Motorhomes and Vehicle Excise Duty

Tuesday 21st January 2020 Westminster Hall

[Sir David Amess in the Chair]

15:59

[Ruth Jones (Newport West) (Lab)]

I beg to move,

That this House has considered motorhomes and vehicle excise duty.

It is a pleasure to serve under your chairmanship today, Sir David. It is good to see you in the Chair for this debate, because I know that this is an issue that you have raised at the highest levels of Government and that you take it very seriously indeed. As you cannot contribute to the debate this afternoon, I will speak for both of us in saying that this issue is serious and real, and that we will keep raising it until the Government take the necessary action. We are not prepared to let the motorhome industry collapse because of Government miscalculation.

I thank the National Caravan Council for bringing this matter to the attention of Parliament, and I am very grateful to have secured this important debate today. The impact of vehicle excise duty on motorhomes and campervans is a niche topic but an important one. The industry and many motorhome users are calling for motorhomes to be removed from the car vehicle excise duty regime, and for motorhomes to be taxed as private light goods vehicles or private heavy goods vehicles, until they can be added to the forthcoming graduated vehicle excise duty regime for commercial vans, from which they are originally derived.

The calls for action are more obvious than many may think. After all, a motorhome is not a car, as motorhomes are designed to perform a function other than general transport of people or goods. They are derived from the chassis of a heavy commercial vehicle, such as a van or a truck, and they have large engines, so motorhomes should not be taxed as cars, when they are clearly not built to be cars or used as such.

So I am pleased to have the opportunity to raise this issue today and it is good that the Exchequer Secretary to the Treasury, the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke), is here to listen to the arguments, understand the concerns and—hopefully—update the House on what measures the Treasury will take to ensure that this anomaly can be addressed and solved at the earliest opportunity that the Government can find.

To be clear, I am calling for a fair approach when it comes to the taxation of motorhomes and campervans. This is a cross-party call for action, both politically and geographically.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

In my area, Swift Caravans has already announced redundancies and I am aware that other companies are currently consulting on making more people redundant. There is huge cross-party support on this issue, as shown by the event that we held in October, the joint letter that we sent to the Minister and the event that we will hold in February. Given that cross-party support and the impact on the industry, does my hon. Friend agree that the Government need to take action now?

[Ruth Jones]

Obviously I agree, and I thank my hon. Friend for intervening to make a powerful point. Yes, there is cross-party support, and she has highlighted both what has been done so far and what we will do in the future. I know that many right hon. and hon. Members who could not be here in Westminster Hall today also support this call for action.

The vehicle excise duty payable for new-generation motorhomes and campervans first registered after 1 September 2019 increased from £265 per year, going up to £2,135 in the first year; it will then be £465 a year for the next five years. That is a huge increase in costs for those people who choose to buy a motorhome and who enjoy using it, and I hope that the Government will reflect on the impact of this massive rise.

The increase in the level of taxation has been applied to all motorhome vehicles, including those fitted with new-generation greener and more energy-efficient engines. If the Government are serious about their climate change targets, why are they not treating light commercial vehicles as cars for the purposes of taxation? Instead of generating an additional £28 million—approximately—from the relatively small number of new-generation motorhomes, they could generate almost £700 million from vans alone.

Let me be clear that that projected £28 million will be raised only if motorhomes continue to sell at rates similar to those in the past. However, I have been informed by the industry that, as my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) has already mentioned, registration rates are declining rapidly because of this tax.

[Holly Lynch (Halifax) (Lab)]

I am eternally grateful to my hon. Friend for securing this debate and for the powerful speech that she is making. Further to the point that she has just made, I will point out that businesses such as Richard Baldwin Motorhomes, which is located in my constituency, Bentley’s Caravan and Motorhome Services, and Caravan Guard and Leisuredays, which is an insurance company that specialises in providing insurance cover for motorhomes, directly employ 60 people in my constituency. Those companies are saying, as my hon. Friend has just said, that such jobs will be at risk if we cannot find the fair approach that she is calling for.

[Ruth Jones]

Absolutely—I thank my hon. Friend for making another powerful point. Jobs in this industry are being lost. That is not right and we must do everything we can to protect those jobs.

