Emissions and Vehicle Type Approval

Louise Ellman Excerpts

Thursday 20th April 2017 Westminster Hall

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

I beg to move,

That this House has considered the Third Report of the Transport Committee, Volkswagen emissions scandal and vehicle type approval, HC 69, and the Government Response, HC 699.

It is a pleasure to serve under your chairmanship, Mr McCabe.

In September 2015, the American non-governmental organisation the International Council on Clean Transportation discovered that Volkswagen had been cheating on emissions tests around the world. The purpose of such tests is to ensure that vehicles comply with standards on nitrogen oxides—a poisonous emission. Volkswagen eventually admitted that its cheating started in 2006. Defeat device software was installed so that emissions were reduced only when the vehicle was being tested in the laboratory and did not reflect what happened on the road. The consequence was 11 million VW vehicles worldwide—1.2 million of them in the UK —pumping out poisonous gases at many times the acceptable level. This is an issue of consumer confidence and public health. Emissions standards exist to protect our health; each year, in the UK alone, nitrogen oxides cause 23,000 premature deaths.

The Select Committee on Transport was determined to find out what had happened. In October 2015 we first heard evidence from Paul Willis, the managing director of Volkswagen UK. It quickly became apparent that this was not just a case of one rogue company—it exposed deficiencies in the vehicle testing process. We launched our inquiry into VW emissions and vehicle type approval in November 2015. Our report published in July 2016 made findings in three major areas.

First, Volkswagen showed a cynical disregard in its treatment of European customers. We were astonished to hear Volkswagen apologise for what it had done, and subsequently deny that it had done anything wrong. Its continuing refusal to provide UK customers with any compensation remains deeply unfair. Secondly, the vehicle type approval process was not fit for purpose; riddled with conflicts of interest, its inadequacy meant that VW was able to cheat the emissions standards for years without detection. Thirdly, much needed to be done to improve the emissions tests overall. Like the type approval process, emissions standards have undergone review at EU level, but before the emissions scandal they had been allowed to become hopelessly out of sync with developments in vehicle technology.

We have continued to pursue this issue as regards Volkswagen’s culpability for its deception and in pressing for fair treatment of its UK customers. Doing so raises the question of the adequacy, or inadequacy, of the action of UK authorities.

[Andrew Selous (South West Bedfordshire) (Con)]

I am listening carefully to the hon. Lady’s impressive speech. Does she agree that the Government are out of pocket because a higher level of vehicle excise duty should have been paid? The vehicles were not as environmentally friendly as they were made out to be, so, in addition to the claims of individual consumers who were misled, the Government are short of tax revenue, which we desperately need for public services. Does she agree?

[Mrs Ellman]

I certainly do. Indeed, I will refer to compensation later, because it relates to the taxpayer, and the Government, as well as to individuals who had purchased vehicles. The hon. Gentleman makes an important point.

We have continued to pursue this issue both as regards VW’s culpability for deception and in order to seek fair treatment of its customers and, indeed, the taxpayer. Let us look at what happened. Volkswagen’s response to the uncovering of the scandal in the UK has been pitiful. I regret that the Department for Transport has so far been unable to convert its strong words condemning VW’s behaviour into action that delivers concrete benefits for customers and the public, including fair compensation for both.

When Mr Willis first gave evidence to us, and when he came in January 2016, he told us that Volkswagen was committed to uncovering what had happened and making sure it never happened again, and the company apologised for its action. Indeed, if I recall, I do not think that Mr Willis and the company stopped apologising for what it had done for much of the session. We were told that it had hired the law firm Jones Day to investigate and produce a report that would be made public. We were told that the investigation involved 450 people looking through the equivalent of 50 million books. Great importance was attached to that; indeed, Mr Willis told us that he declined to answer a number of our questions because the issues would be dealt with in the Jones Day report that was to be made public and that we would clearly then have access to.

When we questioned the same Mr Willis in Committee two months ago we heard an entirely different story. He assured us that the Jones Day findings were contained in the statement of facts published by the United States Department of Justice as part of its deal with Volkswagen —a document that is 29 pages long—and told us that no other Jones Day findings would be published at all. He implied that a report might not even exist; it might just be this statement of facts—29 pages and not to be published. It stretches credulity that the findings of such an extensive investigation can be summarised in 29 pages. The statement of facts produced for the US Justice Department focuses on events in the USA, and Volkswagen itself repeatedly stated that the events in Europe are entirely different.

