Vehicle Excise Duty

HC Deb 23 November 1978 vol 958 cc1460-2

7. Mr. Ronald Atkins

asked the Chancellor of the Exchequer what is his estimate of the extent to which petrol tax would have to be increased if the whole of the excise duty on private cars were transferred to a petrol tax; and what proportion of private motorists would benefit from the change.

Mr. Robert Sheldon

As my right hon. Friend the Secretary of State for Transport told the House on Tuesday, the Government propose to phase out the vehicle excise duty on all petrol-driven vehicles and replace it by an increase in petrol taxation by 1983. I estimate that an increase of about 19p per gallon in petrol taxation would be required to replace the revenue from VED on petrol-driven vehicles in 1978–79. This could be expected to reduce the cost of private motoring for something over 8 million out of the 14 million motorists in the country.

Mr. Atkins

Do not these figures confirm that the petrol tax is not only more equitable than the vehicle excise duty because it taxes actual road use, but benefits the majority of motorists, especially the less affluent?

Mr. Sheldon

I do not think that there is any doubt that the taxation of petrol rather than the taxation of cars results in the taxation of use. In so far as it is possible to do that at present, over a considerable phasing-in period, that is to the advantage both of motorists and those in the industry generally.

Mr. Donald Stewart

Is the right hon. Gentleman aware of the cost of living implications for rural areas? Many of these areas are bereft of alternative transport, in some cases through action by Governments in London, particularly with regard to the railways. Has he any plans to alleviate these extra costs to the rural areas?

Mr. Sheldon

The right hon. Gentleman is correct in drawing attention to the problems of those in rural areas. But they will receive some benefit both from the fact that they will be enabled to keep a car on the road more easily, because of the reduction in the vehicle excise duty, and from the provision that we made in the Transport Act for those who share journeys to share the petrol costs.

Mr. Moate

Does the right hon. Gentleman agree that there is a danger that motorists will end up with the worst of all worlds, in that they will have to pay not only the 19p extra per gallon but a registration charge to cover the administrative expenses of maintaining the bulk of the existing work force at the Swansea licensing centre?

Mr. Sheldon

The hon. Gentleman fails to take into account the way in which the duty on petrol has declined over the past few years in real terms. If we were to bring the cost of petrol up to what it was under the last Conservative Administration, we should have to increase the duty by 30 per cent. That shows the real result of what this Government have done over the past four and a half years.

Mr. Buchan

I am in general agreement with what my right hon. Friend said, even in relation to rural areas, but does he not agree that there is a problem here? In working out the position of the average rural motorist, the Government's paper forgets that there is a wide scatter of non-average motorists within that average. That is especially true of the more remote areas, which have the added burden of dearer petrol. Will my right hon. Friend examine those aspects?

Mr. Sheldon

I am aware of the important point that my hon. Friend makes, but the vehicle excise duty has been evaded on a wide scale over the past few years. Our estimates are that evasion was between 7 per cent. and 9 per cent. I think that it was right that when the conditions were opportune a move of this kind should take place.