The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)
I thank the hon. Member for Poplar and Limehouse (Jim Fitzpatrick) for tabling his amendment. I hope that I will be able to persuade him that it does not deal with the concerns raised by the BVRLA, which I should like also to address. I want to try to prove to him that his amendment would potentially, if we were not careful, give a free £200 to an awful lot of people. I hope he will agree with me on that. We discussed the point about clause 7 in Committee when the hon. Member for Linlithgow and East Falkirk (Michael Connarty) raised the issue of 10 monthly and 12 monthly payments.
Removing clause 7(3) would remove the annual rebating formula and mean that all the rebates would be made under subsection (4), which applies to all periods of time over one month and less than one year. Under the European directive, the charges and rebating formula must be the same for both UK and foreign-registered vehicles.
In selecting the charges for different time periods, we have chosen to offer the annual levy at a discount compared with the purchase of 12 monthly levy payments. That is also compatible with the Eurovignette directive, which states that the annual charge may be no less than 10 times the monthly charge.
The hon. Gentleman’s amendment would not have its intended effect, which I believe is to ensure that UK hauliers would be able to claim the rebates in twelfths rather than tenths, as proposed by the Bill. As he has rightly pointed out, I am aware of what the BVRLA has put together. It has been lobbying for a change to the calculation because at the moment it estimates that a UK operator could incur a small loss when it delicenses a vehicle—typically when it is sold—compared with the existing rebating regime for vehicle excise duty, which rebates in twelfths. The BVRLA has identified that a small extra cost to operators could be introduced by the way in which the levy is rebated compared with how VED is rebated.
Currently, when a vehicle is delicensed—typically when it is sold—the previous owner can claim back the outstanding whole months of VED, with the rebate calculation done in twelfths. From the introduction of the levy in 2014, UK operators will only be able to reclaim VED on the same basis that the levy can be reclaimed, namely in tenths. Setting the annual rate at 10 times the monthly rate complies with EU law and will maximise the revenue from the monthly charges. That means, in effect, that it is discounted when compared with the cost of the 12 monthly levy charges.
The decision to offer rebates in tenths was made, as I explained in Committee and as the hon. Gentleman has mentioned, to prevent foreign hauliers from paying for a year, using a vehicle for a month and then reclaiming 11 months. The hon. Gentleman’s amendment would have the effect—although this is not its intent—of removing that.
Jim Fitzpatrick
I accept the explanation about tenths and twelfths and that we do not want to give an advantage to foreign hauliers, but the question that was raised in Committee by my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) has still clearly not been answered to the satisfaction of the BVRLA. When someone surrenders VED—a tax disc—they can claim back, but if a vehicle is off the road while it is in the process of being sold, which could take two or three months, and is accruing the levy charge, can that be claimed back? If it can, I think that will answer the problem.
Stephen Hammond
I hope that I am about to address exactly that point. I welcome the hon. Member for Linlithgow and East Falkirk to his place, because he raised the point about the levy rebate, which I hope my opening remarks have addressed.
The BVLRA estimates that rebating the charge in tenths rather than twelfths might cost its members, as the hon. Member for Poplar and Limehouse has said, up to £2.7 million a year. That estimate is on the high side, to say the least, because the BVRLA assumes that half the refunds would be for vehicles in the most expensive levy band, whereas, in fact, only 4% of the UK fleet is in that band. Most UK vehicles—83%—are in bands costing between 36% and 65% less. I would therefore question whether the cost is as high as estimated.
The BVRLA also assumes that all refunds are claimed in the 10th month of the VED cycle for each vehicle, which is a worst-case scenario. In fact, there is a peak in vehicle disposals at around month three or four of the cycle, reflecting the fact that vehicles are often purchased in September and sold in January, to deal with Christmas business. The loss for any vehicle at this point is some 60% or 70% less than the worst-case figure.
We estimate that most vehicles will lose in the region of between £30 and £50 when delicensed. That is not a regular event, but it would happen, for example, when a vehicle is sold. The loss therefore needs to be set in the context of the vehicle’s whole lifetime, which can be about 10 years. For example, a typical vehicle that lasts 10 years and is sold twice during that period at a typical stage in the VED-levy cycle would incur between £60 and £100 in rebate costs over its life, because the loss is incurred only when the vehicle is sold or delicensed for other reasons. That cost equates to about £6 a year. Operators can avoid that cost by selling the vehicle taxed or by disposing of it only at the end of the VED-levy cycle so that there is no amount to reclaim.
As the hon. Member for Poplar and Limehouse said, the BVRLA gave oral evidence to the Committee and raised this point, but it did not give it the prominence that it has been given subsequently. I am pleased that we have been able to discuss it today because it did not feature in our discussion about levy rebates. I am pleased that I have been able to clear the point up. The BVRLA could have submitted written evidence on this point to the Committee, but it did not. It is helpful that it has been raised by way of amendment this afternoon.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
The point I raised on instinct, on looking at the Bill, was that this was not a level playing field between those who come into the UK and pay the levy, and those who are in the UK and pay duty and now the levy. Although the Minister has said that the loss will be 70% less than the worst-case scenario and only about £6, it is still not a level playing field. There will be a loss for the leasing companies in the UK. The companies say that the loss will be £2.7 million a year. If it is 70% of £2.7 million a year, it is still a large hit for British business.
