Brown ignores warnings of another 'fiasco' over car tax

Published on Thursday 10 July 2008 22:38

GORDON Brown yesterday refused to apologise after being accused of misleading Parliament over plans to reform car tax, as he was warned of "sleepwalking into another 10p tax fiasco".

The Prime Minister brushed aside repeated Tory demands to withdraw his earlier assertion that "the majority of drivers" would benefit from proposals to increase vehicle excise duty (VED) for more polluting vehicles, despite figures proving that only a minority would gain.

The plans, which will start to come into force next April, have drawn widespread concern among Labour back-benchers, who believe they will punish poorer families as they are more likely to own older vehicles.

They believe the plans could be as damaging to the government as the removal of the 10p income tax band.

MPs are particularly annoyed because the changes apply to cars bought since 2001 – punishing drivers for choosing a larger-engined car at a time when they could not have known of the looming tax penalties.

Mr Brown had been backed into a corner when the Treasury published figures showing that owners of 43 per cent of vehicles in the UK – some 9,423,450 – would have to pay more tax once the change comes in.

By contrast, only 18 per cent of the 22 million vehicles on the road – 3,944,700 – would see their annual levy reduce.

The remaining 39 per cent of vehicles – 8,546,850 – would pay the same amount as at present.

George Osborne, the shadow chancellor, said: "Nine million families face higher car taxes at a time when few can afford them.

"Poorer drivers will be penalised because the tax is retrospective and hits second-hand cars," said Mr Osborne. "Any pretence that it helps the environment has been demolished by Greenpeace, which says that it gives green taxes a bad name.

"Everyone knows that the Labour Party is sleepwalking into another 10p tax fiasco."

Mr Brown said he had discussed the issue of increased VED several times in the Commons and had normally referred to the majority of motorists either gaining or not being worse off under the changes.

Car tax rates have been linked to carbon dioxide emissions from vehicle exhausts since 2001. At present, those vehicles with the lowest emissions are exempt from the levy, while those emitting less than average pay a sum below the benchmark 145 annual figure. Vehicles with greater than average emissions pay up to 400 a year.

The government plans, from next April, to extend the number of bands from seven to 13 to link more closely the levy to the environmental damage caused.

The highest rate will increase to 440 – meaning that some motorists could be up to 245 worse off.

The row came as Robin Harper, the joint leader of the Scottish Greens at Holyrood, said the proposals had given green taxes "a bad name".

Mr Harper claimed that the retrospective nature of the car tax proposals showed that it had nothing to do with saving the environment.

He demanded that the UK government, instead, puts forward a schedule of future increases so that people could make an informed choice about what car they drive.

He said: "These taxes are all about raising money, when it should be about changing behaviour. This decision just gives green taxes a bad name.

"By making the tax retrospective, it will not influence the decision to buy a smaller, less-gas-guzzling car. It simply punishes people for a purchase they made in the past."