My Lords, this debate will deal with both the statutory instrument and the regret amendment laid by the noble Lord, Lord Moylan. These regulations make two principal amendments to the Clean Air Zones Central Services (Fees) Regulations 2020. First, the regulations extend the period during which local authorities may be charged for using the clean air zone central services website from 31 March 2027 to 31 March 2031. Secondly, they increase the fee that local authorities will pay to use the central services from £2 to £4 per transaction as a step towards full cost recovery. The regulations are intended to come into force on 1 September 2026.
As background, clean air zones encourage green travel by charging older, more polluting vehicles a fee to enter such zones. They have been introduced selectively where evidence shows that air quality is worse than the standards set out in the Air Quality Standards Regulations 2010; where they are the quickest way to reduce nitrogen dioxide in the local area; and where other options would not deliver the same results so quickly. There are currently seven clean air zones operated by local authorities in England: Bath and north-east Somerset, Birmingham, Bradford, Bristol, Portsmouth, Sheffield and Rotherham, and Tyneside.
At end insert “but that this House regrets that the draft Regulations will increase the fee payable in respect of clean air zone payments processed through the central services website from £2 to £4; risk additional costs being passed on to motorists who are already facing high fuel costs; fail to provide sufficient assurance that drivers will be protected from any direct or indirect increase in clean air zone charges; and extend the charging period until 31 March 2031 despite the continuing financial pressure on motorists.”
My Lords, I start by saying that if the purpose of the recent changes in procedure for dealing with statutory instrument regret amendments and fatal amendments was to limit the scrutiny applied to government instruments, it has already proved very successful. What we see is that there are three speakers in this debate and they are all from the Front Benches. I suggest that the use of the list system for this purpose is already showing signs of failure. That remark of course is not addressed to the Minister, who is not responsible for the change, but I think it is important that it should be said.
I take as my starting point what the Minister said about the fuel duty. He claimed credit for not increasing the fuel duty in a way that was envisaged by the Treasury, but that occurred only because of a sustained and effective campaign led by the Conservative Party. The Government were embarrassed into falling back on that because of those efforts. It is wrong that they should claim credit for it. Any motorist who thought they might be able to relax in the light of that circumstance obviously has to think again because we now have, in effect, another stealth tax on motorists.
The instrument doubles the fee paid by local authorities to the Secretary of State for each clean air zone payment—namely, every trip that incurs a clean air zone payment charge—that is processed through the central service. That is for all the cities mentioned by the Minister; I believe that London is not part of that system, but all the other cities that he mentioned certainly are. It doubles that from £2 to £4. The Government are trying to get away with that as a cost recovery item, and they say that they do not expect it to be passed on to motorists by local authorities.
My Lords, I thank the noble Lord, Lord Moylan, for tabling this Motion to Regret. We are broadly supportive of most of it, but we have one central reservation about the framing.
There are seven clean air zones—CAZs—in England using the central service, as set out by the Minister. All of them will be affected by this instrument, with fees doubling from £2 to £4 per transaction from 1 September 2026 and extending for an additional four more years to 2031.
We support clean air zones. As the Minister set out, they are working and are delivering measurable and meaningful public health benefits. In Birmingham, the number of non-compliant vehicles has fallen from over 15% at launch to below 4%, and Bristol now sees close to 90% compliance. Nitrogen dioxide levels in Birmingham are down by 29% compared to 2019. That means fewer hospital admissions, fewer children growing up with impaired lung development and fewer premature deaths. Clean air is not only an environmental issue; it is a public health issue and an issue of inequality.
Our support for the policy is, however, separate from any contentedness with the quality of the instrument. The instrument has fallen short. The Secondary Legislation Scrutiny Committee once again had to step in. I recognise that that is partly because of the work of the previous Government.
My Lords, I thank all noble Lords for their consideration of the draft regulations. The noble Earl, Lord Russell, referred to the observations of the Secondary Legislation Scrutiny Committee. I agree that, if we need to pursue this matter again, we should volunteer the information that the committee observed was not supplied in 2020 and again more recently.