We pursued Mr Willis further to seek clarification of a number of points. One was that he appeared to speak in direct contradiction to the evidence given to us by the Minister, who followed him in the evidence session. We received a written response from Mr Willis. That response was not to my or the Committee’s satisfaction; it did not clarify the issue. I have therefore written, on the Committee’s behalf, to Hans Dieter Pötsch, chairman of VW’s supervisory board, seeking further information and, I hope, clarification of where the truth lies.

After so much effort, Volkswagen’s refusal to release in full the findings of the report that we were told so clearly would be published is deeply suspicious. I wonder what the company has to hide and why it is doing this. Mr Willis had told us at an earlier point that it was “implausible” that a senior Volkswagen employee would have known about the defeat devices; indeed, we were told that the scandal originated with a few rogue engineers. Clearly, that view is not shared by the American and German authorities, which are actively investigating several senior VW employees. Oliver Schmidt, who gave evidence to our Committee last year, is among those now being investigated in the States—a situation that hardly inspires confidence.

If VW’s position is that the scandal was caused by a few rogue engineers, it must release the full Jones Day findings to prove that contention. If VW refuses to do so, I ask the Department to act. I recognise that the Department has asked for the Jones Day report, but as far as I am aware, it has not been produced. Will the Minister update us on his efforts to secure the full Jones Day findings and place them in the public domain? Also, what discussions has he held with his American counterparts about the possibility of sharing the information already given to the US judicial system?

Compensation for UK customers is a critical issue. Mr Willis was full of apologies on the company’s behalf when he first gave evidence in 2015, but since then, his tune has changed dramatically. In fact, it is now VW’s position, as Mr Willis stated to us in Committee a short time ago, that the company has done nothing wrong in the UK or the rest of Europe and that therefore no compensation is due.

That is treating the UK with contempt. I remind hon. Members of the position on compensation in other countries. In the US, Volkswagen has agreed to provide each owner with between $5,000 and $10,000, while a deal agreed in Canada will give owners between $4,000 and $6,000 US. Here, they will get nothing at all. Why has no action been taken by the Department for Transport, the Serious Fraud Office or the Competition and Markets Authority? I have asked that question in the past and been told that the issues were being considered, but as far as I am aware, no action has been taken; I hope that the Minister can give me the latest information.

A few moments ago, the hon. Member for South West Bedfordshire (Andrew Selous) raised the issue of compensation. Can the Minister update us on whether he has secured the additional £1 million that he demanded from Volkswagen? That is one of the issues over which we are in dispute with Mr Willis: the Minister told us that the company had not given the Department what it asked for, but Mr Willis appeared to tell us that it had. We are still trying to clarify that issue through correspondence, so if the Minister could help us on it when he replies, it would assist us very much.

I would also be grateful for an update on European Commission proceedings. The officials who appeared before the Committee in February spoke of an ongoing dialogue. What has that delivered, and what action will be taken? I am aware that the Commission proposes to take action against the UK Government for failing to act in relation to its responsibilities to enforce appropriate standards; it would be helpful to know the current position.

I will briefly address the technical measures implemented by Volkswagen in the wake of the emissions scandal. Again, Mr Willis recently told the Transport Committee that the fix had no impact on real-world emissions, and we were told that nothing was wrong. He was asked why, if nothing was wrong, the vehicles were being fixed, and we were told that the sole reason was to ease customers’ minds about how vehicles had got through the testing programme—the company is spending money on so-called fixing, but the company did nothing wrong and is doing it only to ease customers’ minds. I find that completely implausible. That cannot be the situation. We are also told that the technical measure had no impact on vehicles’ performance. I said to Mr Willis that if that was correct, surely he would have provided a warranty to cover the technical measure. I know that the Department has been seeking that warranty, but as far as I am aware, the company has done nothing.

I receive numerous communications almost daily from members of the public who report that their vehicle has been impaired since they had the fix applied. A closed Facebook group bringing together people who have been affected now has 1,400 members. Many have told me about the stress of suddenly finding that their vehicle was not working after the measure was applied. They relayed instances of the vehicle going into limp mode, or not going above a certain speed; in one case, it happened on a motorway, and other cars had to swerve to avoid a collision. In many instances, when customers raised concerns, they were told that it was a coincidence and asked to pay hundreds or even thousands of pounds for the fault created by the so-called fix to be investigated and put right.

Mr Willis told the Committee that he would give us an assurance on that matter and said that it could not be the case, but that the company would investigate free of charge all reasonable concerns raised by VW owners after the fix was applied. I suspect that Mr Willis’s definition of “reasonable” might differ from his customers’. Will the Department monitor what happens in that regard?

