---

Finance Bill

I hoped that I was saying that there are some taxes through which one hopes to change behaviour, but which also have a revenue-raising element to them. Vehicle excise duty is one of those. Obviously, we wish to change behaviour, and I will talk about that later. We wish to incentivise people to buy cars with a smaller carbon footprint and lower CO2 emissions than those that were on the road in the past. That is a clear aim, but another aim is to raise revenue. We can do both. As was said earlier, there can be a balance. If a Government are very successful at changing behaviour, they may have to find other ways to raise revenue, because the more successful they are at changing behaviour by giving signals through taxes, the less their tax take will be. As they need to finance public services and everything that our constituents want the public services to provide, such as health and education, other ways must be found to finance them. That balance exists, and is accepted in all parts of the House. Tax measures are only one means of changing behaviour. Another is regulation, which applies particularly in this instance, as was pointed out by my hon. Friend the Member for Wolverhampton, South-West, with his knowledge of these matters. He mentioned the European Union regulation governing car emissions. We have successfully negotiated increasingly tight limits on emissions to be set for manufacturers. In answer to his question whether 130 g was the correct point at which to allow an effective exemption from first year rates, our judgment is that it is correct at present, but as we always do after every Budget, we will keep an eye on the development of engine technology. We want the incentive to remain taut. As engines become much more efficient, we will review that rate. The other main way of driving behavioural change and driving down CO2 emissions is through new technologies. The Government have made some significant announcements about how we wish to support the car industry through its short-term difficulties, and incentivise it to be at the forefront of the dash to innovation in energy efficiency and carbon efficiency in engine design and the design of transport generally. Despite the significant progress that has been made in engine efficiency—new cars are 30 per cent. more efficient than 10-year-old cars because of innovation and change—we must recognise that road transport still accounts for 20 per cent. of all UK emissions. Given that the House passed the Climate Change Act 2008—this year's Budget contains the first three carbon budgets—we have a legal duty to achieve the huge reduction in carbon emissions that Parliament set us in that legislation. One of the ways in which we must approach that is by dealing with the 20 per cent. of emissions that come from road transport. That means that we must incentivise technological change and innovation, as well as behavioural change. The changes in the Budget, which my hon. Friend the Member for Wolverhampton, South-West spoke about, form a coherent package to achieve that aim. It includes, as he pointed out, the changes to the tax on company cars, with lower tax for lower-carbon cars, lower rates in capital allowances for the business car regime for lower-carbon cars, and the differential rates of VED that we are discussing. Outwith the Budget process, but of equal importance, there is the £250 million of support to provide incentives for ultra-low-carbon cars, too. The hon. Member for South-West Hertfordshire talked about scrappage—a term that also passed the lips of the hon. Member for Taunton. The point of the scrappage scheme is not to reap environmental benefits, except in a secondary way, and we have not argued for it as an environmental measure. It is designed to try to put some confidence back into the new car market in a timely and temporary way. That is why it is time-limited—it ends in March next year—and its cost is capped at £300 million. The scheme is explicitly designed to kick-start, from a confidence point of view, the new car market. The environmental gains, if there are such, will be secondary and consist of the fact that new cars are more energy-efficient than older cars. Therefore, by definition, if an older car is scrapped and replaced with a new, more efficient car, there will be some minor gains. However, I shall not stand at this Dispatch Box and argue that the scrappage scheme is primarily an environmental measure, because it is not designed in that way.