The four areas with surpluses are Birmingham, Bristol, Bradford, and Bath and North East Somerset. I will write to the noble Earl with the information we have about how big those surpluses are. I put it to him and the noble Lord, Lord Moylan, that while the surpluses may be useful for local transport purposes, it would be foolish to guarantee that they existed simply because, as the noble Earl and the noble Lord remarked, the park of these vehicles and the income will change over time. Notwithstanding that I cannot give the figures, in the case of the larger local authorities they are not hugely material sums—but I agree that they are sums, and I will write to him detailing what they are.
The fee was set at £2 by the previous Government, without knowing the volume of vehicles that needed to pay the fee. I am sure it was not an unreasonable calculation and it would have been made by sensible people, but the review that we have done suggests that the taxpayer is making up the difference, rather than it being borne more locally and, in particular, by the authorities that make a surplus. We will review the matter again. I feel confident that in the next 12 or 18 months we will have another look. The noble Earl asked for annual data and we will look to publish something annually. I am not sure when it will start, but that is a reasonable point.
My Lords, it is not a revenue-raising measure, the Minister says—unless you are the Department for Transport, which will raise the revenue to cover its costs, as that is the prime directive it is following.
It has been a useful debate. There is little to be superadded to it at this stage. I beg leave to withdraw my amendment.
Amendment withdrawn.
Motion agreed.
House adjourned at 8.09 pm.
The evidence indicates that clean air zones are having a positive effect. Between 2019 and 2024, in the areas of these cities, annual average concentrations of nitrogen dioxide reduced by between 18% and 46%, including by around a third in Bristol, 40% in Bath and north-east Somerset, and by more than 40% in Tyneside. These results matter. In the UK, it is estimated that exposure to air pollution has an annual impact on shortening lifespans equivalent to 29,000 to 43,000 deaths. This is about children breathing cleaner air, building healthier communities, preventing illness and protecting our National Health Service.
To support local authorities with the introduction and operation of these clean air zones, in 2021 the previous Government established the “Drive in a clean air zone” central services. This allows drivers to check on a website whether their vehicle meets the air-quality standards for that clean air zone and, where necessary, pay the relevant charge. It also provides support for those who do not use digital services to make payments and assists local authorities with enforcement.
This brings me to the issues raised by the noble Lord, Lord Moylan, who in his regret amendment suggests that the statutory instrument would risk additional costs being passed on to motorists, who are already facing high fuel costs; would fail to provide sufficient assurance that drivers will be protected from any direct or indirect increase in clean air zone charges; and would extend the charging period until 31 March 2031, despite the continuing financial pressure on motorists.
I should say at this point that I wrote today to the chair of the Secondary Legislation Scrutiny Committee, the noble Lord, Lord Watson, to clarify government estimates of cost recovery likely to result from this fee increase. This letter corrects information sent to the Secondary Legislation Scrutiny Committee in May. I copied that letter to the noble Lord, Lord Moylan, and the noble Earl, Lord Russell. We expect the fee increase to £4 per transaction to result in greater cost recovery, but this is not expected to be 100%.
To explain the history of this instrument, the 2020 regulations made by the previous Government permit a fee of £2 per vehicle until 31 March 2027. This was based on the assumption that by March 2027, the clean air zone central services would no longer be required, as local authorities would have achieved compliance with legal air pollution limits. The previous Government were not able to achieve this, and it is now clear that in some areas compliance with these limits will not be achieved until the early 2030s. Therefore, clean air zones will need to remain in place for longer than envisioned, and this instrument, by extending the charging period, is necessary to continue operating the central services.
The previous Government also failed to increase—at all—the central service fee designed to cover the Government’s cost of administering the service since it was introduced in 2020. Raising the fee to £4 will increase cost recovery to an estimated 90% for the lifetime of the central services from the financial year 2020-21 to 2030-31. To be clear, this still leaves the Government and the taxpayer subsiding these services to the tune of 10% of the overall cost. Through this fee increase, we are putting CAZ central services on a stable, sustainable footing.
