchasing all of the bands of low-emission vehicles in the future.
We are certainly not alone in harbouring those concerns. Although the Government have claimed that the clause strengthens incentives to purchase low-emission cars, key players in the industry disagree.
Although the RAC welcomes the Government’s proposal to ring-fence VED in the creation of the road fund, it also stated:
“A big question mark remains however over how the new changes will affect people’s inclination to buy low carbon dioxide emitting, fuel efficient vehicles.”
The Society of Motor Manufacturers and Traders welcomes VED reform, but stated that
“the new regime will disincentivise take up of low emission vehicles.”
Similarly, the AA, which welcomes reform, called for further measures to sit alongside the Government’s proposals to offer fiscal encouragement for converting the main urban emissions polluters to hybrid or electric alternatives.
Leaving the environmental impact of this clause to one side for a moment, car manufacturers have expressed concern that the supplementary rate for cars worth more than £40,000 will have a profoundly negative effect on car manufacturing in Britain. The UK has a proud history of producing premium vehicles, which are now likely to be the subject of the supplement rate of £310 a year.
Car manufacturing is one of the few heavy industries remaining in the UK. Given the Government’s negligence at work, with Redcar acting as a backdrop, we do not feel that they have set out a clear argument on the issue of the premium vehicle supplement to allay the concerns raised by car manufacturers and to provide comfort that they are committed to promoting long-term growth within the industry. Indeed, the Society of Motor Manufacturers and Traders has warned that the UK car industry supports almost 800,000 jobs and that a punitive tax on those premium vehicles will almost certainly have an impact on domestic demand, thus affecting growth in UK manufacturing.
As I have outlined, my hon. Friends are concerned that the clause as drafted will discourage the manufacture and purchase of low-emission vehicles. We also appreciate that, although it might increase Exchequer revenue in the longer term, it will potentially have a detrimental impact on car manufacturing in the UK. For the reasons I have outlined, we have tabled amendments that will encourage the manufacture and purchase of low-emission vehicles and preserve Exchequer revenue as lower emission cars are purchased. That is achieved by frontloading VED for the first three years with a reduced taper rate thereafter, dependent on a sliding scale of CO2 emissions.
The Financial Secretary cited research in Committee that suggests that consumers’ choices are more influenced by the immediate cost and he therefore reasoned that an increase in the first year rate was sufficient to influence behaviour. Logically, frontloading VED for the first three years, as we would, will therefore have a greater influence on consumer behaviour and encourage the purchase of greener vehicles. We have also scrapped the punitive regime for cars over £40,000. I have no doubt that the Minister and all hon. Members wish to encourage the manufacture and purchase of low-emission vehicles while at the same time increasing growth within the car manufacturing industry and increasing Exchequer revenue. That is achievable if our amendments are agreed to today, and I urge hon. Members to support them.