Budget 2008 analysis

Today was a good day if you are involved in road charging technology, work in the engineering department of a Midlands university or have an automotive research and development company in India.On the other hand, if you spend a lot of time at the wheel, have a company car and drive anything bigger than a Mondeo 2.0-litre diesel, today will be memorable for all the wrong reasons.The top-line 'tax-grab' figures are that Vehicle Excise Duty will rack in £735m taxes in 2010-11, up from £465m next year.Thanks to pressure groups, the Government is making biofuel use less fiscally attractive. By happy coincidence, it now expects to grab an extra £550m in biofuel taxes by 2010-11.On the recommendation of Julia King (Vice-Chancellor of Aston University) it is also going to ‘write to the Indian Government’ to suggest setting up a joint R&D venture to build ‘low-cost, low carbon cars.’ Expect more on that odd announcement soon.The future fuel tax hikes are complex and hard to follow, so just remember no matter how much the price of a barrel of oil rises over the next two years, the Government is going to keep hiking its tax take.But it's the re-working of the VED ‘road tax’ bands to run from A-M, instead of A-G that is far more significant.From 2010, road tax drops significantly on engines returning under 185g/km. No surprise there.A few years ago a friend accompanied a group of Whitehall civil servants on a trip to study biofuel use in Scandinavia. The impression he got was that nobody ‘really needed’ a car that returns over 180g/km of Co2.Following that logic, above 225g/km cars will be hit with a serious ‘first registration’ road tax hike in 2010. If you are foolish enough to buy a car returning over 255g/km, the ‘first year’ tax disc will cost £950, followed by yearly discs costing at least £455.More ominously, the Chancellor said that the results of its investigations into road charging would be announced next year. I'd expect the result to recommend the use of ‘tag and beacon’ technology, which uses automatic charge cards mounted in the windscreen.The bad news here is that road charges are likely to be varied on engine size, like the future proposals for the London Congestion-Charge.So, what’s the future for driving in the UK, as envisaged by the current Government?First, if you drive a large-engined car, you'll be battered by ever-rising fuel taxes, much higher VED charges, potentially higher charges for local authority parking permits and, when road charging schemes start up in the next few years, you’ll be expected to fork out higher road tolls than other drivers.However, if you play the game, and slip into something with lower emissions, the Government will take less tax from you – certainly when compared to the dramatic rise in the cost of running the biggest and most thirsty cars.But, on this, the hypocrisy of the Government is clear. Treasury projections on the tax take from VED show it fully expects drivers to pay the extra and stick with powerful cars.The Government says it wants a shift to ‘greener’ cars, but its accounts actually show it expects drivers to keep paying handsomely for the pleasure of a bigger engine.

Hilton Holloway