Page last updated at 22:23 GMT, Wednesday, 2 July 2008 23:23 UK

Bill passes after rethink on duty

Car tax disc
The rebellion over car taxes is the latest budget headache for ministers

The government has said it will re-examine controversial plans to raise vehicle excise duty (VED) on the most polluting cars.

The assurances came during a debate on the measures, when ministers saw off a potential rebellion by Labour MPs.

Backbenchers now expect an announcement that the measures will be "phased in" rather than brought in straight away.

Under the plans, branded unfair by the Tories, some motorists face VED rises of up to 245 on their cars.


Nearly 50 Labour MPs had signed a motion calling for the government to reconsider its VED plans.

But only six Labour rebels voted against the government after ministers gave assurances of a rethink.

What kind of policy creates a situation where the owner of new Porsche will face a smaller tax increase than a family driving an older car?
Justine Greening
Shadow Treasury Minister

Treasury Minister Angela Eagle said had been listening to the concerns of Labour MPs and ministers were looking at ideas put forward to help hard-pressed motorists and hauliers.

Labour's Ronnie Campbell said he had been assured the issue would be re-examined at the pre-Budget report in the autumn, when ministers are expected to say it will be phased in.

The vote came after a heated debate in which the Conservatives said that 2.3 million families will pay between 100 and 245 more on each car they already own as changes apply to cars registered since 2001.

A Tory bid to stop the road tax changes applying to cars registered before March 2006 was lost by 63 votes.

Shadow Treasury minister Justine Greening branded the measure "unfair".

Older cars

Ms Greening said: "The people who are being affected are people with older cars, they are people with family cars, they are people on low incomes and they are people who can't afford to upgrade to a less polluting car," she told MPs.

"What kind of policy creates a situation where the owner of a new Porsche will face a smaller tax increase than a family driving an older car?"

She claimed it would have "no benefit to the environment" and would "penalise people" who made decisions about the cars they bought up to seven years ago.

She also said the Treasury's take from the rising costs of car tax would increase from 1.9bn in 2006 to 4.4bn in 2010, but without helping the environment.

But Ms Eagle said the Tory plans were "undesirable, unworkable and down right peculiar". Previous changes to vehicle excise duty had always applied to cars already on the road, she said.

Applying new road tax rates to vehicles after a certain date would be "difficult to determine, understandably complex" and would "create confusion" particularly in the second-hand car market, she added.

10p tax rate

Lib Dem Treasury spokesman Jeremy Browne said his party agreed with having variable car tax rates - and would make the differences greater to encourage consumers to buy more fuel efficient cars.

But he said he would back the Tories because he did not agree with the retrospective element of the plans because it would make it difficult for people with older cars to sell them.

Chancellor Alistair Darling has faced a number of controversies over his budget measures, having already been forced into a U-turn on capital gains tax changes amid uproar from small businesses.

On Tuesday he avoided a potential revolt over plans to scrap the 10p tax rate, on the basis of more promises to revisit policy in the autumn mini-budget.

Although the ending of the starting rate of tax was contained in Gordon Brown's last Budget as chancellor last year, MPs have tried to use this year's Finance Bill to reopen it.

'Difficult decisions'

An earlier rebellion was only prevented because of the announcement of a 2.7m compensation package to help those worst affected.

It was only after a pledge of more measures in the pre-Budget report to assist the 1.1m low-paid workers who would still lose out ensured there was no further revolt.

At the regular morning press briefing, the prime minister's spokesman appeared to dismiss the idea of a climb-down on the car tax measures.

He said the policy was "set out by the chancellor in the Budget" and that remained the government's position.

The government acknowledged that "difficult decisions" had to be taken if you are serious about the green agenda, and that the proposals would save 1.3m tonnes of CO2 by 2020.

The Finance Bill was given a third reading and now goes to the House of Lords.

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