16:29 The Financial Secretary to the Treasury (Mr David Gauke)

For the purpose of determining the rate at which vehicle excise duty is to be paid on each of the first three years of vehicle licence for a vehicle to which this Part of this Schedule applies, the annual rate of duty applicable to the vehicle shall be determined in accordance with the following table by reference to the applicable CO2 emissions figure.

Table Carbon Dioxide emissions

1GD For the purpose of determining the rate at which vehicle excise duty is to be paid on any other vehicle licence for a vehicle to which this Part of this Schedule applies, the annual rate of vehicle excise applicable to the vehicle shall be determined in accordance with the following table by reference to the applicable CO2 emissions figure.

Table Carbon Dioxide emissions

Alongside the amendments, the Government are also introducing new clause 4, which makes changes to exclude companies from qualifying for the seed enterprise and investment scheme, the enterprise investment scheme and the venture capital trust, if their activities involve making available reserve electricity generating capacity—for example, under the capacity market agreement or the short-term operating reserve contract. In recent years, there has been a significant increase in tax-advantaged investment in energy companies benefiting from other guaranteed income streams. These activities are also generally asset-backed. The new clause will ensure that the Government remain consistent in their approach by keeping the venture capital schemes targeted at high-risk companies. We will also introduce secondary legislation to exclude subsidised renewable energy generation by community energy organisations.

As I mentioned, we shall introduce secondary legislation to exclude subsidised renewable energy generation by community energy organisations. This follows the announcement in the summer Budget that the Government would continue to monitor the use of the venture capital schemes by community energy to ensure that the schemes were not subject to misuse and that they provided value for money to the taxpayer. All these changes on energy activities will take effect for investments made on or after 30 November. The Government intend to apply all these exclusions to the social investment tax relief when SITR is enlarged.

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16:45 Mr Gauke (Carmarthen East and Dinefwr) (PC)

In contrast to amendments 91 to 93, the changes made by clause 42 do address the fairness and sustainability problems of the current VED system. These changes base annual rates of VED on a flat rate of £140 for all cars except zero-emission cars, which pay nothing. There will be a standard rate supplement of £310 for cars worth above £40,000 to apply for the first five years in which the standard rate is paid. These changes improve fairness for all motorists and ensure that those with expensive cars pay more than those with ordinary family cars. Those who can pay more will pay more.

The proposal dealing with vehicle excise duty relates to rates for light passenger vehicles in the UK and considerably flattens them out by introducing a flat-rate excise charge for every vehicle, regardless of carbon dioxide emissions, from 1 April 2017. First-year rates will continue to be determined by a sliding scale, depending on CO 2 emissions. For most greener cars, which emit below 120g of CO 2 per kilometre, people will now pay VED of up to £160 in the first year, whereas previously they paid nothing—only zero-emission cars will be liable for zero VED. In subsequent years, there will be a flat-rate of VED of £140 a year. Hon. Members will note that this will result in a substantial VED increase for low-emission cars in the first and subsequent years, while there is a substantial reduction for cars that are less carbon-efficient. Previously, VED for subsequent years was banded, with the more polluting cars paying more—up to £505.

Clearly, over time, the approach being taken strongly benefits more polluting cars, which will pay hundreds of pounds a year less, while greener cars, aside from those with zero emissions, will pay about £100 a year more. To put this into perspective, approximately 445 cars are currently in the top least polluting bands and so pay no VED, as they emit less than 100g of CO 2 per kilometre, whereas under the proposed changes only 13 will fall into the exempt category. That represents a significant drop. In addition to those proposals, moves are also being made to additionally penalise vehicles priced at over £40,000 and, over time, there will also be a supplementary rate of £310 for the first five years.

Labour Members agree with the Government that this is unsustainable, but we question whether the approach they have taken to address it is pragmatic. We do not agree that increasing the duty paid on low-emission cars while decreasing the duty paid on higher-emission cars is the logical solution. The fact that zero-emission vehicles will continue to be exempt from road tax is welcome, but we are concerned that a flat rate of VED, as outlined in this proposal, will mean that low-emission vehicles will pay £800 to £1,000 more over a seven-year period than they do now, while many high-emission vehicles are expected to pay up to £440 less.

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17:15 Sammy Wilson (DUP)

Let me turn to the lengthier debate we have had about reforms of vehicle excise duty. The hon. Lady raised a concern that they may damage UK car manufacturing and penalise cars built in the United Kingdom. We are not doing that. The supplement will apply to all cars worth more than £40,000, regardless of where they are manufactured, and we are supporting cars such as the Nissan Leaf, which is built in Sunderland, through zero rates for zero-emission cars. We think it is fair that more expensive cars pay more than ordinary family cars.

