Presently the standard rate of Vehicle Excise Duty for cars is £155, although vehicles powered by engines up to 1,100cc receive a £55 rebate. However, from March 1 the standard rate of VED for cars and light vans will be increased by £5 to £160. The VED rate for sub-1,100cc cars will rise by £5 to £105. Simultaneously the reduced rate of VED for cars registered before March 1, 2001 is changing with the scheme for 1,100cc vehicles being extended to vehicles powered by engines of up to 1,200cc.
Later this year it will be further extended to sub-1,500cc models. And all new vehicles registered from March 1 will have their VED based on carbon dioxide emissions irrespective of engine size. The four-band system offers discounts for 'clean' cars and penalties for diesel models. Fleets will pay £90 for clean-fuelled vehicles emitting less than 150g/km of CO2 and, at the other end of the scale, £160 for diesel cars emitting over 186g/km of CO2.
Careful selection of company cars means that shrewd fleet managers selecting the 'right' diesel cars can save up to £45 when compared with the existing VED rate for new vehicles. For example, fleets choosing the new Volkswagen Passat TDI PD S (100bhp) with a five-speed manual gearbox will pay £110 VED because it emits 149g/km of CO2 and is a diesel.
However Stewart Whyte, one of the directors of the Association of Car Fleet Operators, condemned the new system, saying it was 'illogical' to penalise fuel in an effort to compensate for the amount of damage being done to the environment by burning fossil fuels. Whyte warned the system would effectively make it easy for future governments to raise funds from the motoring sector by increasing VED's starting point from £90 to £100 and so on. 'If people won't change their driving habits in the face of high petrol costs, they won't change their vehicle buying habits in the face of the VED reforms,' he said.