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Company Cars: Excessive Mileage

Volume 597: debated on Tuesday 9 February 1999

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What measures they plan to take to discourage excessive mileage by company cars.

The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions
(Lord Whitty)

My Lords, the Government's White Paper, A New Deal for Transport, contains a wide range of measures to encourage more sustainable car use, many of which should help to discourage unnecessary mileage by company car drivers. We especially want to promote green transport plans among large employers, aimed at reducing car use for travel to work and on business. The Government are also implementing, over five years, substantial increases in tax where employers provide company cars with free fuel for private motoring, in order to discourage its provision. And, as mentioned in the pre-Budget Statement in November, the Government are continuing to review how the company car taxation regime might be altered to send better environmental signals.

My Lords, I thank the Minister for that moderately satisfactory Answer. Is he aware that those who drive company cars while on private business cover more than twice the mileage of other car users? Does he agree that the practice should be discouraged as a way of reducing both the amount of traffic on the roads and the amount of pollution? Is it not time that something rather more drastic was done about this, along the lines set out in the Labour Party manifesto?

My Lords, as I said, a number of measures are being taken to reduce the use of company cars. It is true that the level of mileage is higher in total for company cars than it is for other comparable cars. The safety record is also less good and, because they tend to be larger cars, there are consequences in terms of emissions. As regards the taxation regime and further policy, your Lordships will have to observe a little patience. There will be a Budget Statement later this year. I could not possibly pre-empt anything that might be said in that context.

My Lords, is the Minister aware of a report in today' s Guardian regarding the Boots company, which, as a major employer, is trying to encourage green transport plans for its employees by subsidising a local bus service? The Inland Revenue has indicated that that represents taxable benefits in kind and is to fine the company half a million pounds. How does that fit in with the Government's green transport policies?

My Lords, I am aware of the report. Indeed, the Guardian is catching up with a story that appeared in the rest of the press a week ago. The provision of transport in kind by employers has been taxable for many years. We are examining the perverse effects of that in order to give better signals in that area as well. However, at present the Inland Revenue is right. Under existing tax rules such provision is taxable.

My Lords, rather than mileage, is it not more important to curb polluting emissions? That is a matter for the Chancellor in his forthcoming Budget, as the noble Lord has indicated. However, should the Government now be commended for themselves restraining excessive mileage as a result of their apparent preference for helicopters?

My Lords, the number of occasions on which the Government use helicopters is relatively small. Nevertheless, we are examining all areas where the means of transport used by government departments add to pollution and congestion with a view to cutting back on them and we are asking the public to take similar measures.

My Lords, I understand what the Minister has said regarding the Government's proposal to discourage excessive mileage in relation to company cars. But is it not the case that the greater the mileage driven in company cars, the more the tax liability of the individual is reduced? 'What do the Government intend to do about that?

My Lords, the present situation is precisely that. There is a perverse incentive to increase the alleged business miles over the figure of 18, 000 a year. As my right honourable friend the Chancellor indicated, he is examining the situation to try to remove the perversity. More than that I cannot say today.

My Lords, why does the Minister's department sanction car allowances for local councillors which recompense those who use large cars at a much higher rate than those who use small ones?

My Lords, a significant number of expense systems—in local government, national government and in the public and private sectors—need to be looked at from that point of view. We should all consider it.

My Lords, does the Minister agree that the important principle raised in the Question is part of a much wider and greater problem? What action do the Government propose to take to try to induce the travelling public to economise on fuel and, more importantly, to use more fuel efficient vehicles?

My Lords, the Government have already taken a number of measures in relation to taxation which should encourage the use of smaller and more fuel-efficient cars and more energy-efficient forms of fuel. There may well be further measures which we could contemplate in that direction. But there is a limit to the extent to which we can achieve such things through traditional taxation. We also have proposals which would give local authorities the power to raise road user charges and workplace parking charges in order further to discourage the inappropriate use of the car.

My Lords, will the Minister look at the other side of the coin in this argument? Let us suppose that a young executive is denied a company car and in turn buys an older model which is less environmentally friendly. Surely, that is hardly the best way to protect the environment. Likewise, he could buy a foreign car, but would that not be detrimental to the British economy and our balance of payments position?

My Lords, I fear that in this globalised economy a number of business executives already drive what could, in one term or another, be called foreign cars. There is a possible indirect effect from using older, less fuel-efficient cars, but the reality is that a company car, in terms of both business and private use, tends to be used more intensively, tends to be larger and therefore tends to create greater emissions than a private car. It is not a straightforward issue but nevertheless the overall picture is that there is excessive use of and therefore pollution by company cars.

My Lords, the noble Lord said that local government arrangements need attending to. Do the Government intend telling local government what to do, or allowing them to do it for themselves?

My Lords, expense systems are a matter for individual local authorities. In general, guidance to local authorities is that they should introduce more environmentally friendly systems of transport, both in terms of their own transportation systems and the way in which they compensate their workforce.