Finance Bill 2008

Government Department: Treasury

Liberal Democrat Spokesperson in the Commons: Jeremy Browne
Liberal Democrat Spokesperson in the Lords: TBC


Government proposals

A Finance Bill is introduced annually by the Government shortly after the Budget to bring the Government's tax proposals into law. A standing committee is set up to deal with the more routine aspects of the bill while the more controversial issues are debated by a committee of the whole House.

The more controversial issues debated during the 2008 Bill’s passage include:
· The abolition of the 10p rate of taxation and the introduction of some compensatory measures for those affected.
· Taxation of motoring, specifically graduation of vehicle excise duty (VED) and level of fuel duty.


Liberal Democrat response

10p rate
The Liberal Democrats strongly opposed the abolition of the 10p lower rate of income tax, which amounted to the doubling of income tax for many of the low paid.

We questioned and opposed the tax changes when they were first proposed in spring 2007. We were the first people to point out how this change would hit the low paid. We said that there needed to be a compensation package for people who would lose out from the abolition of the 10p rate. However when we put this to the vote in Parliament in June 2007 the Conservatives did not support it and the vast majority of Labour MPs voted against it.

Even with the Government’s proposed compensatory measures, there are still 1.1 million people who have lost out after the abolition of the 10p rate of tax. The Liberal Democrats proposed an amendment to the bill that would require the Chancellor to report within six months on the impact of the 10p compensation mechanism on people earning less than £13,000 a year.

The Liberal Democrats also supported an amendment that would have required the Chancellor to make a statement to Parliament before the end of the year on further compensation measures for those affected by a net increase in tax, or see the tax changes reversed at the start of 2009. Not a single Labour MP joined us in this vote, or in the vote to reverse the abolition of the 10p rate.

Further information on votes on the 10p rate can be found on the independent Public Whip website.

Click here for a longer report on the debate on this part of the Bill at report stage in the Commons

Motoring taxes
The Liberal Democrats believe ‘green taxes’ have a vital role to play in reducing emissions from transport. For this reason we support lower vehicle excise duty for fuel-efficient cars, and higher VED for less fuel-efficient cars.

However we believe it is wrong of the Government to introduce their proposed changes retrospectively, so they hit old cars too. As our spokesman Jeremy Browne said during debate on the Bill: “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.”

The Liberal Democrats believe that increases in green taxes should be offset by decreases in taxation elsewhere. Any additional revenue that we raise from green taxes 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 on the tax burden would be zero. By not taking this approach, and using green taxes as an overall revenue raiser, the Government have brought green taxes into disrepute.

The Liberal Democrats have criticised the Conservatives for calling for the autumn increase in fuel duty to be deferred without saying how they would fill the £1 billion shortfall that would result from doing that. We 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.

We tabled an amendment that called for relief to be given to those, living in rural areas, who pay particularly high rates for fuel. Where petrol stations are few and far between, fuel prices are exceptionally high and the opportunity for alternative modes of transport are virtually non-existent. The Liberal Democrats support a more equitable approach to any increases in fuel duty. 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.

We also tabled an amendment calling for an exemption from the increase in vehicle excise duty for those who need to use their vehicles off-road. Among others, farmers, gamekeepers, crofters and people who work in forestry need to use a powerful vehicle to go about their business. It is unreasonable, and in most cases unfeasible, to suggest that these people should have 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.

Click here for a longer report on the debate on this part of the Bill at report stage in the Commons.

Applicability (e.g. England)
UK wide

Further Information
Report Stage debate in the Commons
Progress of the Bill

(NB. Information on the stages a bill goes through to become an act of Parliament is available by following this link.)