HC Deb 11 March 1997 vol 292 cc206-13

'() The small islands to which paragraph 18 of Schedule 1 of the Vehicle Excise and Registration Act 1994 applies, shall include those islands designated under an Order made under the provisions of the said paragraph together with the main island of Orkney, the main island of Shetland, Lewis and Harris.'.—[Mr. Wallace.]

Brought up, and read the First time.

7.45 pm
Mr. James Wallace (Orkney and Shetland)

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this, it will be convenient to discuss new clause 17—Exemption of small islands based vehicles— '() Paragraph 18 of Schedule 1 of the Vehicle Excise and Registration Act 1994, shall be amended as follows: In sub-paragraph (7) the definition of 'mainland road' shall be deleted, and the following definition shall be substituted therefore: 'mainland road" means any public road in the United Kingdom, other than one which is on a small island or which connects two such islands or is on the main island of Orkney, the main island of Shetland. Lewis or Harris.'.".'.

Mr. Wallace

The new clauses give me an opportunity to raise a matter that is important to haulage contractors in my constituency, specifically those based in some of the smaller isles.

The origins of new clause 16 lie in earlier Finance Acts. During the passage of those Acts, there was considerable debate about the application of an exemption from the higher rates of vehicle excise duty on lorries based in the smaller isles. Before the Finance Act 1995, lorries based on islands where there was no opportunity for plating and testing were given an exemption, and paid a much lower rate of vehicle excise duty. The Bill as originally proposed would have taken that away, and would have meant some haulage contractors on those isles paying over £1,000 more than they would have paid if the exemption had continued.

After a spirited debate in Committee on the Floor of the House, the right hon. Member for Wells (Mr. Heathcoat-Amory), who was then a Treasury Minister, met hon. Members whose constituencies contained islands. He gave us a fair hearing, and accepted that we had something of a case. An amendment was subsequently tabled, and there is now a reduced rate of vehicle excise duty for vehicles that are on an island designated under the Vehicle Excise Duty (Designation of Small Islands) Order 1995, which lists a range of islands. It involves goods vehicles at up to 17,000 kg revenue weight normally kept at a base or centre on a small island having use of mainland roads, and goods vehicles at over 17,000 kg revenue weight normally kept at a base or centre on a small island where use of such vehicles on the mainland is subject to a 5 km distance restriction from a mainland port for the purposes of loading and unloading.

New clause 17 is intended to redefine mainland roads—roads where vehicles would be able to travel a greater distance. In my constituency, the operation of the exemption has given rise to some anomalies and inconsistencies. First, in Shetland, hauliers operating on the small islands of Yell, Unst or Fetlar, find that the port where they must arrive at the Shetland mainland, Toft, is 25 to 30 miles from the main town of Lerwick, and that there is nothing much at the port other than a ro-ro terminal. There are no loading or unloading facilities. Likewise, vehicles coming over from Whalsay and arriving at Laxo are some 20 to 25 miles from Lerwick.

In the northern isles of Orkney, the ro-ro ferry comes into Kirkwall, and, for the most part, islands-based lorries weighing more than 17,000 kg can do their business within 5 km of where they land. Those in the southern isles—specifically from Hoy, where I have received representations—come into the rural terminal of Houton. Again, there are no loading or unloading facilities there. Most then go to either Stromness or Kirkwall, the two largest towns on the main island of Orkney, which means that they must travel more than 5 km.

The purpose of the original exemption, which we support, does not apply to a number of lorries on some of the islands, because of the location of the port or terminal where they reach the main island. The purpose of the new clauses is to extend the exemption to lorries based on those small islands.

I raised this matter with the former Paymaster General, the right hon. Member for Wells. At that time, his concerns were that, if we accepted a much broader definition and allowed vehicles to travel much further on mainland roads, that could lead to abuse on the roads on mainland Scotland. I recognise that that was one of the reasons why the restrictions were made in the first place. I propose, therefore, that the new clause should apply only in the main island of Orkney, in the main island of Shetland and in Lewis and Harris. Because those are discrete islands, there is no chance of that sort of abuse arising.