The scandal was not only a case of a rogue company; it could never have happened if the regulatory structures for vehicle type approval had been adequate. We must remember that the cheating was uncovered not by a regulator, but by a US non-governmental organisation, the International Council on Clean Transportation. European Community whole vehicle type approval is the process ensuring that vehicles meet the relevant environmental, safety and security standards. An approval authority—in the UK, the Vehicle Certification Agency—certifies that the vehicles meet the relevant standards. Approval authorities work on the basis of information collected by technical services organisations that witness the test and collate the information.

As well as being an approval authority, the VCA provides technical services to manufacturers. The Committee concluded that that constitutes marking one’s own homework; it is a clear conflict of interests. In addition, the VCA competes with other European approval and technical services agencies across Europe for business from car manufacturers. The incentive to be unduly lenient on car manufacturers is clear. That conflict of interest works against consumers and ultimately damages public health.

In their response to our report, the Minister told us of various measures being considered to manage potential conflicts of interest, including more independent assurance and audit and increased training for emissions engineers. We were also told that an end-to-end review of the technical service process was taking place. Can the Minister update us on the outcome of that review? What plans have been put in place for type approval as part of the Brexit negotiations? We currently use European standards; what will happen after Brexit? Is that part of the negotiations? Is it expected that the UK and EU countries will continue to accept vehicles type approved by one another? How will it work?

Our report emphasised the importance of in-service surveillance, or the process of spot-checking vehicles on the road to ensure that their pollution performance is still within an acceptable range. The Minister told us that a new, robust system of in-service surveillance was being implemented, which is to be welcomed, but in the first instance, that surveillance will focus on new vehicles entering the market. Can the Minister update us on the performance of the new market surveillance unit? What progress has been made in ensuring that that unit operates beyond new vehicles?

A gap exists between real-world emissions and those emitted in the laboratory; it is the result of developments in technology and flexibilities allowed in the test procedure. Can the Minister update us on the progress of setting the final requirements for Euro standards? Is he satisfied that they are sufficiently robust? The Department told us that it had written to the European Commission to press for further improvements. What has the response been?

A year and a half after the emissions scandal came to light, Volkswagen has still not been held to account. Instead of providing the information, compensation and warranties that have reasonably been requested of it, Volkswagen maintains that it has done nothing wrong. Surely it is time that the Minister committed to using the powers available to him.

The scandal goes much further than Volkswagen. In the course of our inquiry, it became abundantly clear that the type approval system and emissions standards were not fit for purpose. Their support for manufacturers at the expense of ordinary people, consumers and public health was well known, but nothing was done about it before the emissions scandal erupted. I ask the Minister today for clear information on how the situation has improved.

The Volkswagen emissions scandal was shocking, but it has shone a light on deficiencies in the testing process. UK consumers are being treated with contempt. What action is the Minister taking to correct this outrageous situation?

--- Later in debate ---

[Mike Weir]

I see absolutely no reason why it cannot. Obviously the American consumer organisations are slightly different from our own and seem to be better at getting things into court and sorted out much more quickly than is the case under our system, but that should not be the case. Volkswagen, which clearly reacted quickly to the problem it had in the United States—presumably because of the damage to its reputation and market share in the US—should have done the same in Europe. That prompts the question as to why Volkswagen thought that it did not need to do that in Europe.

It is imperative that the UK, along with other European jurisdictions, takes action to show that they are not immune from what is happening in the United States. We must put consumer rights at the heart of this, as well as taxpayers’ rights, because the taxpayer faces a huge and ongoing bill, probably for many decades, due to what has happened over the last few years.

I was commenting earlier about the possibility of action under the Sale of Goods Act 1979. I was a solicitor before I came to this place—some years ago now, admittedly—and that is not an easy route for individuals to take. The Government note they are not privy to the terms of the contracts between individual owners and the company, but many individual owners will have contracts with the third parties who sold them the cars and will not generally have contracts directly with the company, although some may, depending on the type of contract.

However, the most problematic area is simply the impracticability of any individual car owner taking on a massive multinational such as Volkswagen in the civil courts. Such actions are not cheap at the best of times and when such a huge technical issue is involved, the costs are likely to escalate quickly. Also, whatever the sum that an individual may be claiming, there is an incentive for the multinational company to fight the case, because it is not dealing with just one such case but potentially thousands of such cases. There would be a real David and Goliath battle, and it is difficult to see how any individual would have any chance of success.

