10:45 Kemi Badenoch (Conservative)

I think that is a point we can all agree on. The Government are doing a lot to encourage the uptake of low emission and zero emission vehicles. As I mentioned earlier, the reformed VED system was introduced in 2017 for new cars. To elaborate, on first registration the owners of zero emission models pay nothing, while those of the most polluting pay more than £2,000. In subsequent years, most cars move to a standard rate, which is currently set at £145. The exceptions are electric cars, which attract a zero rate, and hybrids, which receive a £10 discount.

In the Budget, the Government announced a number of further steps to reduce zero emission vehicle costs, including exempting zero emission cars from the vehicle excise duty expensive car supplement; extending low company car tax rates for 2024-25, as we discussed earlier; and extending the plug-in grant scheme for zero emission cars and ultra-low emission vans, taxis and motorcycles until 2022-22.

Applicable CO2 emissions figure determined using WLTP values

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11:00 Kemi Badenoch (Conservative)

Clause 83 makes changes to exempt all zero-emission cars from the vehicle excise duty supplement that applies to cars with a list price exceeding £40,000 from 1 April 2020. The background is that the Government use vehicle taxes, including vehicle excise duty, to encourage the take-up of cars with low carbon dioxide emissions to help to meet our legally binding climate change targets. Vehicle excise duty incentives help to reduce the cost of zero-emission cars, which is one of the most significant barriers to uptake. From April 2017, on first registration, zero-emission cars paid no vehicle excise duty, while the most polluting cars paid more than £2,000. In subsequent years, while most cars move to a standard rate—£150 in 2020-21—electric vehicles attract a zero rate. Previously, however, all vehicles with a list price exceeding £40,000, including electric vehicles, paid a vehicle excise duty supplement of £325 in 2020-21 from years two to six following registration.

Under the changes made by clause 83, from 1 April 2020, all zero-emission light passenger vehicles registered from 1 April 2017 until 31 March 2025 will be exempt from the vehicle excise duty expensive car supplement. That will reduce vehicle excise duty liability for almost a third of zero-emission cars by an estimated £1,625. This demonstrates that the Government will continue to incentivise the uptake of zero-emission cars through the 2020s. The measure will incentivise uptake by reducing tax liabilities and aid the Government in achieving net zero. I therefore commend the clause to the Committee.

On the question of what more we can do, the best mechanism is the call for evidence that the Government published at the Budget, which includes how vehicle excise duty can further incentivise the uptake of zero-emission cars. That is probably the best way for the industry and Parliament to suggest what more we can do to make low emission vehicles more affordable.

From September 2019, EU regulatory changes have required motorhomes to record carbon dioxide emissions on the vehicle type approval document. Previously, the majority of motorhomes attracted a flat rate of £265, but from September 2019, due to their high emissions, new motorhomes saw a significant increase in their first-year vehicle excise duty liabilities. Motorhome dealerships and the main industry body, the National Caravan Council, expressed concern about the changes. The sector argued that, as motorhomes are generally derived from vans, their VED liability should be aligned with vans, rather than passenger vehicles.

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