The former Paymaster General also felt that there might be competitive disadvantages for hauliers based on the main islands of Orkney and Shetland—hence new clause 16, which would extend the lower rate of vehicle excise duty to all hauliers based on the main islands, as well as to those on small islands. Again, there are arguments for that, apart from the points that I have already raised. First, in my constituency, there is no designated trunk road in either Orkney or Shetland. The origin of vehicle excise duty was to reflect wear and tear on the road network. Some consideration might be given to the fact that a haulier operating on the Orkney or Shetland mainland, which has no trunk roads, has to pay the same as a haulier based in Birmingham who has immediate access to hundreds of miles of motorway.

Secondly, there is a practical point in terms of the companies based in the islands. There is little scope or opportunity, if a haulier's vehicle breaks down, to hire another vehicle. As a result, I am informed that many hauliers feel obliged to maintain a spare vehicle so that, if anything goes wrong, they have the capacity to carry on their business. Of course, that adds generally to their costs, because those vehicles have to be maintained, quite apart from being bought. In particular, if the vehicle excise duty is at the higher rate, that is another imposition and burden on those hauliers.

To address the practical situation, I understand that, if a lorry goes from mainland Orkney to the Scottish mainland, there are no tachograph requirements in the isles, but, if the lorry crosses the Pentland firth, a tachograph must be calibrated in Thurso. Therefore, the potential for abuse does not exist because, if lorries are exempted from vehicle excise duty and a special disc has been designed to cover those lorries, clearly, there will be a simple means of enforcing the exemption when the tachograph has to be calibrated.

In short, the purpose underlying the new clauses is to try to give some support to hauliers who are based in the islands. It is not easy to make a business flourish there and we are considering ways in which they can receive the exemptions, specifically with regard to those hauliers whose lorries arrive at a ro-ro terminal more than 5 km from the main towns.

I ask basically that hauliers in those islands be put on the same basis as was intended originally by the Government when they agreed the original amendment to the Finance Act 1995. More generally, it would make sense to extend the exemption throughout the main islands because that would help those hauliers, who have a range of additional costs, which are not faced by those who run haulage operations on mainland Britain.

Mr. Calum Macdonald (Western Isles)

It will come as no surprise that I support the principles behind new clauses 16 and 17. I congratulate the hon. Member for Orkney and Shetland (Mr. Wallace) on raising the matter in that way. He gave the history of the origin of the exemptions. Although the Government in 1995 agreed to restore some of the concessions, that restoration benefited only half the lorries previously eligible for the exemption. As he pointed out, it has also left adrift some of the smaller islands, which the Government themselves intended should be part of the exemption.

Although this is an important matter for hauliers who are affected, it is worth making the point—I am sure that the hon. Member for Orkney and Shetland would concede this—that the new clauses address only one aspect of the disadvantages that remote island communities face because of transport costs and difficulties. We need to consider the whole picture affecting the island economies to understand the significance of the issue.

It is clear that the single biggest handicap or disadvantage faced by island communities such as the Western Isles and Orkney and Shetland is their distance and remoteness not only from the mainland of Scotland, but, taking a wider economic view, from the markets of the whole of the United Kingdom and, indeed, of Europe. The costs imposed on businesses by transport costs and the costs that come indirectly from the difficulty of making transport connections have a significant impact on island businesses. That is the single biggest handicap facing the economy of the Scottish islands and the single biggest factor in producing consistently high unemployment rates, particularly in the Western Isles; Orkney and Shetland obviously have a special position because of the impact of the oil industry.

Those transport costs affect not just island businesses, but consumers. The price of everything is increased because of transport costs: the price of petrol, building materials and food—anything that consumers buy in the shops. Therefore, if we take the sum of those two effects on the economy—high unemployment and high prices—transport costs produce hardship and poverty in the island communities.

The Government can help to overcome those handicaps in many ways. Spending on general public services is among them, but one of the best ways that a Government can help is by targeting help and reducing overall transport costs and their effects on businesses and consumers in the islands. To do that effectively, we need, first, an accurate measure of just what those costs are and how they affect the islands' local economy.

The Scottish Office recently produced a report through some consultants on the effect of transport costs on the highland economy, but it was supposed to include the island economies as well and only one company was included in the report. Therefore, we need to have a specific study of the impact of transport costs on the Scottish islands. I recommend such a study both to the Government in place and to the Government in waiting. It would help to formulate a policy to tackle this problem.