[Mrs Ellman]

The hon. Gentleman is making some very pertinent and interesting points. The change in Volkswagen’s attitude towards the Committee, from the first time they appeared before us to the last time, two months ago, was dramatic. Initially, they were full of apologies, but on the last occasion they said they had done nothing wrong. I can only feel that that is because they believe that they have got away with this and will not be challenged. Does he agree that that makes it even more important that the Department for Transport considers its powers to challenge, so that individuals are not left isolated and vulnerable?

[Mike Weir]

I was just about to make that very point. It is not within the power of the individual to take on these companies. It seemed clear to me from Mr Willis’s attitude when he last appeared before the Committee that Volkswagen would try to defend its actions, if it says it has done nothing wrong, which would leave the individual consumer in an impossible position. It will only be by Governments—not only in the UK but in other European nations—acting together and going after the company, and making certain that there is a compensation scheme akin to the one that has existed in the United States and Canada, to compensate ordinary victims of this scandal in the United Kingdom.

This is not an isolated case; there are other scandals in the motor industry. For example, there is the Vauxhall Zafira, which kept bursting into flames. The motor industry is an important industry in many parts of the United Kingdom and it may well become even more important as things progress. However, it must get its house in order, because if these scandals continue, there will be a great loss of confidence in many of these vehicles among ordinary consumers. I would ask the Minister to consider that and also to say whether he has discussed with other European jurisdictions the possibility of a joint and multilateral approach to getting a consumer compensation scheme to cover the European Union, or at least several countries together.

--- Later in debate ---

[The Minister of State, Department for Transport (Mr John Hayes)]

It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate the Chair of the Transport Committee, the hon. Member for Liverpool, Riverside (Mrs Ellman), on securing this important debate and bringing this subject to our attention once again. Let me be clear—I apologise if this is repetition, but repetition from one’s own mouth always seems like re-affirmation or re-emphasis; repetition only seems to come from other people’s mouths—that the Government continue to take this matter extremely seriously.

As you would expect, Mr McCabe, I want to deal with a number of the specific points raised in the debate, but if I may, I will first address a couple of the issues raised by the hon. Member for Cambridge (Daniel Zeichner) in his remarks, which preceded my contribution. I do not want to be distracted from the main subject of the debate, and you would not allow me to be, Mr McCabe, but air quality is relevant, and we debated it yesterday in this place. The hon. Gentleman asked a number of specific questions. He will understand if I am circumspect about the exact details of what the draft plan on which we will consult will look like, but I am prepared to say —it is right that I am open with him and this Chamber—that I think it is important that public transport is part of our response to the air quality challenge.

My view, which I have made crystal clear in the Department, is that if we can get fleet purchasing and public transport, including buses and taxis, in a better place in respect of emissions—by that I mean getting those kind of vehicles moving to a low-emission metric, although I have no fixed idea of exactly what that might look like—we can make quite a significant difference in the worst-affected areas in particular. He will know that we have taken a zonal approach in the past, and I see no reason why that should change fundamentally.

That is not to say that air quality is not a national concern. The policy will, of course, be a national policy, but it will be focused on the zones where air quality is at its worst, because we know that air quality is closely related to wellbeing. It has a deleterious effect on health, particularly for vulnerable people—the sick, young children, elderly people and so on—and its effects are exaggerated in urban places, unsurprisingly, because of the density of traffic and population and the coincidence that that brings.

Similarly, the hon. Gentleman knows that that plan will be a matter for consultation. A draft will be published, and we will consult widely on that draft with Members of this House, local authorities in the worst-affected areas and others who have interests in this business. We are genuinely open-minded about that. I have worked very closely with my colleagues in the Department for Environment, Food and Rural Affairs. I have been meeting weekly with my hon. Friend the Member for Suffolk Coastal (Dr Coffey), which is a great pleasure in itself, but is also a productive, professional business. She and I have engaged our officials to ensure that we get a joined-up approach to this issue.

Of course, DEFRA leads on air quality, but as transport is so salient in finding the right solutions, we are very conscious that there has to be a close association between DEFRA’s perspective and ours, and that of other Government Departments. We have been in close liaison and association with them too. It will be an open-minded approach, founded on a clear determination to do the right thing.

