Clause 186 - Not exhibiting licence: period of grace

Finance Bill – in a Public Bill Committee am 10:30 am ar 18 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

This is another short, technical clause, which replaces the current five-day waiver on vehicle owners displaying a newly issued tax disc in their vehicle with a 14-day waiver. It is a welcome change. It follows on from the Government’s Budget 2012 aim to reduce the DVLA’s tax disc postage costs. The measure will have effect on and after the date this Bill receives Royal Assent. The Government’s stated intention is for the DVLA to centralise its issuing of tax discs on to call centres and internet applications to save administration costs, although tax disc applicants will still be able to receive their disc directly from the Post Office if they so desire.

I am sure many people welcome the streamlining of the process of applying for tax discs, resulting from the centralisation of the information that is required to get a tax disc issued. Will the Minister say a few words about the process of centralisation? Can he give us a breakdown of the expected cost saving of the administrative centralisation, the number of jobs involved, and what the time frame for completing the centralisation is? The centralisation is intended to save on postal costs. Will the Minister confirm how much of the saving is expected to come from postal costs, and how much is expected to come from job reductions in the newly centralised process?

The impact note states:

“The Driver and Vehicle Licensing Agency (DVLA) will save at least £1.5 million a year in reduced postage costs.”

Will the Minister give us a breakdown of where those savings will come from? Will they be simply from the change in postage costs—presumably from first class to second class—or will there be other associated cost savings as a result of the change? Will he also provide an updated figure for the number of licences expected to be granted, and a figure for those expected to be posted rather than directly collected from the post office? I am sure the Treasury has undertaken that assessment as part of processing this change.

Photo of Steven Baker Steven Baker Ceidwadwyr, Wycombe

May I invite the Government to extend indefinitely the grace period for not exhibiting a licence? In other words, will they abolish it altogether? The motorist already pays for the roads many times over through fuel duty, and the country is so festooned with automatic number plate recognition cameras automatically checking whether our vehicles are insured and MOT-ed that there can be no reason whatever for continuing with the licence. Why not just abolish it altogether and make some considerable administration savings?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

Clause 186 provides for a 14-day grace period against the requirement to display a newly issued vehicle licence tax disc. The existing display waiver period applying to licence renewals is five working days and was introduced by the previous Government in 2008. The clause will extend that period to 14 days and create further situations where the waiver will apply, so  that it is no longer limited to simple tax renewals but also supports applications for tax discs where a vehicle’s status has changed.

The change to the waiver has several benefits. First, it will enable the Driver and Vehicle Licensing Agency to reduce tax disc postage costs. The agency intends to issue tax discs via second-class mail from a single central point rather than the current practice of issuing tax discs via first-class mail through local offices. It is estimated that that will save some £1.5 million a year, and I can confirm to the hon. Member for Newcastle upon Tyne North that that amount comes just from postal cost savings. She also asked about the impact on jobs, but we have made no such assessment, so I cannot give her more information on that.

Secondly, the change increases the convenience of the online and telephone electronic vehicle licensing service to taxpayers. Taxpayers will for the first time be able to use the service when licensing a newly acquired second-hand vehicle or returning a vehicle to the road after a period of storage. The option to obtain a tax disc immediately at a post office will remain.

Finally, the change will reduce the burden on motor dealers by removing the need to collect blank tax discs, store them securely and manually issue them to each customer. Tax discs will instead be sent directly to customers by the DVLA, which will have the positive effect of removing the indemnity that motor dealers have had to hold as insurance against the loss of tax discs, thus reducing the financial burden on the motor dealer industry.

The measure is not just a cost-saving exercise, because it will reduce the administrative and financial burden on motor dealers who register and licence new vehicles. It will also give motorists more flexibility to continue to drive while waiting for a tax disc to arrive. The measure has built-in contingency to cater for any disruption to the postal service.

Further to the hon. Lady’s question about jobs, I have just had a moment of inspiration and I can tell her that we believe that there will be no impact on jobs as a result of the change in posting practice.

To conclude, the measure enables the DVLA to deliver significant efficiency savings while reducing the burden on businesses and motorists.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

My question related more to the process of centralisation rather than simply the switch to concentrating on postal delivery for tax discs rather than using the post office. I appreciate that the Minister may not have that information available, but I just wanted to make that clarification.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I do not have specific information on centralisation. I will check to see whether there is any more information once I have contacted the DVLA. If there is, I am more than happy to write to her and furnish her with that information.

Photo of James Duddridge James Duddridge Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

I am minded to support my hon. Friend the Member for Wycombe in his pursuit to abolish this tax altogether, and I somewhat regret that neither he nor I tabled an amendment on the matter. The reason is that we already have a distribution method of collecting tax equitably through fuel duty, but I  wonder what the cost is. Specifically, what is the cost of this individual process? I own a Toyota Yaris and pay only £35 in tax—it is a good vehicle in relation to the certificate that goes on the window. I cannot possibly believe that the Government managed to process that tax disc at a cost below £35.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury 10:45, 18 Mehefin 2013

I am glad that my hon. Friend has raised that issue, because it has prompted me to give a response. I also thank my hon. Friend the Member for Wycombe for his views. They might know that the excellent Secretary of State for Transport has published a consultation on a number of issues, including the potential abolition of the paper road tax disc. The Government are considering a response and will publish our decision on whether we are ready to abolish the disc.

Photo of Ben Gummer Ben Gummer Ceidwadwyr, Ipswich

Would it be possible to refer the matter to the Office of Tax Simplification to see the effects of amortising the revenue from tax discs across fuel duty?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I have heard my hon. Friend and will take on board his representation.

Photo of Steven Baker Steven Baker Ceidwadwyr, Wycombe

I listened extremely carefully to what the Minister has just said, and I think that he intimated that he might abolish the paper disc, but not the tax itself. Will he just explain whether he means to consult on abolishing the tax as well as the disc?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I think my hon. Friend knows the answer to that question, but it is incumbent on me to be clear that I am talking about the paper disc and not the tax. I do not think that that will surprise him. To put some perspective on the matter, the vehicle excise duty raises approximately £6 billion each year, which is vital revenue for the Government to pay for public services. The actual cost of the paper system that the DVLA administers is approximately £8 million a year, and we are considering how to reduce that figure. The paper disc costs money to produce and is delivered to the post office or through the post, which is why the Department for Transport has run a public consultation and is seeking the views of motorists and businesses. Most on-the-road enforcement action is now based on digital technology, which is the automatic number plate recognition system rather than visual inspection of the disc, which is a helpful innovation.

Question put and agreed to.

Clause 186 accordingly ordered to stand part of the Bill.