HGV Road User Levy Bill

Jim Fitzpatrick Excerpts

Tuesday 29th January 2013 Commons Chamber

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

I beg to move amendment 1, page 5, line 4, leave out subsection (3).

I had the opportunity to have an informal chat with the Minister earlier today about the amendment. Although I am aware that technically it may not do the job exactly as required, I shall outline its intent and the background, and I hope the Minister will address both the intent and what is proposed, and deal with the requirements in due course.

The background to the amendment is correspondence from the British Vehicle Rental and Leasing Association, from Miss Amanda Brandon, the legal and policy executive of the BVRLA, and the legal director, Mr Jay Parmar. The BVRLA, as the Minister and colleagues who were on the Committee will know, gave evidence to the Public Bill Committee on 4 December. In response to a question from the Chair of the Committee, Mr Parmar said:

“However, we have some serious concerns about the drafting of the Bill and the impact it could have both financially and economically on our members”.

He went on to say:

“To give the Committee a feel for the figures, we have estimated that our members tend to dispose of around 20,000 trucks every year, so if we look at a typical fleet that is being disposed of being between band E, as proposed in the Bill, and band G, we believe that, under band E, with two months unused lorry road user fee available, the figure is around £1.06 million, and for band G it is £1.6 million. That is the amount that we would not be able to reclaim under the Bill, which would result in a loss of around £2.7 million each year to UK operators. That starts to give the scale of our concern.”––[Official Report, HGV Road User Levy Public Bill Committee, 4 December 2012; c. 35-36, Q87-88.]

I am sure that the Minister has seen the correspondence received this week from the BVRLA, which says:

“The BVRLA is fully supportive of the Bill’s key aims of creating a level playing field between UK and foreign hauliers and ensuring foreign operators make a fair contribution towards using UK roads. However, clause 7(3) will impose a new cost burden on UK owners as they will be restricted in the amount they are able to claim as a refund for the unused proportion of the levy. A vehicle owner today is able to obtain a VED refund without such a restriction when it is being sold or SORN’d”—

a reference to an off-road notice, as the Minister knows. We had this exchange in Committee, so he is very familiar with this territory.

--- Later in debate ---

[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.

[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

--- Later in debate ---

[Jim Fitzpatrick]

I delighted that I have been joined on the Opposition Front Bench by the shadow Secretary of State, my hon. Friend the Member for Garston and Halewood (Maria Eagle), and by the newest member of the shadow transport team, my hon. Friend the Member for Makerfield (Yvonne Fovargue).

Despite the previous debate, this is a good Bill, and the Opposition welcome it, as we did on Second Reading. I commended the coalition for introducing it to support British haulage, and I commend the Minister and his predecessor, the hon. Member for Hemel Hempstead (Mike Penning), who was the architect of the Bill—he built on that which Labour left him when it left office. It is clear from pre-legislative scrutiny and debates in Committee that the Bill has cross-party and cross-industry support.

The Opposition raised a number of issues in Committee: hypothecation, visible evidence of payment, rebates, meandering Irish cross-border roads—an issue covered by the hon. Member for Strangford (Jim Shannon) and others—and road safety. We also dealt with the Bill’s timetable, enforcement and reduced pollution certificates. On all those issues, I am happy to say that the Minister was able to respond so positively and provide enough reassurance that none of the amendments we tabled was pressed to a Division. It is to the credit of the Minister and his officials that they responded so positively to the probing to which we exposed them. He reassured both sides of the Committee that the Bill should be supported.

I should make one or two brief comments on the issues we have raised. The Minister made a stout philosophical defence against hypothecation, and the Opposition could not argue against it because we too would have opposed hypothecation. He therefore made a lot of sense when he said that hypothecation was not an appropriate way forward.

On enforcement and the question of using some of the money as supplementary funds for the Vehicle and Operator Services Agency, the Minister reassured us on his confidence in the system. We have moved on a lot—we have the success of the congestion charge in London and the technology for automatic number plate recognition cameras—and the Committee was reassured that we have the technology to ensure that the system works.

The one question on which those on both sides of the House have raised concerns was road safety and the disproportionate number of crashes caused by foreign vehicles. Perhaps the Bill will deter some foreign hauliers from coming to the UK, which might in turn reduce the number of crashes caused by foreign hauliers. In that respect, the Bill will have an impact on road safety.

The Opposition also raised the question of giving a tokenistic measure of support for road safety. We suggested using some of the money raised—either from fines or the levy—for road safety purposes. It was suggested that The Times cycling campaign, which has been championed by my hon. Friend the shadow Secretary of State and other hon. Members, was an appropriate campaign to benefit from the levy. That was clearly not going to happen, but we considered it and demonstrated cross-party support for the campaign and for road safety in general, and so indicated that we need to maintain our rigour in respect of trying to reduce the numbers of people killed and seriously injured on our roads. This measure ought to help in that regard.

The Bill is a good Bill. It will make a contribution to rebalancing the playing field for UK hauliers. The previous Government should have introduced it. I discussed the matter with the Treasury Minister responsible at the time, and he too could not work out why we did not introduce it. I assume it was too late in our legislative cycle. That is slightly embarrassing, but Labour has none the less supported the Bill on Second Reading and in Committee, as we support it on Third Reading.

We appreciate the efforts of officials and my hon. Friends who supported the official Opposition in Committee. We also appreciate the efforts of my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), the Chair of the Select Committee on Transport—she was in the Chamber on Second Reading and is here again on Third Reading—whose Committee helped in our deliberations. We want the Bill to make progress and are pleased we are debating it today.