Page last updated at 22:15 GMT, Wednesday, 14 May 2008 23:15 UK

Tories warn of car tax 'timebomb'

Cars on the motorway
The government wants to reduce CO2 from cars by a third by 2030

Plans to increase car tax on the most polluting cars are a "ticking timebomb" that could become next year's 10p tax row, the government has been warned.

In a debate, ministers were criticised for planning to make the highest band of vehicle excise duty (VED) apply to cars registered after 2001.

The Tories said many families would see car tax double. Labour MPs said many could not afford to change their car.

Ministers said the new tax bands would save 1.3m tonnes of CO2 by 2020.

The changes, due to come into effect next year, will mean cars will be put in one of 13 bands from A to M, based on their carbon emissions.

High polluting

Owners of the most polluting cars in band M will pay 440 in tax. And from April 2010, people buying the most polluting cars would pay a one-off "showroom tax" of up to 950.

In his Budget speech, Chancellor Alistair Darling said it would "encourage manufacturers to produce cleaner cars".

This is not a tax rise for most motorists, nor is it a tax rise which hits the poorest
Angela Eagle

But the Treasury is also abolishing exemptions from the highest rate of tax for older cars.

This means that owners of larger cars bought since March 2001 will find that their road tax will rise steeply from next April, the Tories claim.

In a Conservative-led debate on Wednesday, shadow chief secretary to the Treasury Philip Hammond said the measures were "ticking timebomb" under the chancellor's successor for 2009, "just as surely as his predecessor's Budget was primed to explode under him".

The Conservatives say 3.7m people will lose 90 a year under the changes, and overall more than one million families will see their car tax double.

'Punitive taxes'

Mr Hammond said the new system had been "dressed up as an environmental measure" but was "in truth, an old-fashioned revenue-raising measure" aimed at "filling a bankrupt Treasury".

He said motorists - who he said were already paying more than 1,800 a year in tax on average - may not be able to afford to change their car and would be "unable to change the vehicle they drive because its value has collapsed, yet forced to pay the chancellor's punitive taxes to stay on the road".

A Labour motion expressing concern at the retrospective changes to the tax has been signed by 25 MPs - 18 of them Labour.

During the debate, Labour MP Albert Owen said in his Ynys Mon constituency, car use was "absolutely essential" for many families who were already suffering from high fuel prices and would be faced with a "double whammy" if the changes came in.

Labour's Martin Salter urged the government to "reflect carefully on the sheer unfairness of the retrospective nature of these proposals".

'Sheer unfairness'

Liberal Democrat Treasury spokesman Vincent Cable said he agreed the changes had not been introduced with "great clarity" and it was wrong to attack existing vehicles - but could not back Conservative calls to abandon the measures as a whole.

For the government, Angela Eagle said most low-income families would be unaffected or better off - as those that owned a car at all were more likely to own one registered before 2001.

"This is not a tax rise for most motorists, nor is it a tax rise which hits the poorest, nor is it a tax rise which hits the average family car," she said.

The government says owners of 24 of the most popular 30 models of car will be better off under the new system, and says fuel duty and the cost of motoring has fallen in real terms over the past 10 years.

A Conservative motion, calling for the government to abandon the planned VED increases, was defeated by 284 votes to 125 - a majority of 159.


SEE ALSO
Budget car tax rise 'not hidden'
30 Apr 08 |  UK Politics
New tax changes explained
03 Apr 08 |  Business
Darling puts up car and drink tax
12 Mar 08 |  UK Politics
Gas guzzlers set to face 950 tax
12 Mar 08 |  Business

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