HGV Road User Levy Bill

Michael Connarty Excerpts

Tuesday 29th January 2013 Commons Chamber

[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.

--- Later in debate ---

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I want to raise a couple of issues just to put them on the record. We have had a debate, and eventually an agreement, not to press any of the worthy amendments to a vote. As my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) said, the Bill has been a long time in gestation, going back to our time in office. People wanted to see something done, a point made by the hon. Member for Tiverton and Honiton (Neil Parish), and felt strongly that there was an imbalance and a disadvantage to the UK haulage business for many reasons, including diesel prices and the lack of any contribution to our road network.

Some of the points that have been raised are sound. Kent county council made an excellent contribution to the argument for hypothecation on the basis that a large percentage of the vehicles coming into the UK use its road system that it then has to maintain. Given that the Government are now in the ludicrous position of rate-capping every council—they call it council tax freezing; it is rate capping—the money available to Kent through the normal levy powers is diminishing, so it was looking to see whether this measure would bring some money into its coffers to help it to maintain its roads. However, we are told that it will all go into the Consolidated Fund—into the back pocket of the Treasury.

A colleague from the north-east of England made a good case for the need to upgrade the poor quality roads in the north-east of England. The point was made very well that to drive from Scotland to Tyneside, a major European hub for roll-on/roll-off transport and tourism, it is necessary to drive down what is virtually a country road for about 20 or 30 miles. I have done that journey and can verify that feeling of having lost my way because there is no decent road network leading to that major port. I can see why hypothecation would make a lot of sense. I made a bid for hypothecation for a major bridge project in Avon gorge in my constituency, a choke point where accidents happen all the time. It was decided, however, that there would be no hypothecation.

I still question the decision that the money raised should all go to the Consolidated Fund. There are two points about that. One of those points is to level the playing field up in terms of making charges on those from abroad who use the roads, and who at the moment do not do pay. However, everyone who gave evidence from the Freight Transport Association made a bid for some, if not all, of that money to be put into the road network. The idea that some of that money will go into the Vehicle and Operator Services Agency and some into registration recognition cameras is a small point in policing, but that does not raise the quality of the road network, which is what the transport companies were speaking about.

The question we need to ask over the years is whether the money going into the Consolidated Fund comes out at the other end so as to benefit the road user in any way, particularly heavy goods vehicles, which deliver goods to the shops, homes and companies in this country. That is one question that I leave to be considered over time. It should be looked at in the review that the Minister kindly offered during the debate on the amendments. I like the idea of reviews, because although I am sure the Bill is grand and well thought through, there is always the law of unintended consequences to be taken into account.

The second thing I want to address is the question dealt with by our amendments today. In reading the Bill, one thing was clear to me. I do not know the kind of transport detail that the hon. Member for Tiverton and Honiton and others seem to know—including, possibly, the Chair of the Transport Committee—but I have a large number of heavy goods vehicle depots in my constituency, in and around Grangemouth, which is the only recognised totally inter-modal hub in Scotland. It has road, rail and a major shipping port—the biggest container base in Scotland. People tell me that cashing in their HGV licence at particular times can be sensible business; the problem now is that they have to work out how to cash it in at the same time as not losing money on the levy. I know that the Minister said that the figure of £2.7 million that the leasing companies gave us was high—possibly every vehicle had to be in the worst category, and so on. The point I was asking about was the principle and what, on first look, I thought was a dislocation between the fact that someone who does not come into the UK and does not pay their levy—because they are not coming in—faces a zero sum and the fact that someone with a British-registered vehicle who pays the levy but cashes it in at the wrong time will be out of pocket.

The Minister says the figure turns out to be only £6 a year. That may be the case, and that may all right for the industry. However, the industry would not have rung the alarm bells—it perhaps rang a bigger bell that it should have—if it had not felt that there was some justification being made for the concept of placing an imposition on UK hauliers. That was not the point of the Bill; the point was to place an imposition entirely on non-British-registered vehicles coming into the country. If, as a consequence, we put an imposition on what is an already very burdensome industry to work in, with the cost of diesel and all the regulations that have to be faced—I get it all the time, and I sympathise with Malcolm’s, Russell’s and all the others based in my constituency who tell me they carry small amounts, but over a large number of vehicles and a large number of trips, which makes them uncompetitive compared with others coming into the country—we will have failed in what we set out to do. We set out to level the playing field up, not push UK road hauliers up a bit further so that they do not bridge the gap to the point intended by the levy.

We need to ensure that the review is a serious promise from the Minister—that he will look at the consequences and at the figures at the end of the year, and that every year he will talk to the people in the road haulage industry and see whether we have got it right. I commend him and his team for bringing the Bill forward. I know it is difficult—it was difficult for my hon. Friend the Member for Poplar and Limehouse when we were in government to do this—and the Minister has marched a long mile. I just hope that he will continue seriously to review the unintended consequences of the clauses that we were concerned about and that, at the end of the day, if they need amending, he will come back and amend them on the Floor of the House.

[Andrew Bingham (High Peak) (Con)]

I, too, commend the Minister and the Government for bringing this Bill forward. I fear that it will be lost in the media tomorrow, given the previous business in the Chamber today. However, the wider population would welcome the Bill. When I speak to hauliers across my constituency, I know that they are grateful for the freezing of fuel duty, but this Bill starts levelling the playing field up.

I hear what the hon. Member for Linlithgow and East Falkirk (Michael Connarty) said about hypothecation and Kent, and all the rest of it, but I would make this argument. People might think that the High Peak is a little rural backwater, but believe you me, they probably all walk, sit and drive on the limestone that comes from our area. If we are going to hypothecate, which I do not think we should, I would argue for more money because our roads get so much stick from the wagons that carry that limestone.

[Michael Connarty]

The hon. Gentleman can be assured that I support him on that point, because the roads are in a terrible state throughout the whole country.