Car Tax (Hansard, 1 December 1992)

§ Lord Strathclyde
My Lords, about 55 per cent. of new car registrations are in respect of imports. The burden was borne by British motorists irrespective of whether they were purchasing a British or a foreign produced car. The Chancellor has already confirmed that the cost of abolition from 1993–94 will have to be met from motoring taxes. The precise means will be considered as part of his next Budget.

§ Lord Monson
My Lords, I thank the noble Lord, Lord Strathclyde, for that very straightforward reply. Given that 55 per cent. of new car sales are accounted for by imported cars, will the noble Lord agree that the tax forgone on those imported cars as a result of the abolition of the car tax amounts to about £410 million per year? In order to compensate for that it will be necessary either to raise petrol tax or to raise the road fund licence by between £16 and £17 per year, in addition to the £13 per year by which it will be necessary to raise it in order to compensate for the tax forgone on British-made cars? Thus, the total will be raised by about £30 on top of the existing £110 per annum. Does that not demonstrate once again that the Government are favouring business motorists, who can normally afford to change their cars every year and write off their petrol and other expenses against tax, at the expense of private motorists, who cannot normally afford to change their cars very often and who must pay for petrol and road fund licences out of their own pockets?

§ Lord Strathclyde
My Lords, under our international trade obligations it would be impossible to discriminate between foreign manufactured cars and British manufactured cars, and we shall not do so. Between November this year and whenever the Chancellor makes his Budget announcement, the cost will be £100 million. That is a price worth paying to boost the vehicle industry. After that, it will be the British motorist who pays and again there is no discrimination between the business buyer and the private buyer.

§ Lord Richard
My Lords, the Minister has just said that it will be for the British motorist to pay. Can he confirm that if the cost of abolition were to be borne by vehicle excise duty alone, it would have to increase from £110 to £142 a year? If it were done by duty on petrol, the cost would be an additional 2.2p per litre on leaded petrol and 1.8p per litre on unleaded. It is a strange policy which, on the one hand, encourages people to buy cars and, on the other, makes it much more difficult for them to run their cars.

§ Lord Strathclyde
My Lords, of course these are decisions for the Chancellor to make. He has provided an opportunity during the past few months of this financial year for a fiscal boost to the car-buying public. I shall not quibble with the noble Lord the Leader of the Opposition on the figures that he gives because they are broadly similar to those I possess. However, the announcement made by the Chancellor was clearly that the tax would be made up in the Budget.

§ Lord Marlesford
My Lords, does my noble friend agree that there are far too many cars cluttering up our roads? Far from what the Leader of the Opposition said, the rate of vehicle excise duty has fallen behind other rates. In April 1975 when the party of the noble Lord, Lord Richard, was in power, the vehicle excise duty was set at £40. If that is adjusted for inflation, as all other taxes are, the vehicle excise duty today would be £166. In 1975 there were under 15 million cars; there are now about 22 million. If the Chancellor were to increase the vehicle excise duty from £110 to £166, he would receive an extra £1.2 billion. Would that not be a good idea?

§ Lord Strathclyde
My Lords, I am sure that that is precisely the kind of idea that my right honourable friend the Chancellor of the Exchequer will examine closely early next year.

§ Lord Ewing of Kirkford
My Lords, is not the Minister sending the wrong signal to the prospective new car purchaser? He is saying today that there is a threat that the vehicle excise duty will be increased in the Budget next year, but the Chancellor was saying only two weeks ago that the abolition of the 5 per cent. sales tax was in order to assist the car industry.
Further, what does the Minister understand is a car manufactured abroad? The matter is much more complicated than appears at first sight, since part of the range of the Ford Motor Company is wholly manufactured abroad. If the Minister is suggesting that, for the same company, there should be two levels of taxation depending on where a car is manufactured, that will damage the British car industry.

§ Lord Strathclyde
My Lords, of course my right honourable friend the Chancellor made it quite clear in his announcement that this was a short-term measure to give a short-term boost to the vehicle industry in regard to cars being sold in this country.
As to the second part of the noble Lord's question, there is no question of the Government deciding on what are foreign manufactured cars and what are British manufactured cars. That was the thrust of the original Question from the noble Lord, Lord Monson, and I gave the same reply in my original Answer.