I wish to reassure noble Lords on the question of the potential impact of this increase on motorists. We have been very clear with local authorities by letter that we expect them not to pass on any increase in costs to motorists. Tackling the cost of living is this Government’s top priority, and we are ensuring that this change does not add to the challenges many people face. This will be manageable for the relevant authorities as most of the schemes are currently running a surplus—significant surpluses in some cases. It is not right that taxpayers across the country should be subsidising surpluses, in these few authorities, generated from a scheme that is designed to clean up our air, and not to generate income. For example, from the information published by the council in Bristol, we understand its CAZ surplus has been running to several millions per year, and the fee increase could reduce it by around £400,000 in 2026-27, £1.2 million in 2027-28 and £1 million in 2028-29.
I further reassure noble Lords that, should any local authority be in a shortfall because of the operating costs relating to its clean air zone, this will be covered by the Government under new burdens rules. We have ensured both that any costs will not be passed on to motorists and that any additional costs to local authorities whose schemes are not in surplus will be covered by the Government.
The noble Lord raises a concern about rising costs to motorists, including fuel charges, but this issue is separate from the administration of a clean air zone service and the internal fees we are speaking about today. We are backing drivers and businesses by extending the 5p fuel duty cut and extending the 12-month road tax holiday for hauliers. This extension to the 5p duty is keeping taxes at a 16-year low and saving the average driver £120. The Government are also making record levels of investment in our road network, including a £7 billion commitment to tackling potholes and improving local road maintenance. Furthermore, we are delivering long-term funding through the road investment strategy, ensuring that a strategic road network continues to support economic growth and connectivity across the country. These measures demonstrate our commitment to easing the immediate pressures on motorists and investing in the future of our transport system.
I also wish to address the point raised by the Secondary Legislation Scrutiny Committee that the fee has not been reviewed or updated in line with inflation for six years and that charges set out in legislation should be reviewed regularly to avoid significant step changes in amounts. I cannot account for the previous Government’s inattention to this principle, as clean air zones have been operating for some years, but this Government now have the necessary data available from the past 12 to 18 months on the usage costs and revenue, and therefore it is an appropriate moment to revisit the fee structure considering the improved evidence base.
We will continue to monitor usage costs and revenue from the central services over the coming years, so that we can anticipate any further changes needed. Local authorities are expecting this fee change from 1 September, and officials continue to help them prepare. The Government will also work closely with the DVLA, which manages the clean air service, to ensure the smooth implementation of the revised fee when the regulations come into force. The Secondary Legislation Scrutiny Committee requested that, should further instruments be required to increase the fee or extend the period for which it is charged, the Explanatory Memorandum should include information, and we will do this in future, should it be necessary.
In conclusion, these regulations will ensure that the central services underpinning clean air zones continue to operate effectively and sustainably, supporting continuing improvements in air quality in towns and cities with clean air zones. I hope noble Lords will join me in supporting these regulations. I beg to move.
But, if you take the case of Birmingham, for example, where the daily charge is £8, this is now fully half of the fee. Of course this is significant, and local authorities will seek to recover it one way or the other. The Minister says that they do not need to do that because local authorities are generating a surplus—it is true that many of them are—and he imagines that local authorities just sit there with the surplus in the bank smiling at it and counting it as it accumulates. But in fact those surpluses are used for desperately needed transport improvements in their cities. So, if they are to be told, “You can’t pass it on and you will have a smaller surplus to spend”, something will have to give—and it will be local transport improvements. In fact, that is very unlikely because those expenditure plans, which are often laid several years in advance, will require funding, and that funding will no longer be available from this source, so it will come out of the motorist’s pocket.
I appreciate that today the Minister copied me into his letter to the chairman of the Secondary Legislation Scrutiny Committee, and he has explained the levels of cost recovery that are now expected as a result of this measure being implemented. But there is no transparency, and nothing has been offered to us to show that the central system is operating efficiently or that it needs fully half the revenue from the fee. It will not be half in every city, admittedly—it is half in Birmingham because the fee is £8, and in Bath it is £9—but it is approximately half. Fully half of the fee, or approximately that, is being snaffled for a processing system when it could be spent—and is being spent—on necessary and important improvements.
The burden of these fees, and the increase that I feel confident in saying will ensue, does not fall evenly. The vehicles that fail to qualify for these clean air zones are typically older vehicles likely to be owned by people on lower incomes, older motorists and so forth. This is not an abstract consideration about clean air; it affects people’s lives.