Once we have an accurate measure of how the local economy is affected by those transport costs, the Government can work out how best to deploy their resources in the most targeted and cost-effective way to help the islands overcome the transport handicap. Vehicle excise duty is only one way in which transport costs affect the Scottish islands. The cost of ferry transport is obviously another important factor. Others include high air fares and the air passenger tax. All of those, in their different ways, affect the island economies. Therefore, we need to have from Government an overall view of the impact of transport costs and a strategic approach to working out the most cost-effective ways in which Government can assist to overcome that handicap.

I would like not simply a piecemeal approach, tackling specific aspects of the costs, but an overall strategic view. Although I support the principle behind the new clause, what we really need in the islands is an overall view. That is what we are looking forward to, after the election.

8 pm

Mr. Alistair Darling (Edinburgh, Central)

The hon. Member for Orkney and Shetland (Mr. Wallace) is to be congratulated on raising the matter. It is quite clear that the concern affects many people living in the Scottish islands, and he is right to put down a marker for the future.

The hon. Gentleman wishes to extend the exemption that applies to some of the smaller islands but—as he rightly said—not to others, which causes all sorts of anomalies and resentment. Half the lorries might be covered, but half are not. The question is whether we extend the exemption to include all lorries and appropriate vehicles on the islands or whether it might be more appropriate to have a proper look at the whole system of support—direct and indirect—for island transport.

I agree with my hon. Friend the Member for Western Isles (Mr. Macdonald), who put forward a cogent and coherent case for a proper strategic look at the way in which the Government support island transport. The vehicle excise duty problem, to which the hon. Member for Orkney and Shetland referred, is only one part of an overall problem. My hon. Friend is right to draw attention to the transport costs faced on the islands—not only by hauliers and commercial travel but by those who cross the sea in private cars. The cost of going to the Scottish islands is much greater than that of crossing the English channel, for example. All of us who have ever attempted to take a car and family across the Minch, let alone a large lorry carrying freight, will know that transport costs impose a formidable burden. In addition, such costs have a substantial bearing on the competitiveness of island firms.

A strategic approach is clearly called for. I know that the Government have agreed to a further study—the first study that they carried out having been rather more limited than was desirable. My hon. Friend the Member for Western Isles will know that the shadow Secretary of State for Scotland has said that he will embark on a comprehensive review of Scottish Office spending. I can certainly undertake on his behalf that, as part of that study, we shall examine how the Government support transport to the Scottish islands—by both air and sea—and see how we can best assist the majority of individuals and businesses based there.

Such a strategic study is long overdue and marks the difference between us and the present Government, who have tended to regard such things, inasmuch as they ever think about them, in a very piecemeal way. We believe that an overall comprehensive approach is absolutely essential with regard not only to the new clause but to the amendment on air passenger duty, which we shall consider later. People living on the islands of Scotland clearly face specific problems. They rightly look to the Scottish Office in particular and Parliament in general to address them. If the Government will not do that, we certainly will.

Mr. Oppenheim

I have sympathy with the points made by the hon. Member for Orkney and Shetland (Mr. Wallace). He has fought a battle over a long period on this issue, with a certain amount of success. I am sorry that, certainly for the Government's part, I cannot offer him any further success this evening. However, I emphasise that there is quite a lot of sympathy for some of the points that he made. I shall briefly give the reasons why we do not think that the new clauses are acceptable.

The hon. Member for Orkney and Shetland argues that, on Orkney and Shetland, there are no trunk roads. Heavy goods vehicles can of course cause more wear and tear on smaller roads that are not necessarily designed to take them than on trunk roads, so quite a large cost is still involved. The reason why the islands were originally excluded is that the islands that were included were included for historical reasons. There is a danger of where to stop if a concession is made to one or two more islands. There are the small islands around Northern Ireland and the Isle of Wight—the list could go on. If one island got a concession, the next would lobby for a concession that—arguably—might be justified. The issue would become quite open-ended for any Government.

I did not find the point that the hon. Member for Orkney and Shetland made about some hauliers having to keep a second truck in case the first broke down because they could not rent a truck on the islands totally convincing in this day and age. Even fairly modern commercial vehicles are not that unreliable. The general points that he made about the difficulty of living on the islands and the importance of increasing employment opportunities and reducing cost penalties wherever feasible are, however, well taken, but I am not sure that the creation of further anomalies in the indirect tax system is necessarily the way in which to address them. The debate could be taken far wider into regional aid policy, European regional aid policy, and so on. I think that that is the way in which to address the issues rather than creating anomalies in the vehicle excise duty system.