On the accusation that it is unfair that cars that are more fuel efficient pay the same as gas-guzzling vehicles, I would argue that they do not. Under the new system, the first-year rates for the highest-emitting cars will be doubled compared with the current system. Zero-emission cars will continue to pay no annual VED rate, and more expensive, bigger, higher-polluting cars will pay the standard rate supplement, so there will be incentives to buy smaller, lower-emitting cars on the second-hand market. What is unfair in the current system is that those who can afford to buy a brand-new car pay less than those who cannot do so. That point was made by the hon. Member for East Antrim (Sammy Wilson). In the new system, those who can afford an expensive car will pay more.

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17:30 Jonathan Edwards (Mrs Eleanor Laing)

Our longer-term plan will be announced after the spending review. To drive down carbon emissions and air pollutants, we will give the greatest incentives to zero-emission cars—those that produce no air pollution or CO 2 whenever they are driven—which pay no VAT.

Zero-emission cars, even ones with a list price of £40,000, will pay zero first-year rates. Only a small proportion of motorists can afford cars that cost more than £40,000. The most popular cars in the UK cost an average of £15,000, and even the most popular large family cars cost an average of £21,000. It is fair that premium cars—including low-carbon ones—pay more than ordinary family cars.

For the purpose of determining the rate at which vehicle excise duty is to be paid on each of the first three years of vehicle licence for a vehicle to which this Part of this Schedule applies, the annual rate of duty applicable to the vehicle shall be determined in accordance with the following table by reference to the applicable CO2 emissions figure.

Table Carbon Dioxide emissions

1GD For the purpose of determining the rate at which vehicle excise duty is to be paid on any other vehicle licence for a vehicle to which this Part of this Schedule applies, the annual rate of vehicle excise applicable to the vehicle shall be determined in accordance with the following table by reference to the applicable CO2 emissions figure.

Table Carbon Dioxide emissions

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18:15 Alex Cunningham (City of Chester) (Lab)

I will now turn to value added tax, enforcement by deduction from accounts and the climate change levy—unless any Member wishes a quick run-around again on inheritance tax, but I suspect not.

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18:45 Alex Cunningham (Wycombe) (Con)

I now wish to turn to new clause 11 on the climate change levy, and to amendment 90, which would delete clause 45 on the CCL. In a sense, the proposal is a double negative. If clause 45 were deleted, the exemption would be restored. Again, I urge the Government to look at both these measures, which retain, certainly for the moment, the exemption on the climate change levy and, as stated in new clause 11, look at the effect of the abolition of that exemption. As I understand it, there was no consultation to speak of before the measure was announced. In contradistinction, when a fundamental change to the tax regime of combined heat and power units was introduced, that industry got two years’ notice of exemptions. In this case, this year, there was 28 days’ notice, which is next to no notice at all, because these things have long lead times.

I accept the Government’s figure that a third of this exemption is claimed by overseas producers—if only that were not the case. When many, if not all, western countries address the issue of greenhouse gas emissions, which is the nub of what we are talking about, they tend to offshore the problem. Carbon dioxide intensive manufacturing, using lots of non-renewable fossil fuels, gets relocated by capitalists to places such as China and India, making it look as if the CO 2 emissions per capita in the United Kingdom are falling quite dramatically, but if the CO 2 emissions in the United Kingdom were to include those for which UK residents and consumers are responsible, we would see a rather different picture. Of course Labour Members are not happy about a third of this exemption money going overseas, but in one sense that is all part of offshoring. As far as one can see, successive Governments have been turning a blind eye to the offshoring of greenhouse gas emissions to China and India and so on, but when we are talking about measures to lessen that, no offshoring is to be allowed under this Government. They should think again.

This whole issue cannot be divorced from carbon capture and storage and the need for the Government to confirm their support for the two projects in the competition—I think we are due a decision on that in the new year. After that, we need to encourage industry with industrial CCS, especially on Teesside where my constituency sits and where, nearby, we have just lost a large section of the British steel industry.

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19:00 Sammy Wilson (DUP)

The short response to what the hon. Gentleman is saying is that massive subsidies deployed in other countries are being authorised by the European Commission, but we do not get them. As the hon. Member for East Antrim (Sammy Wilson) said just now, there is an increasing failure in renewable energy because it is too expensive and the subsidies are a complete disaster zone.

