And while the proposed new system will see VED duty for the cleanest and smallest cars cut by £50 - VED is currently £150 a year - the motor industry looks to have won its battle to have the revised system based on a vehicle's carbon dioxide emission rate and not engine capacity. A Treasury press release said that while new cars would pay VED according to carbon dioxide levels, it was proposed to use engine size, and possibly age, as proxies for existing cars. The statement added: 'Fuel type is another factor which could also be taken into account.'
During the consultation exercise the Government is also asking whether VED rates should be set according to bands or a continuous sliding scale. The Government plans to introduce the new scheme during 1999 following the passage of the Finance Bill - usually before the summer recess. The consultation exercise continues until January 31, 1999.