Constant updates on the 2008 Budget
12 March 2008

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.

National road pricing

Last week it seemed that road charging proposals had stalled – but now Alistair Darling used his budget to report that extra funds will be released to allow trials in national road charging to continue. Speaking during the budget announcement, the Chancellor said that road pricing could help to reduce congestion in future and that the funding would enable the development of a national road pricing system.

Mike Duff

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Comments
12

12 March 2008

Don't motorists pay enough tax!

It's not fair to target on part of the population!

12 March 2008

[quote Jaggie]

It's not fair to target on part of the population!

[/quote]

I think motorists actually make up the majority of the adult tax-paying population.

On the whole this could be a lot worse. No immediate increase in fuel duty, and no immediate increase in road tax. No increase in road tax at all for most cars on the road in fact.

Not sure what the increase in road tax for super-high emmisions vehicles is going to achieve. How many cars in the poposed band M cost less than £45000, and how many are actually bought by individuals with their own money?

12 March 2008

If the road charging were handled by road stretches, then it may very well prove effective. But i doubt the potential for pointless admin is as great as whatever the government plan.

12 March 2008

The latest changes to Vehicle Excise Duty have thrown up some serious anomolies. I do wish that the chancellor would leaves things alone and not keep changing everything all the time. I bought a new car last summer and specifically chose the version of the car that was below 225 grams of CO2, not least because of the VED bands. These have now been changed again and the increase in my 198 g/CO2 car is from £210 to £260 in 08/09. This is virtually a 25% increase for a car with not unreasonable emissions. The higher band G increase is only from £400 to £410!

I really don't think it is reasonable to apply these changes retrospectively in this way to purchase choices made under the previously announced bandings. Please please please leave things alone now so that we know where we are.

Furthermore, the VED process ignores the most important variable - miles driven per year in a given car. Other variables include style of driving and quality of maintenance etc, but these are even harder to measure.

You can have a very inefficient car that only does a few miles a year, or a low emission car that does many thousands of miles. The low emission car polutes more!

In any event the only truly sensible and fair way to both raise tax revenues and encourage environmentally sensible behaviour would be to scrap VED and increase tax on fuel. This then captures fuel efficiency (the primary contributor to CO2 emissions), mileage driven and also driving style etc as the more efficient drivers use less fuel and incur less expense. Simple.

It must also be true that if everyone ends up with a zero rated VED car then the cost of managing the VED process is loss making - so why bother? But then that would mean a government withdrawing a tax/process! Just think of the trees we could save by scrapping VED (including all the paperwork involved)!!!

The real reason that this simplification would not be done by this government though is that they want to micro-manage every area of all of our lives.

12 March 2008

How can the government re-classify the car tax bands and therefore retrospectively raise annual car tax? that only makes existing owners suffer drop in value of their cars (eg >225g, pre 2006 registered band f cars). Making prospective new car buyers think twice is one thing, but what is the environmental impact of doing this to existing owners? They can't sell, so they have to keep their cars

time for a petition?

13 March 2008

I’d sign it I just don’t understand how 45% increase in tax on some used cars is going to help. For new cars it will make people choose clean vehicles and thus keep “gas guzzlers” off the road, but a used car is already built, you can’t turn it into a lower emissions car. If I don’t choose the 225 g/km car in the used lot because of emissions then the price will drop until someone does. It just seems devoid of logic.

13 March 2008

[quote phenergn]For new cars it will make people choose clean vehicles and thus keep “gas guzzlers” off the road,[/quote]

But will it? New cars are sold "on-the-road" so if you're in the market for a £40k car, you're in the market for a £40k car, regardless of what the cost of the VED is included in that. I'd take a wild stab that some manufacturers would even adjust prices downwards slightly to help things along a bit.

As for ongoing VED, if I were to buy my car, new, after the roll-out of the new bands, it would mean paying an extra £155 per year over and above what I currently pay (and I think it is due to go up to £400 this April anyway!). This, in the overall annual cost of motoring for me is not a deterrent, and I guess it will be the same for many others.

It's just a money grab by HMG, nothing to do with the environment. It's the same with 5p carrier bags. If you've spent £50 on shopping another 25p for bags wont kill you but multiplied by billions of bags it provides a very healthy VAT stream for HMG.

14 March 2008

You are right about the annomalies, but there is another problem to those which you identify. I have a Volvo XC 90 which was registered in 2004 and therefore was not eligable for the top VED band even though it produces 242 G/KM. I had intended to keep the car for a few more years because although the VED was high, it was not punative. From the introduction of the new measures it will be in the top but one band at a cost of £410, I believe. If this is the case, then I might as well update the car, and as I have a large trailer to tow for my business, and a family I will need a large vehicle. So instead of the intended effect, this legislation my in effect put another high polluting vehicle on the road.

14 March 2008

I hear you, Nigel. Land Rover will get another sale from me before April 2010 and this stupid tax comes in. I shall then vote Conservative who will hopefully reapportion taxes more fairly. Hey, they might even spend some money on the environment rather than miserably taxing us all and leaving us without alternatives.

17 March 2008

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.

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