Stephen Hammond
As I have said, the figure of £2.7 million is predicated on half the vehicles in the fleet being in the largest band, whereas only 4% are in that band. There will be a very small loss, if there is a loss at all. The £2.7 million figure is clearly an overestimate.
I seek to persuade the hon. Member for Poplar and Limehouse that under the amendment, all rebating would be done under clause 7(4), which is designed for shorter periods of time than one year. Rebating the annual levy under that subsection would not resolve the tenths versus twelfths issue, but it would allow some foreign operators to drive on the UK’s roads for free for up to two months when they purchase an annual levy. That is because, as we discussed in Committee, they would be able to claim a rebate for whole outstanding months at the monthly levy rate, rather than at the discounted rate.
As well as the potential for free use of the roads, a further consequence of using clause 7(4) as the rebating mechanism would be to allow anyone to make a claim for more than they had paid, without ever driving on the UK’s roads. For example, if an operator purchased a levy starting at a future point in time, say 1 February, and immediately asked for a rebate, they would be able to claim 12 times the monthly rate because the levy period would not have started. That would contrast with the actual cost of the 12-month levy, which is discounted to 10 times the monthly rate.
The consequential amendments would mean that clause 7(4) could also be used for annual rebating and would remove the references to clause 7(3) in clause 7(8), which deals with the level of the rebate. Given the unintended consequences of providing updates only through clause 7(4), and given the relatively small value of the typical loss, which is incurred only if the vehicle is delicensed or sold, we do not propose to change the rebating formula from tenths to twelfths.
I will keep the situation under review. I hope that with those reassurances, the hon. Member for Poplar and Limehouse will withdraw the amendment.
Jim Fitzpatrick
We are very grateful to the Minister for his response. My hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) raised this matter strongly in Committee. We supported the inquiry by the BVRLA because this seemed to be an issue that was slipping through the cracks. The Minister reassured us in Committee. He has said solidly that he will keep the matter under review. We do not want to see this develop into a disadvantage for British road haulage.
Given the assurances that the Minister has reaffirmed today, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Third Reading
Stephen Hammond
I beg to move, That the Bill be now read the Third time.
As the House knows, this Bill introduces a new levy for all heavy goods vehicles that weigh 12 tonnes or more and that are kept on, or use, the UK road network. The levy is aimed at recognising the damage that HGVs do to our roads, so that a contribution is made for that.
The Bill has, I am pleased to say, enjoyed cross-party support as it has proceeded through the Ways and Means motion, Second Reading, Committee and now—I hope—Third Reading. With some exceptions and questions it has been broadly welcomed by industry, with agreement on the fundamental point that vehicles that use and cause wear to our roads should make a payment to take account of that. The HGV road user levy will, for the first time, require foreign-registered HGVs to make a contribution to the costs of maintaining the road network that they use.
Subject to the Bill being passed in the House today, although the financial burden of road maintenance will be largely borne by UK taxpayers, from April 2014 it will no longer fall solely to them. Our intention is for the levy to apply to all categories of public road in the UK, and to UK and foreign-registered HGVs equally. The Government plan to implement the levy from April 2014 for UK and foreign-registered hauliers, and I am working to ensure that the process to procure and develop the necessary vehicle payment systems is completed. That is being done to a short time scale, but as I stated in Committee, I am confident it can be achieved.
As stated in previous discussions, UK hauliers will pay the levy in a single transaction with vehicle excise duty—VED—when it is renewed from April 2014. Foreign hauliers do not currently contribute to road maintenance through a vignette or other form of payment, even though such charges are common in other countries and our hauliers pay them when they use roads overseas. Foreign-registered hauliers who have long enjoyed an advantage over our own haulage industry will now have that advantage removed. All main parties have wanted to introduce a measure to correct that imbalance for many years, and I am delighted that this Bill, which will go a long way towards addressing it, is receiving its Third Reading.
HGVs play a crucial role in our economy by supplying businesses and servicing consumers. More than two thirds of goods moved within the UK travel by road on an HGV. It is estimated that foreign hauliers make around 1.5 million trips in the UK annually, and the levy will ensure that they pay a fair amount when they use UK roads, and increase opportunities for UK hauliers in international trade.
