Chancellor of the Exchequer Gordon Brown announced the controversial 3% company car tax supplement on diesel engines would be removed if they met stringent Euro IV emissions standards. This week, a source at the Inland Revenue admitted that the introduction of the scheme had been a last minute decision that was taken at ministerial level, rather than after widespread consultation with departments.
Although Peugeot has claimed to be the only manufacturer to reach Euro IV emission standards, the complexity of legislation means that while it surpasses some standards, it does not reach them for all.
The announcement has marked a shift away from the Government's sole focus on CO2 emissions, the basis for company car tax from 2002 and vehicle excise duty next year. To meet Euro IV standards that are the cornerstone of cutting company car tax rates for diesel drivers, manufacturers have to focus on a range of emissions, from oxides of nitrogen to particulates and carbon monoxide emissions.
But pushing to improve engine technology to meet Euro IV emission requirement could actually create higher emissions of CO2 and raise fuel consumption, presenting a confused picture to manufacturers trying to reduce emissions.
Ford has retuned Euro IV compliant petrol engines in the new Mondeo to meet Euro III specifically for Britain, because such a move actually lowers CO2 output.
A spokesman said that the Government was 'out of step' with the rest of Europe in focusing on CO2 emissions and the sudden decision to base a part of the tax on Euro IV emissions compliance had created confusion.
Manufacturers do not have to meet Euro IV regulations until 2006, so they face a frantic effort to speed up development processes to enter the Euro IV emissions band if they want to offer drivers a vehicle without the 3% supplement.
Currently, only Peugeot comes close with the new 607, fitted with a particulate and a filter to take out oxides of nitrogen, but it still has not reached all the Euro IV requirements. A spokesman said: 'As far as particulate emissions are concerned we are Euro IV compliant and we are looking to meet that for all our diesel engines by 2002. We will still keep campaigning for the 3% levy to be removed entirely. We are campaigning for a turnaround of the Government's perceptions of diesel and we will continue to do that.'
A spokeswoman for Volkswagen said the Lupo 3-litre, which uses just 3-litres of fuel per 100kms, was the only vehicle to meet Euro IV emissions standards, but was not available in the UK.