Jeremy Browne, Liberal Democrat Shadow Chief Secretary to the Treasury, spoke on behalf of the party during the Report Stage debate on the Finance Bill. Mr Browne said that the unprecedented rise in the cost of oil, the need for green taxation and the general squeeze on household incomes make this “a live and important issue that will not go away.”

Mr Browne detailed the Liberal Democrats’ case for green taxes. He said:

“My party takes climate change extremely seriously and always has, and we wish to achieve reductions in emissions from transport. Environmental taxation clearly has a vital role to play because transport contributes to a large degree to the total amount of CO2 emissions. Tax can make a contribution to changing behaviour.”

He said that the Liberal Democrats support lower vehicle excise duty for fuel-efficient cars, and higher VED for less fuel-efficient cars. But he thought it was wrong to introduce the changes retrospectively, so they hit old cars too:

“Green taxes should incentivise people to make environmentally friendly choices, and people cannot be incentivised to make a different decision from the one that they have already made.”

Mr Browne argued that the Government’s approach to this issue has produced cynicism because the money raised from green taxes has not been used to offset and reduce other areas of taxation. 

He said that Liberal Democrat proposals to make increases in green taxation would be entirely revenue neutral (i.e. reducing other taxes at the same time so the overall tax burden is not increased). This would apply to VED too:

“People who choose to drive very fuel efficient cars, or moderately fuel efficient cars, will benefit financially. Those who choose? to drive more fuel inefficient cars will have to pay a higher premium. But the additional revenue that we raise from that would be used to reduce taxes on individuals, specifically income tax. People would be paying more through environmental taxation, but less through income tax. The overall impact would be zero.”

Earlier, Mr Browne criticised the Conservatives for calling for the 2p increase in fuel duty, due to come into effect in the autumn, to be deferred, without saying how they would fill the £1 billion shortfall that would result from doing that:

“The Conservative Party has said that the proceeds of all its environmental proposals will go towards a family fund. As a result of the shadow Chancellor’s intervention, that fund would already be £1 billion in deficit.”

The Liberal Democrats have argued that a decision should not be taken on whether to go ahead with the 2p increase in fuel duty until closer to the time, as we cannot be sure what will happen to volatile oil prices in the meantime.

Liberal Democrat MP Alan Reid also contributed to the debate. He tabled an amendment that called for an exemption from the increase in vehicle excise duty for those who need to use their vehicles off-road. Mr Reid said:

“I am thinking especially of farmers, gamekeepers, crofters and people who work in forestry. They use the car off-road and need a powerful vehicle to drive on muddy tracks to go about their business. They obviously cannot afford two cars - one for work and one to take the children to school, go to the village for shopping or tow loads on the public roads. It is therefore important to charge people in that position a lower rate of duty.”

John Thurso tabled a further Liberal Democrat amendment designed to give relief for those, living in remote rural areas, who pay especially high rates for fuel. Mr Thurso pointed out that the cost of fuel in rural areas is exceptionally high; the opportunity for alternative modes of transport, however, is virtually non-existent. He said:

“Broadly speaking, taxation should be equitable. It is clearly inequitable that in an area where there is no choice the tax should be higher, by virtue of the VAT element, than it is in other areas of the country. It is perverse that fuel costs are lower in many areas with public transport than in many areas where there is none.”

Liberal Democrat MPs supported an amendment to make vehicle excise duty non-retrospective. This amendment was defeated by 303 votes to 240. Click here to read the voting record in full.

The Liberal Democrats abstained on a complex amendment, tabled by the SNP, that proposed that the rate of fuel duty should be tied to increases in oil prices, and proposed entrenching this in legislation. Click here to read the voting record in full.

The Liberal Democrats’ proposal to offer a discounted fuel scheme for those in rural areas was defeated by 305 votes to 67. Click here to read the voting record in full.