Motor Industry News
So called gas-guzzling vehicles will incur a new 'garage tax' of £950. Alistair Darling also announced that fuel duty would rise by 0.5p a litre in 2010, the lowest increase for three years.
A reform of vehicle excise duty, means that motorists will have to fork out an additional £1.2bn between April 2009 and March 2011.
Darling quashed speculation that the idea of road pricing had been abandoned and announced funding for trials next year to examine how charging by the mile may alter drivers' behaviour and how concerns over privacy could be explained. The trials will also examine the cost-effectiveness of road pricing, which the Treasury believes will replace fuel duty in the long term.
The vast majority of motorists would either pay less road tax or be no worse off according to Mr Darling, but rates will rise by up to £90 a year for some medium sized family cars.
Six new road tax bands will be added to the existing seven next year, creating a scale from A to M, which Mr Darling said would hopefully encourage drivers to buy more efficient cars. From 2010, band M cars such as the Range Rover and larger BMW and Mercedes vehicles which emit more than 255g of carbon dioxide per km (g/ km), will be liable for a higher rate of £950 in the very first year.
Some motoring groups described it as a showroom tax because motorists will have to pay it just to collect their new cars. All cars over 160g/km, which is the current average for new cars, will pay the showroom tax.
The driver of a two-litre Ford Mondeo, emitting 189g/ km, will pay £210 road tax today, £260 next year and £270 the year after. The showroom tax for a similar new Ford Mondeo in 2010 will be £425.
The 2.5m cars emitting more than 225g/km in the existing band G will pay £400 in vehicle excise duty (road tax). Band A cars that emit 100g/km or less will continue not having to pay road tax for the next three years.
Businesses will be penalised for buying any car with above average emissions, under changes to capital allowances for company cars. Alistair Darling said that the Government would urge the EU to agree a target of 100g/km for the average new motor car by 2020.
This would force manufacturers to make reductions in average engine size. Motorists will have to switch to smaller, less powerful cars or face large penalties.
A report commissioned by the Treasury on low-carbon cars recommended that retailers be forced to give buyers much clearer information on fuel economy and to show how much they could save by choosing the most efficient models in the same class. The report, by Professor Julia King, suggested that all adverts should have more prominent information on vehicle emissions. She also suggested that tax discs should be colour-coded according to the car's excise duty band.
There are 13 bands from next year and this may prove unworkable. Professor King was sceptical about the benefits of biofuels and recommended that the Government should "move the short-term focus to automotive technology". She advocated much greater investment in electric cars.
The Petrol Retailers Association welcomed the six-month delay in the fuel duty increase, but pointed out that drivers would face two rises within six months: 2p in October and another 2p in April 2009. With VAT, these increases will add almost 5p to the cost of a litre of fuel.
The Liberal Democrats condemned the postponement of the fuel duty rise. they said: "Over the last ten years the cost of motoring has decreased by 10% in real terms while the cost of public transport continues to rise. The last thing the Chancellor should do now, when public finances are so tight, is throw away an income stream while simultaneously damaging the environment."
Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said: "Trying to force people out of high-value cars has no environmental merit and will be seen as a smokescreen for revenue-raising."
A poll of 1,000 drivers commissioned by the insurance company esure, conducted before the Budget, found that 42% planned to buy an environmentally friendly car when they next changed vehicles. Another survey, by the Environmental Transport Association, found that two-thirds of drivers did not know how much CO2 their cars emitted. These can be found on the mycarcheck.com website.