It was billed as being the greenest budget yet – but Alistair Darling's first outing as Chancellor saw both gains and losses for Britain's beleaguered drivers. The decision to freeze the proposed 2p/litre rise in fuel duty until October came as welcome relief in the face of the relentless rise in fuel prices, but reforms to road-tax and company car tax are going to hit the drivers of higher-emitting models very hard – and many will be alarmed by Darling's announcement of further funding for road-charging pilot schemes.
Reduced CO2 emission targets
The Government has said it will be pressing the EU to introduce tougher targets for the long-term reduction of CO2 from cars. It is already clear that the original target to reduce the average emissions to 140g/km by 2008-9 will be missed and the EU has since introduced an amended target – to reduce average emissions to 130g/km by 2012. The Chancellor used the budget report to announce that the Government will lobby the EU to set an even tougher medium-term target, committing car-makers to reduce average CO2 emissions to just 100g/km by 2020: a figure that even the lightest and most fuel-efficient cars currently have difficulty meeting.
Increased road tax for high CO2 vehicles
The Budget also announced a radical review of road tax bands, including the scrapping of the existing seven-band system and its replacement with a new 13-band system.Currently cars are split between bands ‘A’ and ‘G’ according to their CO2 emissions, with cars emitting below 100g/km falling into ‘A’ and anything putting out more than 225 g/km falling into the highest band ‘G’.From the next April, the bandings will be tightened up, with the new band ‘L’ applying to cars emitting between 225g/km and 255 g/km and a new ‘super-band’ – ‘M’ for cars that put out more than 255 g/km.Road-tax rates are going to be dramatically increased for higher emitting vehicles, with new cars also subject to a higher first-year VED charge (effectively a registration tax) according to CO2 emissions. Cars emitting under 130 g/km will be exempt from this and cars emitting between 131 g/km and 160 g/km will pay no more than their standard VED rate – but anything falling into the new band ‘L’ will pay £750 in the first year and then £430 a year in VED and the new band ‘M’ will be hit by a £950 first-year charge and then a £455 annual VED rate.Cars are also likely to be given colour-coded tax discs, with local authorities empowered to vary parking and congestion charges according to a vehicle’s emissions.
2p fuel duty rise frozen
Despite the hype around what has been proclaimed the greenest budget yet, Chancellor Alistair Darling announced that the proposed increase in fuel duty of 2p a litre – which had been scheduled to take place on April 1st – has been suspended until October. The move follows intensive lobbying from motoring and road transport organisations, and reflects the fear that fuel prices are likely to rise further on the back of an increase in global oil prices. It’s good news for drivers – but the price of fuel has still risen by almost 20 percent in the last year. The move will cost the Treasury £500 million in lost revenue, but much of this will be recovered by higher duty and VAT on the rising fuel prices – which currently average 106p/ litre for petrol and 113p/ litre for diesel.
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Re: Budget ’08 special report
plus, here's a letter that I sent to my MP clarifiying the unfairness and un-greenness:
(Please feel free to copy it and use it yourself. IT's surprisingly easy to write to your MP --> go to http://www.writetothem.com/)
Dear **my MP**
Ref: 2008 Budget: unfair retrospective changes to VED bandings
With reference to Rt Hon Alistair Darling's recent 2008 budget, I am writing to express my immense disappointment at the changes in VED categorisation that masquerade as a green tax.
Whilst, as a car enthusiast, I am not happy with the new showroom taxes, I can understand that a "green tax" at the point of sale enables me as a buyer to make my green choice. And it should also influence the manufacturers. I can even understand further VED bands being added above the current G band to apply from a certain future date forwards.
However, it is the retrospective changes in VED banding that are so wrong. How can this be regarded as a "green tax" when it DOES NOT enable an owner to make an informed green decision. The owner of a pre-2006 car, for instance, has already made his green choice based on the VED levels at the time he bought. He already has that vehicle so cannot now not buy it. He may indeed now have trouble selling it because it will be less attractive on the 2nd hand market. He may even be tempted to scrap the car - which is hardly environmentally friendly. In fact the government ought to be encouraging us to keep our cars for longer and look after them as this is far greener than changing to new cars frequently.
In closing, it is obvious to me that the real way to have a "green tax" on car usage is to add a further tax on fuel. This is fair as it affects (1) those that drive more and (2) those that have least economical cars. Conversely, the VED tax is not a tax on usage - the driver can drive as much as he likes once he has paid his VED! The interesting side effect of scraping VED and taxing fuel more is the two further financial savings that you can make: (1) the DVLA VED admin system can be removed, and (2) there is no need for any expensive and complex road charging policy.
many thanks for your interest, and I hope that you can apply pressure to reverse this grossly unfair change in VED bandings.
Yours sincerely
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Re: Budget ’08 special report
Here's a petition or 2 that I am aware of:
http://petitions.pm.gov.uk/UNFAIR-VED/
http://petitions.pm.gov.uk/greenstealth/
Re: Budget ’08 special report
With regard to the budget increases in car tax I think it unfair and stealth to hit young families who genuinely need and already own a bigger motor to haul the kids around in.
However going forward cars such as the honda civic hybird/Polo/Golf ( when it arrives ) blue motion etc make more sense as these come onto the used market and the average punter can afford to buy them.The new taxes will force people to think about cutting C02 and fuel costs and perhaps make hybrids/lean diesel become desirable and even aspirational as opposed to high BHP/Status/fashion ( delete as appropriate ) cars that no doubt are well engineered but practically useless on the UKs heavily congested roads.