One can see a bit of a pattern with what is happening with the removal at 28 days’ notice of the climate change levy exemption for electricity from renewable sources used by non-domestics—non-doms, as it were. The Liberal Democrat policy was for the percentage of taxation to come from environmental taxes to keep rising year on year, and when the Liberal Democrats first came up with that crazy idea in about 2007 I pointed out that it was a bit self-defeating. That has been formally abandoned by this Government, which is not necessarily a mistake, but in the context the issue is what has or has not replaced that policy. Support for large onshore wind is being cut, and support for photovoltaics is being ended one year early. The Government’s policy is to lessen air passenger duty, and they aim to abolish it and to expand airports. That is not good news for the environment. The policy on zero-carbon homes for 2016 is being scrapped, not just diluted. There is a massive nuclear subsidy, which we heard about last week with the visit from China. What will our nuclear industry be built on? State support from China and from France.

The Government are contemplating huge subsidies in a panic over energy security, which of course will not guarantee energy security as it will take so long to build a new fleet, as they are pleased to call it, of nuclear power stations. Meanwhile, as my hon. Friend the Member for Stockton North points out, we have the craziness of all this abundant coal yet quite insufficient Government-funded CCS research and development through which we could proceed to the gasification of coal as North sea gas is running out.

The Department of Energy and Climate Change Minister Lord Bourne of Aberystwyth wrote to me on 26 August saying that the Government had committed to delivering on the national infrastructure plan published in December 2014, which contained a number of priority investments. He went on to list some of them. One is rail electrification, and we know what has happened to that—it is on pause. Another is low-carbon energy such as nuclear; we know the cost of that, which is enormous. A third is low-carbon energy such as renewables, but clause 45 is going in the wrong direction on that. Lord Bourne also cites energy efficiency measures such as smart meters, but the evidence on them is mixed, to say the least. Before Conservative Members jump up, I know that it was a Labour Government who started down that route and it struck me as a very odd thing to do at the time.

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19:30 Mrs Main (Glasgow Central) (SNP)

The group of amendments also addresses the renewables obligation incentives and seeks to adjust the feed-in tariff regime. Why are we able to reduce taxation on renewable energy products to only 5%? It is because of the European Union. Why could the previous Labour Government not abolish VAT on fuel, which they said they wanted to do after it had been applied by the Major Administration? It is because of the European Union.

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20:30 Barbara Keeley (Worsley and Eccles South) (Lab)

The “Conservative modernisation project mark 2” is now dead in the water, but let us remind Tory Members of “modernisation project mark 1”. We remember the Prime Minister promising “the greenest Government ever” when he was running with the huskies and hugging hoodies, yet here we see clause 45 of the Finance Bill, which will remove the exemption from the climate change levy for electricity produced by renewable sources from 1 August this year—it will be backdated. Conservative Members need to decide whether they are going to be the “true blue” Conservatives that we have seen represented in the unlikely forum of a debate on tampons and sanitary products, or whether they are the party of the centre ground and the working man and woman.

Well, we have the European Parliament and the Council of Ministers, which are accountable to their respective Governments and, of course, the Commission itself is in many ways accountable. I would like to see reforms to some of the accountability mechanisms, but as the old saying goes, “you’ve got to be in it to win it”. On Europe, as on climate change, inheritance tax and the debate taking place in the other place on tax credits, we have seen in virtually every clause debated this evening that this is not the new modernised Conservative party; it is the same old right-wing Tories. They have hung their Chancellor and Prime Minister out to dry, and I hope that the Opposition’s reasonable, centre-ground amendments will be supported by Members from all parts of the House.

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20:45 Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)

On the climate change levy, let me briefly explain the policy rationale, as we have debated this on a number of occasions. The climate change levy renewables exemption was misaligned with today’s energy policy, providing indirect support to renewable generators when the Government are now investing in more effective policies that target them directly. Together, policies such as the renewables obligation and the feed-in tariff will provide more than £5 billion-worth of support to renewable electricity generation in 2015-16 alone. I do not believe the report on this clause is necessary. The Chancellor has already written to the Chairman of the Treasury Committee in August setting out the environmental analysis of the summer Budget in 2015.

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21:50 Rob Marris (Shipley) (Con)

The changes to the climate change levy are a step backwards that indicates the Government have lessened their commitment to the environment and can no longer make the laughable claim to be the greenest Government ever—it is one of a host of changes indicating that they are not serious about our environment. We disagree with the provisions on the direct recovery of debt that allow HMRC to take money out of someone’s bank account without a court order. They are doing this because they find, as so many people do, that the court system is costly and slow, but rather than change the court system, for which they are responsible, they are simply introducing a different rule for themselves. They have done the same in clause 48 with interest on judgment debts. It is one rule for them and another rule for the rest of us.

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