H.M. TREASURY

EXPLANATORY NOTE

CLAUSE 24: RATES OF VEHICLE EXCISE DUTY FOR GOODS VEHICLES
SCHEDULE 5: RATES OF VEHICLE EXCISE DUTY ON GOODS VEHICLES

SUMMARY

This clause and schedule provide for changes in the rates of VED for lorries to take effect from March 22, 2000, and set a rate for 6-axle lorries travelling up to new 44-tonne weight limits, due to be allowed for general use on UK roads on January 1, 2001.

Changes in these rates will have a consequential effect on the VED rates for buses and special vehicles whose rates are linked in legislation to the general goods vehicle rate.

DETAILS OF THE CLAUSE

2. Sub-section (1) and (2) of the clause give effect to the new schedule of rates of VED for goods vehicles in respect of licences taken out from March 22, 2000.

Sub-section (1) of the schedule provides for the amendment of the schedule setting out the annual rates of VED payable by goods vehicles.

4. Sub-section (2) sets out the changes in the annual rates of VED payable by rigid goods vehicles exceeding 3.5 and not exceeding 44-tonnes, which comprise an increase of £5 in the rates of VED for vehicles between 3.5 and 7.5 tonnes from £160 to £165.

Sub-section (3) sets out the changes in the annual rates of VED payable by rigid goods vehicles exceeding 3.5 and not exceeding 44-tonnes and qualifying for the reduced pollution concession, which comprise an increase in the rates of VED for those vehicles formerly paying £155 to £160.

6. Sub-section (4) sets out amendments to the table setting out the annual rates of VED payable in respect of articulated goods vehicles exceeding 3.5 and not exceeding 44-tonnes, which comprise:
(a) an increase of £5 in the rates of VED for vehicles exceeding 3.5 and not exceeding 7.5 tonnes from £160 to £165;
(b) reductions in the rates of VED for certain vehicles with two-axle tractive units capable of being used with 3 or more semi-trailer axles:

for vehicles exceeding 34 and not exceeding 36 tonnes, by £500 from £2,840 to £2,340;
for vehicles exceeding 36 and not exceeding 38 tonnes, by £500 from £3,210 to £2,710;
for vehicles exceeding 38 and not exceeding 44 tonnes, by £1,800 from £5,750 to £3,950;

(c)a reduction in the rate of VED for a vehicle with a three or more axle tractive unit capable of being used with 1, 2, 3 or more semi-trailer axles exceeding 38 and not exceeding 41 tonnes by £500 from £4,250 to £3,750;
(d) the setting of a £2,950 VED rate for a vehicle with a three or more axle tractive unit capable of being used with three or more semi-trailer axles exceeding 41 and not exceeding 44-tonnes - a vehicle due to be allowed for general use on UK roads from January 1, 2001.

Sub-section (5) sets out amendments to the table setting out the annual rates of VED payable by articulated goods vehicles exceeding 3.5 and not exceeding 44-tonnes and qualifying for the reduced pollution concession, which comprise:
(a) an increase in the rates of VED for vehicles currently paying £155 to £160;
(b) reductions in the rates of VED for certain vehicles with two-axle tractive units capable of being used with 3 or more semi-trailer axles:

for vehicles exceeding 34 and not exceeding 36 tonnes, by £500 from £1,840 to £1,340;
for vehicles exceeding 36 and not exceeding 38 tonnes, by £500 from £2,210 to £1,710;
for vehicles exceeding 38 and not exceeding 44 tonnes, by £1,800 from £4,750 to £2,950;

(c)a reduction in the rate of VED for a vehicle with a three or more axle tractive unit capable of being used with 1, 2, 3 or more semi-trailer axles exceeding 38 and not exceeding 41 tonnes by £500 from £3,250 to £2,750;
(d) the setting of a £1,950 VED rate for a vehicle with a three or more axle tractive unit capable of being used with three or more semi-trailer axles exceeding 41 and not exceeding 44-tonnes - a vehicle due to be allowed for general use on UK roads from January 1, 2001.

Sub-section (6) creates a separate VED class for 6-axle lorries formerly allowed to run at 44-tonne weight limits as part of a combined road-rail transport operation, but maintains the annual rate of VED currently paid by these lorries at £1,280, or £280 where the vehicle qualifies for the reduced pollution concession.

BACKGROUND

Acting on the unanimous recommendations of the Commission for Integrated Transport (CfIT), the Government has decided to allow 6-axle lorries meeting Euro II emissions standards to use UK roads at new 44-tonne weight limits. A target date of 1st January 2001 has been set for their introduction: the final date will be confirmed in July's ten year plan in the context of wider freight policy.

44-tonne lorries are no bigger than existing lorries, but are simply allowed to carry heavier loads. They do less damage to roads than existing 40-tonne/5-axle lorries because of their better weight distribution. CfIT recommended that their introduction would cut down on the total number of lorries on UK roads.

A VED rate of £2,950 has been set for the new 44-tonne/6-axle lorries, which will take effect from a target date of 1st January 2001. The other Budget changes to lorry VED will cost a total of £45 million per annum, with major VED cuts targeted at areas of the haulage industry which are under the most competitive pressure:
(i) the VED rate for the road-damaging 40-tonne/5-axle lorry will be cut by £1,800 from £5,750 to £3,950 to boost the competitiveness of international hauliers who need to run at 40-tonnes due to continental weight limits;
(ii) a £500 cut in the VED rate for the UK-standard 38-tonne/5-axle lorry from £3,210 to £2,750 to encourage hauliers to continue using this lorry;
(iii) a £500 cut in VED from £4,250 to £3,750 for the 41-tonne lorry capable of being used with up to 3 or more trailer axles - a lorry typically used by smaller operators collecting freight shipped 'unaccompanied' to UK ports;
(iv) rates will be frozen for almost all other lorry types except for the 36-tonne on 5-axles (cut by £500 in line with the 38-tonne) and for lorries currently paying £155 or £160 which rise in line with the standard car rates.

To protect the competitiveness of legitimate UK hauliers, the Government also announced in the Budget that it would be taking forward a number of measures designed to impose more stringent checks and penalties on those who operate illegally and to lessen the compliance burden on legitimate hauliers. These included the addition of legislation to the Transport Bill to allow for the impounding of illegally-operated lorries;