New car taxes get Parliamentary backing

4 August 2008

Government proposals to increase vehicle excise duty on older cars have won the backing of a Parliamentary select committee.

The all-party Environment Audit Committee gave its support to plans, announced in the Budget, which mean that some cars registered before March 2006 will now be subject to increases in vehicle excise duty.

When the top rate of tax was implemented for heavy-emission cars, an exemption was made for those registered between March 2001 and March 2006. However, a new set of duty bands has been introduced, depending on a vehicle’s CO2 emissions, and as part of the new system the exemption on older cars has been removed.

As a result, heavy-emission cars registered between March 2001 and March 2006 could be liable to the new top bands. The change is to take effect as from April of next year.

Although three members of the committee compiled a minority report arguing that the tax was retrospective and that its implementation should be put on hold until its likely effects have been properly assessed, the Committee supported the government’s move.

However, the Committee’s report did offer criticism of the way the changes had been tucked away in the Budget Report.

The MPs also argued that the differentials between the various tax bands were not sufficient to encourage people to buy less polluting cars.

While backing the vehicle excise duty regime, the report suggested that the government needs to go further in tackling car emissions.

Tim Yeo, who chaired the Committee, said: “We don’t want people to stop driving, but we want them to choose the greenest car. They need the biggest possible incentive, that’s why the government should be even bolder – really penal rates for high-emission cars and really attractive ‘carrots’ so that tax is almost nothing on the greenest models.”