Ministers repeatedly refer to the importance of incentivising drivers and vehicle owners to choose low-emission alternatives. However, if someone wants to buy a new motorhome, or if someone wants to manufacture one, there are no alternative engines. So, where is the incentive? There is not one, which is why it is so wrong that motorhome owners are being disadvantaged by having their vehicles taxed as if they were cars. Motorhomes are not cars.

It is important that we regulate emissions and do what we can to preserve our environment, and it is right that owners of new vehicles are encouraged to choose cleaner and more efficient engines. Indeed, the car and light commercial van industries have been consulted on the impact of the worldwide harmonised light vehicle test procedure and the implementation dates have been delayed. It is regrettable that the motorhome industry has had no such assistance from the Government.

We must also remember that, unlike cars and light commercial vehicles, motorhomes are the smallest group of vehicles, travelling just 3,000 miles per annum on average and contributing just 0.22% of all emissions. The Government should encourage people to stay here in the UK and holiday at home. I know from my many staycations in Wales that there are some wonderful beaches, and places for people to rest and enjoy themselves, so that they can spend their money within the UK.

[Peter Aldous (Waveney) (Con)]

The hon. Lady is making a very powerful speech. Does she agree that there are clear parallels between this tax and the aborted static caravan tax in 2012, with disproportionate impacts on those areas where these vehicles are manufactured and indeed on the holiday areas that she has just talked about?

[Ruth Jones]

Absolutely, and the hon. Gentleman makes that point very clearly. I will come on to the importance of staycations in this country now.

[Sammy Wilson (East Antrim) (DUP)]

Does the hon. Lady agree that because motorhomes are used on average for only 31 days each year, a tax of £70 a day is not likely to produce the kind of result that she is talking about?

[Ruth Jones]

Absolutely, and the right hon. Gentleman must have read my speech because I will come on to that very point later.

What happens to staycationing locations across the UK that will lose income and tax revenue because of these proposals? Have the Government completed any studies on this issue? What do they propose to do for people who lose their jobs in the tourism sector because of this arrangement?

We know that staycations stop people from getting on planes, which damage our air, or taking cruises, which damage our marine ecosystems and pollute our waters. So, by holidaying at home, we see lower levels of greenhouse gas emissions and thus less pressure is put on our environment.

The increase in taxation is already having a significant impact on the staycation industry. Unlike the car industry, the motorhome sector saw modest growth year on year up to September 2019, when it recorded a fall of over 7%. That was the very month that the increase came into effect.

I would like the Minister to explain why the Government are penalising 15,000 motorhome-owners, who all contribute to our domestic tourism industry and only use their motorhomes for leisure purposes for about 30-odd days a year, as we have already heard. The policy cannot be about reducing air pollution levels, because if it was, the Government would have a more thought-through and logical approach.

[Gillian Keegan (Chichester) (Con)]

The hon. Lady is making an excellent speech, and I agree with her. There is a disparity between motorhomes, which on average do about 3,000 miles a year, and light vehicles and vans, which do 12,800 miles a year on average with exactly the same carbon dioxide emissions per mile. Does she agree that if we are trying to tackle climate change, motorhomes are not the area on which to focus?

[Ruth Jones]

I agree with the hon. Member entirely. She has made a powerful point.

I want us to think about the people we are talking about. There are people across the UK who use motorhomes and there are manufacturers, as we have already heard, in Hull and other areas. Many committed holidaymakers are using their vehicles to holiday at home in the UK. Those UK-based holidays are a much-needed boost to our regional economies and our coastal and rural communities. Indeed, motorhome and caravan owners make a key contribution of some £9.3 billion every year to the tourism industry and the economy, according to recent UK Caravan and Camping Alliance impact reports.

The days and months ahead as we leave the European Union remain uncertain and a little unclear. We do not know what economic winds may sweep us up or what global shocks may hit us, so the Government must focus on all measures to make life easier and our economy stronger—not weaker. One way to do that would be to tackle the problems associated with the vehicle excise duty for motorhomes. Let us think about the people who will be affected. There are almost a quarter of a million motorhome owners in the UK today. According to figures from the NCC, 81% are over 55 years old, and more than 50% are retired.

