VED: rates for light passenger vehicles, light goods vehicles, motorcycles etc

Finance Bill – in a Public Bill Committee am 2:15 pm ar 7 Gorffennaf 2016.

Danfonwch hysbysiad imi am ddadleuon fel hyn

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

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Chief Secretary to the Treasury, Member, Labour Party National Executive Committee

The clause increases the rate of vehicle excise duty on certain vehicles in line with RPI for the financial year 2016-17. This is standard practice, as VED rates have increased in line with inflation since 2010. Labour has not opposed that and I have no intention of doing so today, but I have some issues to take up with the Minister.

I want to repeat on the record how opposed we were to the last raft of changes to VED made in the previous Finance Bill. These changes put a stop to the link between the level of carbon dioxide emissions and the rate of vehicle excise duty. There is now simply a flat rate after the first year, with a surcharge on cars that cost more than £40,000. We simply do not see the Government’s justification for removing incentives for lower-polluting cars. I would be grateful if the Minister clarified that. Aside from that issue, I am happy for this clause to stand part of the Bill.

Photo of Damian Hinds Damian Hinds The Exchequer Secretary

Clause 138 makes changes to vehicle excise duty rates for cars, vans and motorcycles, with effect from 1 April 2016. For cars first registered prior to 1 March 2001, vehicle excise duty is based on the car’s engine size. The rates of duty for those cars and vans before 1 March 2001 increase by £5 only as a result of this clause. For cars first registered on or after 1 March 2001, vehicle excise duty is based on the car’s carbon dioxide emissions. There are currently 13 CO2 bands. One rate is payable in the first year, and a separate, standard rate is payable in all subsequent years. For about 98% of those cars, the payment will be no more than £5 extra in 2016-17. That means that a motorist already owning a popular family Ford Focus will pay only £5 more.

First-year rates influence the purchasing choices of drivers buying brand-new cars. They act as a signal at the point of purchase that people can save money by choosing a cleaner car. In response to what the hon. Lady said about the 2017 reforms, it is not true that we have removed the incentives on CO2. First-year rates have an extra effect: the so-called “sticker price” effect. There is also the zero rate for zero-emission cars.

We had a fairness and a sustainability challenge on vehicle excise duty. The sustainability challenge was due to the projected decline in revenues as more and more cars come into the lowest charging bands, and the fairness challenge was due to the fact that people who can afford only an older, second-hand car would pay more than those who can afford to change their car every couple of years.

This measure will mean that the highest-emitting new cars will pay first-year rates of £1,120—an increase of £20—and rates for the cleanest cars will remain unchanged at zero. The clause also increases the standard rate of duty for vans first registered from March 2001 onwards by £5 only. Finally, rates for motorcycles will also increase in line with inflation. Motorcyclists will see an increase of no more than £2.

Question put and agreed to.

Clause 138 accordingly ordered to stand part of the Bill.

Clause 139