Mr. Wallace

I am grateful to the Minister for the understanding way in which he has negated what I have sought to do. Will he address the point with regard to vehicles that come from islands that are designated as small islands but, due to almost an accident of geography, those over 17,000 kg have to go more than 5 km before they reach a landing point where they can do any business? Such an anomaly seems to defeat the purpose of the exemption.

Mr. Oppenheim

The hon. Gentleman makes a reasonable point, and we shall look at that particular anomaly. We have already looked initially at the matter. The fundamental problem is that the system would still be left open to abuse, to which hauliers, especially on the mainland, would object. There is an anomaly, but if there were a concession that vehicles could go more than 5 km, it could be abused in other directions—not particularly on the islands mentioned. That is a fair point; there is a particular problem and we shall certainly look at it. The hon. Gentleman is coming into the Treasury tomorrow for a meeting on another issue, so perhaps we can discuss the matter in more depth then, if that is convenient for him.

The comments of the Chief Secretary were absolutely marvellous—very new Labour. New Labour does not make spending pledges, it makes report pledges. We heard the usual story: lots of hints, but no firm pledges.

Mr. Eric Martlew (Carlisle)

The hon. Gentleman said that my hon. Friend the Member for Edinburgh, Central (Mr. Darling) is the Chief Secretary.

Mr. Oppenheim

Sorry, shadow Chief Secretary. We heard the old story—all talk and no action. If the hon. Member for Edinburgh, Central (Mr. Darling) seriously thinks that, if Labour were to get into office, all the little hints and nudges about increasing spending here and there would be fulfilled, he and his constituents are dreamers.

We costed all the pledges very conservatively in the winter—and they came to £30 billion. What happened? The shadow Chief Secretary said, "That is nonsense. We have potentially an iron Chancellor. He is not going to go rusty or exceed Tory tax and spending targets." I find it absolutely incredible that, after 18 years in opposition, the unique selling proposition of new Labour, after all the focus groups and spin doctors—

Mr. Darling

rose—

Mr. Oppenheim

If the hon. Gentleman will sit down a minute—is that the Tories have made such a mess of things that it is going to stick to all their policies.

Mr. Darling

I thank the hon. Gentleman for giving way, since I assume that that is what he is going to do. It is a pity that, when discussing a matter that is important to many thousands of people living in the Scottish islands, he should depart from—indeed, not attempt to answer or come up with a constructive solution to—the points made by my hon. Friend the Member for Western Isles (Mr. Macdonald) and the hon. Member for Orkney and Shetland (Mr. Wallace). He surely must accept that, given that the Government support to a greater or lesser extent some aspects of transport in the Scottish islands and given that there are anomalies, any Government should be prepared to consider them and see whether there is a better way in which to support such transport. Nobody is in the business of writing blank cheques or making promises that cannot be delivered. He admits that there is a problem. Rather than making silly and inaccurate points, might he not do better in his remaining days in the Treasury dealing with some of the problems?

Mr. Oppenheim

The hon. Gentleman clearly did not listen. I did my best to answer the points made by the hon. Member for Orkney and Shetland. I also said that we would discuss them further tomorrow. Some of his points were invalid but some were valid. There are anomalies. I said that the new clause was not the best way in which to deal with them. I offered to discuss the genuine anomalies with the hon. Member for Orkney and Shetland.

It is legitimate for me to criticise the total dishonesty of Labour's policy, which is constantly to drop hints that people need only elect Labour and help will consequently be given here and there. However, whenever Labour Members are pinned down on their policy, they say, "No; we'll stick to the Government's tax and spending commitments." It is legitimate for me to make those criticisms, having dealt reasonably fully with the legitimate points made by the hon. Member for Orkney and Shetland and offered him a meeting on the subject. On that basis, I hope that he will withdraw the motion.

Mr. Wallace

We achieved the original concession from the Government in the Finance Act 1995 by a remarkable cross-party consensus involving the support not only of the Conservative party, the Labour party and the Liberal Democrats but of the hon. Member for North Antrim (Rev. Ian Paisley), who made a very lively speech.

I have no intention of making this a partisan matter. For the Treasury, the amounts involved are relatively small, and I should certainly welcome any review, from any quarter, of the islands' transport. I think that, tomorrow, the Minister and I can usefully discuss the matter further. I am glad that he realises that there are some genuine anomalies. As I do not intend to push the matter to a Division, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Forward to