Chancellor declares war on gas guzzlersNew high rate of car tax in Budget

13 March 2008

Chancellor Alistair Darling yesterday went to war on owners of gas-guzzling cars by imposing swingeing future taxes on the most-polluting vehicles.

He also signalled the government's long-term road congestion-easing plans by setting aside extra funding 'to develop the technology which could underpin national road pricing'.

But Mr Darling temporarily eased the burden on hard-pressed motorists by postponing to October the 2p a litre fuel duty rise that had been planned for April.

'Dirty' cars

As widely forecast, the Chancellor announced his intention to crack down hard on the 'dirtiest' of road vehicles.

He said Britain's 30 million road vehicles accounted for 22% of the total carbon emissions and that something extra needed to be done.

The amount owners currently pay on annual Vehicle Excise Duty (VED) car tax is based on size and emission levels.

New tax bands

Mr Darling said that from 2009/10 there would be six new VED bands including a top band (band M) for cars emitting more than 255g of carbon dioxide per kilometre. These cars would pay an increased VED rate of £425.

£425 a year

New high rate of tax for cars that emit high level of CO2

But greener cars, emitting 150g or less per kilometre, would pay less.

Mr Darling also said that from 2010/11, the most-polluting new cars would pay a first-year VED rate of £950, while those new cars with a 130g/k or less emission level would pay nothing at all.

Company cars

Company car owners were not exempt from the Chancellor's war on pollution, as Mr Darling said he was reforming capital allowances for business cars to increase the incentive to move to lower carbon-emitting vehicles.

Mr Darling said: 'It is right that if people choose to buy a more-polluting car that they should pay more in the first year to reflect the environmental cost.

'The changes will provide a real incentive to manufacturers and motorists.'

Fuel duty rise

The Treasury reckons that as a result of the reforms, the majority of motorists will be better or no worse off in 2009.

Mr Darling said he was postponing April's 2p fuel duty rise 'to support the economy and help business and families'.

But motorists are already facing a previously-announced 1.84p a litre rise in April 2009, and today Mr Darling said that there would also be a 0.5p a litre rise in real terms from 2010.

Green attack

While motoring groups welcomed the April 2p postponement, green groups attacked the move.

But the RAC said the postponement was 'the only bright spot in a Budget seemingly doing nothing positive for the motorist'.

The Society of Motor Manufacturers and Traders said that 'introducing what is effectively a sales tax for many new cars is a retrograde step'.

It added: 'Trying to force people out of high-value cars has no environmental merit and will be seen as a smokescreen for revenue raising.'

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