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Finance Bill

We have had an interesting debate about vehicle excise duty rates. Various Members on both sides of the Committee have made important points and observations about the general approach. The amendment calls for an estimate of the carbon savings that result from the changes to VED contained in the clause, and for that to be audited by the independent committee on climate change, which is being created by the Climate Change Bill. We hope that when that is approved by both Houses and is on the statute book it will enable us to make progress towards our carbon accounting, which we have discussed in relation to more than one amendment this evening. UK vehicle excise duty rates are set at current rates for good reasons—to raise revenue to fund essential services, and to help to achieve our environmental obligations and objectives. The changes to vehicle excise duty in 2008-09, which were announced in Budget 2007, further sharpen the environmental signal to motorists to purchase more fuel-efficient vehicles and continue to support the development of the low-carbon market. The rate for the most polluting cars in band G increases by £100 to £400 in 2008-09, whereas the rate for low-carbon band B cars is frozen. In deciding VED rates the Government take account of all relevant economic, social and environmental factors, including proportionality and fairness to motorists to ensure that there are appropriate signals across the entire system. The vehicle excise duty system is designed to signal, at purchase, that the more polluting the vehicle, the more VED will be payable and the higher its fuel costs will be. As my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) pointed out, table 7.2 of the 2007 Budget sets out the environmental effect of the VED changes announced in that Budget. However, the climate change committee's role is not to audit Government policy, but to advise on technical issues, such as setting carbon budgets and the level of the 2050 carbon emissions target, which will be needed if we are to stabilise climate change. Although the carbon savings from VED changes are initially small, they will increase over time as the number of low-carbon cars is forecast to increase significantly. In addition, VED is part of a package of measures that support the European Union 2012 proposal to reduce average new car CO2 emissions to 130 g per kilometre, which could save as much as an additional 800 tonnes of CO2 per year by 2020. Estimating the amounts of CO2 saved merely through VED rates is a tiny part of the entire picture. It is easy to argue that increases in tax achieve only tiny savings in CO2 emissions, but that is not the whole story, although some Conservative Members are trying to make out that it is. The change in respect of CO2 emissions and engine technology was pointed out by Professor Julia King in her important report, which was published alongside this year's Budget. She said that a 100 g target was achievable by 2020. In the 2008 Budget, the Government confirmed that they will push the EU Commission to include a longer-term target of 100 g per kilometre by 2020 in its proposals for reducing vehicle emissions. Professor King has also concluded that a typical driver can reduce their fuel bills and CO2 emissions by 25 per cent. by choosing the most efficient vehicle in the preferred class. That is why this year's Budget contained announcements that further increase the VED signals that aim to encourage people to move from high-emission to low-emission cars; confusingly, however, they are not in this Finance Bill, but for debate in next year's Finance Bill. My hon. Friend the Member for Wolverhampton, South-West also read out some of the increases planned not for 2008-09, but for 2009-10 and 2010-11. I suppose that he is entitled to consider the very high emitting levels in the top bands, including the six new bands that have been created. However, in the interests of fairness he should also have pointed out that 55 per cent. of drivers will be better off or no worse off as a result of the changes announced in this year's Budget. Their VED bands will be frozen or go down. The changes to the VED bands are designed to strengthen the signals so that people move from the top-emitting class of car to lower-emitting cars. I am thinking first of purchasers, but the changes are also designed to give those who design and produce new cars further incentives to produce more cars that qualify for the lower bands of VED.