As colleagues in the House may be aware, any form of road user charge is subject to strict conditions set out in the Eurovignette directive, in which the maximum daily charge is specified as €11, which is likely to rise to €12 by 2014 to compensate for inflation. By that stage it will equate to about £10 per day, which is what we intend to charge to the largest foreign vehicles that use roads in the UK. I recognise that many trips by foreign hauliers last longer than one day, so they will also be able to pay the levy for different periods—daily, weekly, monthly or annually, for up to one year. For the largest vehicles, the annual charge will be £1,000, and proportionately less for the smallest vehicles. Overall, most vehicles that come to the UK are in the heaviest two bands.
The Government have estimated that the revenue gained by charging foreign hauliers will probably be between £18.7 million and £23.2 million annually. I appreciate—this was discussed in Committee at some length—that that may not be an enormous sum in the grand scheme of things, and I am sure some of my colleagues would like it to be higher, but the levy is set at the highest level allowed by the Eurovignette directive. Other measures—principally the reduction in VED—mean that nine out of 10 UK vehicles will pay no more than they do now. That will ensure a fairer deal for UK-registered HGV operators, who should not, and will not, have to bear an additional financial burden as a result of the levy. As we have announced previously, details of vehicle excise duty will given by my right hon. Friend the Chancellor in due course.
With those brief comments, I hope that the House supports the Third Reading of the Bill.
Stephen Hammond
With the leave of the House, I would like to make a few concluding remarks and to respond to some of the points made in the debate.
My hon. Friend the Member for Tiverton and Honiton (Neil Parish) made the case, as did several other Members, about the size of the fee charged. As I have explained earlier on Third Reading, on the Ways and Means motion and on Second Reading, we are limited to what level of fee we can charge. I am sure that we will, as with other aspects of the Bill, keep it under review. My hon. Friend went down the line of suggesting that sat-navs be used for HGVs, but I am going to leave that issue for another day.
I welcome the support of hon. Members across the House, and I particularly welcome the support of the Chairman of the Select Committee and the points she made about road safety. The hon. Member for Poplar and Limehouse (Jim Fitzpatrick) mentioned those reports, too, and I think road safety is one issue that has cross-party support, with all of us determined to continue the UK’s good record on road safety and never to be complacent about it. We all want to see it continually improving.
I remember that I was glad in Committee to satisfy some of the concerns of the hon. Member for Argyll and Bute (Mr Reid) about some parts of his community. I also noted his plea for a higher charge.
I was not entirely surprised to hear the hon. Member for Linlithgow and East Falkirk (Michael Connarty) refer to the Tory Chancellor’s back pocket, as he had used the same phrase several times in Committee. Although he expressed sympathy for Kent, he will be unsurprised to learn that I have little. If it were to exchange its proportion of these sums for a hypothecated amount, it would be considerably less than the Chancellor made available for local road maintenance in the autumn statement, and continues to make available.
However, the hon. Gentleman was right in saying that I had promised to bear in mind the views of the BVRLA. I understand the concern that the organisation has expressed about size, but the analysis shows that the number of vehicles likely to be affected is relatively small. Even when the “urban artics” mentioned by the hon. Member for Strangford (Jim Shannon) are taken into account, it is clear that 98% of the fleet in the United Kingdom will be less than £50 worse off. In fact, very few people will be worse off as a result of the Bill.
I am glad that my hon. Friend the Member for High Peak (Andrew Bingham) enjoyed the experience of serving on the Committee. I think that it was an enjoyable experience, although I am not sure that all Bill Committees are quite as enjoyable or, indeed, give Bills such a speedy passage. I am glad that my hon. Friend did not press the point that he raised on Second Reading about the Mottram-Tintwistle bypass. I know that the Highways Agency owes him a letter, and I have chased that up today. He will receive letters from both the agency and me, but no promise that the bypass will necessarily arrive.
My hon. Friend the Member for Amber Valley (Nigel Mills) may not have been able to ask the oral question that he had tabled, but he certainly made his points eloquently this afternoon, and I thank him for his contribution.
The hon. Member for Strangford raised a couple of issues that we also considered in Committee. Our discussions about criss-crossing of the border continue, but I am convinced that we shall reach a satisfactory conclusion with the Government of southern Ireland. As for the small “urban artics”, the hon. Gentleman must bear in mind that although some are in lighter weight categories, they often have fewer axles and are therefore disproportionately damaging to the network.
Vehicles with reduced pollution certificates pay lower rates of VED. Because some are paying the minimum levels set by the Commission, we cannot reduce the levels further. Our solution is to change the nature of the benefit provided for vehicles holding RPCs. In future, such vehicles will receive a grant to the current value of the VED discount. I hope that that addresses the concerns expressed by the Freight Transport Association.
I thank all Members who have taken part in our informed, constructive debates, not just this afternoon but throughout the Bill’s earlier stages. I also reiterate my thanks to the Chairmen of the Committee and the Clerks who supported it. I particularly thank the hon. Member for Poplar and Limehouse for acknowledging that the Bill deserved all-party support. His scrutiny was constructive and sensible, and I was delighted to have his support for the Bill. I wish it a speedy passage.
Question put and agreed to.
Bill read the Third time and passed.