Mr McCabe, we did not enjoy the pleasure of your chairmanship yesterday, so I hope you will not mind if I inform you and others of what I said then. It is absolutely my view that we must not, in our determined efforts to tackle air quality, disadvantage those who are already worse off—I am thinking in particular of the less well-off drivers of older diesel vehicles. We have to be careful that an unintended consequence of any otherwise efficacious policy should not put those people into a very difficult position indeed. Yesterday, in the debate secured by my hon. Friend the Member for Tiverton and Honiton (Neil Parish), we talked about a targeted scrappage scheme, as that was the case he made. I say now what I said to him: of course, we always welcome contributions to the discussion. He made his contribution and that will be fed into our work and our thinking. If one is to have a genuine, open-minded consultation, one must take into account a range of views and opinions, ideas and schemes. Forgive me for repeating—but that did not sound any worse than it did yesterday, at least not from my perspective.

The other matter that the hon. Member for Cambridge raised, and quite properly so, was the upcoming changes to testing. It is important to be crystal clear about what the new emission tests are and why they matter. The changes introduce a compliance criterion that is defined as a conformity factor. The conformity factor is the ratio of emissions recorded during the real world test, which is the limit on the laboratory test that must not be exceeded during the real world, on-road testing.

In the proposal, the requirement for the real driving emission tests is phased in in a two-step process, to allow manufacturers time to bring compliant products to the market. Step one mandates a conformity factor of 2.1 for all new model types by 2017. Step two achieves full compliance with Euro 6 standards for all new model types in January 2020, with an additional conformity factor margin of 0.5 to take into account measurement uncertainties. That proposal means that after 2019 all new models brought to the market must meet the Euro 6 limits in the real world tests. That is the bottom line, with a margin for measurement error of the test equipment. The hon. Gentleman asked what the UK’s position had been on that. I can tell him, and I think he will be reassured, that the UK pushed very hard in the negotiations for the introduction of those changes on the timescale I have described. We were anxious to make sure that there was no delay in moving to those real world tests.

That point gives me an opportunity to deal with some of the specific matters raised by the hon. Member for Liverpool, Riverside and others and to say a word about how we got to where we are on air quality and emissions. I do not see the air quality challenge as a partisan matter, taking it as read that Members across the House take it seriously. Bluntly, the challenge has been compromised, and I would go so far as to say worsened, by the failure of the EU vehicle emissions regulations to deliver the anticipated reductions in air pollution—we know that now—and by neglect and cheating by some diesel car makers to avoid reducing emissions as they were supposed to. The pollution limits in EU law agreed under the Labour Government in directive 2008/50/EC were based on the assumptions that improvements in vehicle technology were deliverable. Although it is true that in the UK we meet the majority of our air quality limits, it has become clear that, like 17 other countries, we breach annual targets for nitrogen dioxide.

Yesterday I committed to make available to those who were in the Chamber then—my hon. Friend the Member for South West Bedfordshire (Andrew Selous) is one of them, and the hon. Member for Cambridge is another—the breakdown of the sources of that gas by transport type, which includes shipping, trains and all kinds of other sources. I will make that available to other Members present today, as I think it will be helpful in informing future consideration. However, we are certain, and other Members of the House will be too, that diesel vehicles are a significant part of the problem. They are not the only part, but they are significant. It is right that the hon. Gentleman emphasised buses and other vehicles, because we often think that is about only cars. It is about not just cars but light goods vehicles, HGVs, buses and so on.

The failure of Euro standards and the failure therefore of the anticipated improvements to air quality are a pressing problem across Europe. I hesitate to say it is a scandal, but I would say that it is a fundamental failure of the approach of the EU. As in so many other areas of our national life, we have been injuriously affected by the European Union. How wonderful that we will not have to face that prospect in the future as we leave.

[Mrs Ellman]

rose—

[Mr Hayes]

Oh, I have provoked the Chairman of the Select Committee to intervene.

[Mrs Ellman]

I am sure that the EU is not without fault, but national Governments are responsible for their own certification systems, and our certification system and the type approval process has been found severely wanting. I hope that the Minister will tell us in due course what he as Minister in this country is going to do about that.

--- Later in debate ---

[Mrs Ellman]

All hon. Members have made important points about the scandalous behaviour of Volkswagen and the broken testing and type approval system. I am encouraged by the Minister’s response about the work that he has done, and I urge him to continue it so that individuals and the taxpayer receive compensation and the promised fix. I ask him to keep pursuing the Jones Day report and, so far as he is able to, to enable its publication, because it contains vital information. It is a shame on Volkswagen, a major international company, that it seeks even to deny the existence of a report that could expose the horror of its shortcomings.

Question put and agreed to.

Resolved,

That this House has considered the Third Report of the Transport Committee, Volkswagen emissions scandal and vehicle type approval, HC 69, and the Government response, HC 699.