VED INCREASE
‘The Chancellor is attempting to encourage the motorist to move to lower emitting cars with the increase in Vehicle Excise Duty (VED) for large vehicles, He asserts that the reclassification of vehicles into six new VED bands will force motorists to choose lower emitting vehicles, but the inducements are so small, that the effects are likely to be equally small.

There are more effective ways to influence the buying habits of motorists than the “blunt instrument” approach of a road tax increase.

‘It will be those who really need larger vehicles for their daily lives that suffer most.  Families, rural dwellers, farmers, and business users are less able to absorb this increase, as they are already paying extra to use their vehicles through fuel duty, company car tax, and other measures.

‘Instead of punishing motorists for choosing what is available, the Government needs to do more to assist vehicle manufacturers to develop cleaner vehicles. Consumers need to be given a proper choice, and manufacturers and vehicle dealers need to be able to give it to them.’

FUEL DUTY postponement
‘The Chancellor has made a sensible choice by postponing the fuel duty increase scheduled for 1 April to the autumn. The high oil price made it inevitable, but this does not make the rescheduled rise in October any more justifiable. By implication, motorists will have to endure tax increases of around 4.7 pence per litre, covering the Excise Duty plus VAT in just six months, as announced measures in two Budgets are applied.

A revision of all taxes associated with all forms of road transport seems to have been promised in the Budget. We welcome this and will encourage the Treasury to make sure that  appropriate consideration is given to all the relevant factors.

Motorists will also have noticed a return to real increases in fuel tax from 2010. When last used, this measure led to 2000’s fuel protests. Let’s hope our new Chancellor reconsiders this policy in his overall review of road taxes.’

ROAD PRICING STUDY
‘There are still many unanswered questions surrounding the concept of road pricing. As it is likely that the motor industry would be in the front line of implantation it is vital that Government consults with both motor retailers and manufacturers before going ahead with any study on the issue.’ 
 

Society of Motor Manufacturers and Traders:

Initial response to budget

Sales taxes on higher emitting cars have little effect on CO₂ emissions and create an unwelcome market distortion. That’s the view of SMMT to news that buyers of new cars with CO₂ above 160g/km will have to pay a supplement to VED on first purchase from 2009.  For cars emitting more than 255g/km CO₂ this rises to £950 (£455 of which is VED)

“Since the introduction of CO₂-based road tax in 2001, there has been a clear trend towards lower-CO₂ new cars,” said SMMT chief executive Paul Everitt. “Encouraging even more buyers to choose models with class-leading emissions should be the priority. We are therefore pleased to see an increase in the number of bands to 13 from 2009.

“However, introducing what is effectively a sales tax for many new cars is a retrograde step. Trying to force people out of high-value cars has no environmental merit and will be seen as a smokescreen for revenue-raising.”

SMMT believes the key to driving demand for cleaner cars is to improve incentives in what are currently the middle bands; these make up more than three-quarters of new car sales. It is encouraged therefore that the number of bands will increase to 13 and welcomes the certainty that comes from a system set until 2011.

Today’s budget will take VED to a more linear framework, like that applied to company car tax. This rewards drivers who specify lower-emitting models within each class, as well as lower CO₂-emitters overall, through a linear pathway of 5g/km tax increments. Since its introduction in 2002 this long-term model has worked, encouraging sales of lower-CO₂ emitting company cars.