The document says: 'VED is one of a number of instruments available to the Government for giving clear signals to vehicle purchasers and manufacturers about the environmental consequences of their decisions. 'However, the present single rate structure for cars offers no incentives for purchasers to buy or manufacturers to produce cleaner vehicles.'
'Clean' cars will benefit from a reduction of £50 in VED, and the Government has selected a car's carbon dioxide emissions as the key criterion for measuring its green credentials in a bid to help the UK meet its international and domestic environmental commitments. The new VED system will only apply to new cars, while VED for the existing parc will be based on engine size or age, regardless of their environmental performance.
The danger, however, is that the Treasury uses fuel duty to recoup revenue lost by cutting £50 from the VED of 'greener' cars. A spokesman for the Treasury rejected suggestions that the £50 cut would cost it £1.8 billion per year, and refused to comment on allegations that adding £40 to the VED of cars with 1.6-2.0 litre engines would raise £1.5 billion, and that a £100 increase for 2.0-litre-plus cars would bring in £2 billion.