Motorhomes and Vehicle Excise Duty

Simon Clarke Excerpts

Tuesday 21st January 2020 Westminster Hall

[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.

--- Later in debate ---

[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.