Fleet News

Fuel and VED tax changes could be abandoned

The Government is coming under increasing pressure to back down over plans to make changes to Vehicle Excise Duty (VED) rates applicable retrospectively to cars registered since 2001.

This week the Government indicated that it will climb down over plans to introduce a 2p tax increase on petrol and diesel, which was due to come into force in October.

This followed a joint call from an alliance of UK industry trade associations and motoring groups representing hundreds of thousands of companies and millions of motorists including the AA, the British Chambers of Commerce, Confederation of Passenger Transport, Federation of Small Businesses, Forum of Private Business, Freight Transport Association, National Farmers Union, Petrol Retailers Association, Road Haulage Association and UK Warehouse Association.

"It is clearly a matter that will be looked at very, very carefully over the next few weeks,” the prime minister told the Commons liaison committee.

Now ministers are also being pressured to re-think the VED changes. If unamended, the changes announced in the 2008 Budget will affect millions of company cars.

For low-emission fleets the impact will be minimal or even beneficial, but for fleets forced to run specialist vehicles such as 4x4s the costs will be significant.

For example, a fleet of 100 Land Rover Discovery TDV6 4X4s will be hit with an additional annual bill of £33,500 just to tax their vehicles from 2010.

The argument put forward by the opposition was that many older family cars will also be penalised under the new system.

Such cars, they say, are often run by poorer families.

The Conservative Party published research showing that 2.3 million car owners would be forced to pay up to twice as much in road tax, with millions facing an increase of between £100 and £245 a year.

"The people who are being affected are people with older cars, they are people with family cars, they are people on low incomes," said shadow treasury minister Justine Greening.

"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?"

The Government managed to defeat a move by the Conservatives during the final stage of the Finance Bill’s passing through the Commons to block the VED changes.

However, the pressure remains, as Stephen Glaister, director of the RAC Foundation, said: "The chancellor may pull a populist rabbit out of the hat by scrapping the October 2p rise, but this will be a drop in the ocean compared to his plans to take an extra £2 billion from the road users’ pockets by 2011."
 

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