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Company Cars

Volume 734: debated on Tuesday 10 January 2012


Asked by

To ask Her Majesty’s Government what action they plan to take to limit high mileage by company cars.

My Lords, the Government recognise that high mileage by company cars may impact the economy and environment. Our policies encourage businesses to consider whether they can reduce their travel and to embrace sustainable transport choices. Some businesses have operational needs that mean that a company car is vital. Motoring taxes such as fuel duty and company car tax can encourage fuel-efficient behaviour and the use of low-carbon vehicles, in addition to supporting the public finances.

I thank the noble Lord for that reply, but is it not clear that mileage is higher for company cars, which are large cars, than for other cars, and is not the greater mileage driven in company cars unacceptably more than the tax liability of the individual?

My Lords, I do not accept that company cars are necessarily larger than average. It is up to the employer what size car to supply to the employee. The system of company car tax takes into account the retail value of the car plus accessories and the CO2 tailpipe emissions. A heavier car is likely to, but will not necessarily, have higher emissions and therefore higher costs for the employee.

Is there not evidence that company car drivers tend to drive not only far further but faster and less safely than people who own their own cars? Should not the Government look at that?

My Lords, the noble Lord is right; I asked my officials that precise question. I suspect that the reason why the accident rate is higher with company cars is that company car drivers are working under increased pressure and can be more tired, which is a well known cause of accidents on the strategic road network.

My Lords, can my noble friend confirm that many company car drivers use their company cars as offices? If they are sales reps, they cart around stuff that they could not possibly take on and off trains, et cetera, and visit many places that are way out in the sticks. Therefore, they need their cars and have high mileage as a result.

My noble friend makes an extremely important point. Many company car users have to use a company car; there is no alternative. I am also confident that the system of company car taxation is progressive and fair.

My Lords, does my noble friend agree that, apart from what he said in his last answer about ensuring that large company cars pay the maximum tax feasible, this issue would be better not dealt with by the Government?

My Lords, I am happy to agree that the Government should not interfere any more than we already do, by the system of company car tax that I have outlined, but I am also confident that bigger and heavier cars pay considerably more in company car tax, not least because an employee who is entitled to a large car will also be paying much higher rates of marginal tax, and company car tax is paid at the marginal rate of tax.

My Lords, one of the questioners asked my noble friend about insurance and there being many more accidents. What is the insurance position and is it taken into account in the terms of the taxation? Do people not care so much about accidents because it is not their no-claims bonus that they are losing?

My Lords, if a company car driver has an accident, I suspect that it would affect their no-claims bonus because they would have to declare their accident to the insurance company, but I am not absolutely certain on that point.

My Lords, the Minister will be all too well aware—he indicated this in his Answer—that the issue of car emissions is important for the health of our environment. Will he look again, and encourage his colleagues in the Treasury to look again, at whether we are giving sufficient encouragement to companies to provide greener cars for their people than they do at present?

My Lords, I am confident that with the CO2 emissions regime we already encourage cars to be as green and economical as possible. However, the noble Lord will also be aware that we are encouraging the use of electric vehicles, which are exempt from fuel duty and have numerous other taxation benefits.