Motorhome and campervan purchasers are often older people who have saved for much of their lives to purchase these leisure vehicles. I do not think the Government want to be accused of making such lifestyle choices unattainable or of taking away the means for ordinary people to enjoy such holidays.

[Mr Richard Holden (North West Durham) (Con)]

I have Elddis, a manufacturer of caravans, and Weardale, an area where many motorhome users go, in my constituency. Does the hon. Lady agree that this policy could have unintended consequences for the environment in terms of more CO₂ emissions from foreign travel and for the Government through a hit on taxation with VAT and other duties when money is not spent in the UK?

[Ruth Jones]

I thank the hon. Gentleman for making that succinct and clear point. He does it so much better than I could. Why are we penalising those who will not see their incomes grow or those who have stable incomes and have planned accordingly for their futures? They are entitled to holidays, and the Government should not make it difficult for them. I note that my hon. Friends the Members for Kingston upon Hull West and Hessle (Emma Hardy) and for Kingston upon Hull East (Karl Turner) take that point seriously and have made it over recent months. We now have a Government with a solid majority who are looking to their first post-election Budget. I am sure the Chancellor is busy across the road as we approach 11 March, but I remind the Government that they have no more excuses for inaction. They have a clear majority in this House, so they can act if they want to.

[Craig Mackinlay (South Thanet) (Con)]

I thank the hon. Lady for securing this powerful and important debate. She has made the point that it is often elderly, retired people who enjoy such vehicles, but quite a big lump of younger families also enjoy motorhomes. The clear point is surely that these are not vehicles for personal transport, but leisure vehicles. Has she ever seen such a vehicle in a supermarket car park? I never have.

[Ruth Jones]

The hon. Gentleman makes a powerful point. As I said earlier, these vehicles are not designed to be used as cars because they are not used to transport goods and people as cars are. He is quite correct in that.

I urge the Minister to listen to the industry, to Members from all parts of the House and to the thousands who enjoy using their motorhomes, and to get this mess sorted out.

[Mr David Davis (Haltemprice and Howden) (Con)]

rose—

[Sir David Amess (in the Chair)]

Order. I call the Minister.

16:14

[The Exchequer Secretary to the Treasury (Mr Simon Clarke)]

It is a pleasure to serve under your chairmanship, Sir David. I am grateful to the hon. Member for Newport West (Ruth Jones) for bringing this topic to the House today. I am grateful to all Members who have taken the time to attend and intervene and who have taken the chance to stand up for their constituents. This debate makes it clear that while motorhomes may make up only a small proportion of the vehicle fleet on our roads, they play an important role.

[Sir David Amess (in the Chair)]

Order. I sense that there is some confusion about this debate. It is a half-hour debate. The sponsor of the motion speaks and then the Minister replies. It is for other Members to intervene. Unless permission is obtained, the debate is not for other Members to make separate speeches. There are still many Members here who have attended because they are interested in the matter, but it is simply that they can make interventions.

[Mr Clarke]

I will of course be happy to take such interventions if colleagues wish to make them. I may regret saying that in a moment, but I will take the chance for now.

As I was saying a moment ago, we recognise the importance of this sector for our tourism economy and that it supports thousands of skilled jobs right across the United Kingdom and, indeed, in certain clusters. Yorkshire is obviously one of those.

To recap the situation, the Government use the vehicle excise duty system to encourage the take-up of vehicles with low CO₂ emissions to help meet our legally binding climate change targets. The new VED regulations were introduced in September to aid that, as motorhomes with higher emissions are liable to higher rates of VED than those with lower emissions. After all, transport is the largest sector for UK greenhouse gas emissions, accounting for some 27% of the total. Road transport makes up more than 90% of that.

[Emma Hardy]

Does the Minister not accept that the Government are taxing new motorhomes, which have a greener engine, at a higher rate, while allowing older motorhomes, which have a dirtier engine, to continue on the lower rate? It is completely illogical.

[Mr Clarke]

We clearly have to start the new system somewhere. I take the hon. Lady’s point, but I would argue that if we retrospectively hiked tax on existing vehicles, we would face a backlash. The policy is about trying to influence choices at the point of purchase.