The clean air zones themselves should wind up in the very near future. They are, after all, a measure that work only if they achieve a certain objective within a certain timeframe. But we now find that the other effect of this instrument is that they are being extended out as far as 2031. The reality is that this is almost certainly redundant already. The vehicles that qualify for these charges are disappearing from the streets; that is happening simply through the passage of time and the fact that older vehicles are taken out of the fleet. I imagine that it could very easily be the case that the same effect could be achieved by 2031 as keeping these charges in place is likely to achieve.
We have all heard cases in the past where the Government have said that there will be a charge that will be levied for a certain period and then it will fall away. When the time comes for it to fall away, it is extended or kept in place, and sometimes it is even made permanent. The Government have more regard for their own finances—that is the simple fact—than they do for the life of the motorist. They should be ashamed of what they are doing. I beg to move.
The Explanatory Memorandum, as originally laid, contained no information on cost recovery and transaction data and no assessment of the impact on individual local authorities. The committee had to ask for that information and publish it, so that this House could properly scrutinise the measure. That is not how this process should work.
The lack of an impact assessment is also troubling. The Government say that there will be no impact on business, charities or the voluntary sector. While that is technically correct, it is not a complete picture. The cost falls on local authorities, which are responsible for delivering local transport strategies, and the law requires that net revenues from CAZs be reinvested in those strategies. While I recognise that CAZs were not set up to raise revenue and local authorities have known that fees would be subject to review, the committee was right to highlight the real-world consequences: where authorities fund these schemes from CAZ revenues, doubling the central service fee directly reduces the resources available for local transport investment. These changes mean less funding for buses, cycling infrastructure and sustainable transport alternatives.
The scale of that impact is also uneven. Birmingham and Bristol, with the largest volumes of chargeable transactions, are likely to face additional costs in the hundreds of thousands of pounds. Mid-sized schemes, such as Bradford, Sheffield and Tyneside, will face smaller but still material increases. For Bath and Portsmouth, the impact will be more modest. I understand that four local authorities are expected to absorb the increased fee from within their own revenues. Can the Minister say which four those are and what assessment has been made of the impact on their transport investment plans? For the authorities that will instead be supported by central government, what is the expected cost?
I will address the issue of timing. The fee has remained at £2 since 2020 and is now set to double. The department describes this as a timely change. The committee observed that charges should be reviewed more regularly, and we agree with it. If updated for inflation, the fee would be closer to £2.70. Instead, we are seeing it double in a single step, not a routine adjustment.
Since the policy aim is to achieve full cost recovery over the lifetime of the service, are fees being set higher than they might have been had they been previously reviewed? Can the Minister also confirm what the review cycle will be going forward? The period during which these fees are charged is now extended to 2031, but transaction volumes are beginning to fall as these policies are working and we have greater compliance. That raises an obvious question: has the department adequately modelled cost recovery on the shrinking transaction base? If the number of operating zones declines over time, what does that mean for the long-term viability and cost structure of the central service?
I turn to my reservation about the amendment itself. The amendment expresses concern about costs being passed on to motorists. As far as we can tell, there is no evidence for that happening at all in practice. Instead, the evidence suggests that these costs will not be passed on through any higher charges for motorists. The more credible risk is that they will be absorbed within local authority budgets, reducing investment in sustainable transport.
We support the concerns raised by the Secondary Legislation Scrutiny Committee. I press the Government for greater transparency, better analysis and a clearer account of who ultimately pays. To that end, will the department commit to publishing annual data on cost recovery for the central service, so that Parliament is not in the same position again?
Finally, I thank the Minister for his letter to the committee, his engagement with me ahead of this debate, and the words and reassurances that he has already given to the House.
The major point is that this is an air quality measure and not a revenue measure. When local authorities are able to comply with the air quality standards for two consecutive years, they can close the clean air zone. That is what we want them to do. We do not want charging mechanisms; we want clean air for people in those towns and cities.
I think I have answered all the relevant points. I will not test your Lordships’ patience by going through again what I said 10 minutes ago. I commend the regulations to the House.