The hon. Lady for Newport West said that the options are not available. Clearly we want to incentivise manufacturers to come up with new options, and it is worth pointing out that the stats that I have show a difference of more than £1,000 in first-year VED liabilities between the most polluting 5% of new motorhomes and the bottom quarter. We are trying to encourage people to make rational choices and buy less polluting and therefore less expensive vehicles.

[Jason McCartney (Colne Valley) (Con)]

I thank the Minister for giving way. A local converter company has told me that the range of low-emission options just is not there at the moment. It has already not replaced five workers who have moved on because sales have dropped. The policy is bad for converters and bad for British business, and it is bad for the environment, because it is staycations that we are damaging. Holme Valley Camping in my patch has also lobbied me, because bookings are starting to be affected by the policy as well. Please will the Minister look at it again.

[Mr Clarke]

That is a typically passionate intervention from my hon. Friend. I take his points to heart, and the Government are listening. Clearly in this context, we can only make announcements at fiscal events. It is important to note that we are hearing the strong messages that people are sending out.

[Mr David Davis]

The Minister has my sympathy. I have a sense of déjà vu from the omnishambles Budget, when the last attempt was made to attack pasties and caravans. At the time, I spoke to a predecessor in his post. I said, “You will lose taxes as a result of the impact on jobs, trade and so on.” He said, “Well, we don’t do calculations that way in the Treasury”, to which my response was, “You ought to.” This policy is masquerading as a green policy. It is destroying jobs in my constituency in Haltemprice already. It is hurting the poorest in our society in terms of their natural holidays travelling around the country. As we have heard, it is replacing staycations with trips to Cyprus and so on, which will use more in one trip than these vehicles use in one year. I look forward not to the Minister solving the issue today—I know that that is not within his reach—but to it being solved in the Budget.

[Mr Clarke]

I thank my right hon. Friend for his remarks. Everyone who bears the scars of taking on him and his colleagues in the context of the 2012 Budget changes will well remember that. The Government are certainly resolute that it is sensible to have a system in place that discriminates on the basis of emissions. How we calibrate that, and the way in which we operate the system, is kept under constant review. It is worth, in that context, pointing out that the current VED system applies to all light passenger vehicles, not just motorhomes, with a recorded CO₂ figure registered from 1 April 2017. That includes all vehicles that fall within the category M1.

I imagine that all Members spend their time reading up on category M1, which covers those vehicles defined as designed and constructed for the carriage of passengers and comprising eight seats or less, in addition to the driver’s seat. In addition, regulations relating to the worldwide harmonised light vehicle test procedure include a requirement for any multi-stage build vehicle, including motorhomes, to record their CO₂ emissions and fuel consumption on their type approval certificate.

[Martin Vickers (Cleethorpes) (Con)]

The Minister has just quoted, word for word, what he said about those regulations when he wrote to me on 12 August. He may recall that I made representations to him on behalf of Auto-Trail, a business that operates on the border of Cleethorpes and the constituency of my hon. Friend the Member for Great Grimsby (Lia Nici). Auto-Trail forecasts that job losses will occur. The Minister concluded that letter by saying that he recognised the concerns. Will he recognise them even more after today? Otherwise, as other Members have said, there will be another omnishambles.

[Mr Clarke]

I thank my hon. Friend for his remarks. He, like many others, has been assiduous in drawing attention to companies in his constituency that stand to be affected. Clearly, we planned to have a fiscal event in the autumn. Events supervened, and I am very glad that they did, but the March Budget gives us the opportunity to assess the tax, as we do all taxes, in the round.

To defend the Government’s record on this matter, we were explicit that motorhomes with a CO₂ figure would be part of the graduated VED system introduced in 2017, and my officials are in constant dialogue with the automotive sector. I have held productive talks with the National Caravan Council, accompanied by you, Sir David. Talk about having a partial Chair.

[Mr Davis]

He is a total Chair, not a partial one.

[Mr Clarke]

Indeed. The NCC is a passionate champion for its sector, and I look forward to further conversations.

[Emma Hardy]

I thank the Minister for giving way again; he is being very generous. Is it not right to say that when the tax was devised, he did not meet with the motorhome or campervan industries to talk about how it would affect them specifically?

[Mr Clarke]

To the hon. Lady’s point, I was not the responsible Minister at that point. In fact, I think I was not even a Member of Parliament at that point. I genuinely cannot speak to whether those conversations were held, but we are now engaged in dialogue. I have met with representatives of the industry since being appointed. Anyone who is present for today’s debate can see the strength of feeling that exists across the House.

The structure of reformed VED is designed to encourage drivers to make the lower emissions choices that we all want to see. However, the high rate reduces significantly in subsequent years, which means that the VED liabilities in year one are not reflective of the total VED liabilities for a vehicle over its lifetime. The VED charge also remains a relatively small proportion of the purchase cost—these are, after all, expensive vehicles—typically between 1% and 5%. It is therefore a comparatively small charge, albeit that marginal costs obviously add up.

[Sammy Wilson]

Does the Minister accept that it is not the percentage of the purchase cost that is important but the running costs per year? If a vehicle is being used on the road an average of 3,000 miles a year, a duty of more than £2,000—nearly 60p or 70p a mile—is a substantial increase in its running costs.

[Mr Clarke]

The right hon. Gentleman raised the issue with me in the House at Treasury questions. He is obviously very committed to ensuring that we look at it again. Of course, VED is a one-off expense that is paid at the point of purchase; it does not accrue to the running costs per se. The way in which we tax that is through fuel duty. If someone drives more miles, they will pay more fuel duty. That is the real correlation and link. However, I recognise that, if people do not use the vehicles a great deal during the course of any given year, VED represents a substantial one-off cost in the first year of operation.

[Mr Davis]

I thank the Minister for being so generous in giving way. On that exact point, perhaps the best thing to compare, if he wants to look at more than one-off costs, is the first six years, which can be reasonably compared. A light commercial vehicle doing 8,000 miles a year will have to meet £3,325; for a motorhome doing 3,000 miles a year, it is £4,460. It is a ridiculous comparison.

[Mr Clarke]

We are trying to standardise the way in which we deal with VED. There is a particular grievance at the moment that it applies to motorhomes but not to vans, for example, as the hon. Member for Newport West mentioned. In the 2018 Budget, the Government confirmed that vans would move to a CO₂-based emissions system, which will apply from April 2021. At that point we will have at least ended the imbalance between the treatment of one sector and another. Clearly, we need to look very closely at how we move forward, in order to ensure that the operation of VED does not penalise people who use such vehicles relatively infrequently. I understand the distinction between vehicles that are on the road every day or every week and those that may be on the road for only a month or two in any given year.

[Craig Mackinlay]

I thank the Minister for being generous. The heart of the nonsense is that the Euro 6 engines, which many of these vehicles will now have, are low on particulates. Let us put CO₂ aside; particulates are what are important with diesel engines. We are actually encouraging the continued use on the road of older vehicles to the detriment of new ones that are, in the round, better for the environment. We are creating the opposite of what we are trying to achieve.

[Mr Clarke]

I thank my hon. Friend for that remark. Reducing particulates is a major aspect of Government policy in terms of air quality as well. It is not solely a question of CO₂. As I remarked in relation to a question from the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy), we are trying to address the matter in a way that does not lead to retrospective taxation of people who have already invested in a vehicle. However, I recognise the point that, were we to create a situation in which it was unviable to buy new vehicles, we would effectively lock them in in perpetuity.

I close by emphasising that we really are listening to the remarks of hon. Friends and Members across the House. We understand the centrality of the sector to jobs and the tourism industry, and the pleasure that people derive from going away in caravans and motorhomes. The Government reformed VED because we believe that tax rates should reflect environmental impact. Although ultra-low or zero-emissions motorhomes may not yet be available, the Government are seeking to incentivise new motorhome purchasers to make the most rational low-emission choices that they can. However, like all taxes, VED remains under review. Any tax changes are considered and announced by the Chancellor as part of the Budget process. As all Members know, the Budget will be on 11 March. Thank you very much, Sir David, and thank you to everyone who contributed.

Question put and agreed to.