The UK's Society of Motor Manufacturers and Traders (SMMT) on Friday said that the proposed increase in costs to new car buyers to register their cars seemed to be covering the estimated 1.75 million vehicles that remain unlicensed each year.

The government on Friday announced a long-rumoured rise: that from 1 January 2004 new car and van buyers will face a 52% rise in the first registration fee. The current £25 'stealth tax' fee was introduced in 1998 allegedly to cover the administration costs throughout the life of the vehicle, but the DVLA has now said that it will rise to £38, without any clear reason for the meteoric increase.

When the issue was raised at the Modernising Vehicle Registration Implementation Board - a group which represents consumers, the police, the motor industry and government - there was a unanimous rejection of any proposal to increase the current £25 fee.

SMMT chief executive Christopher Macgowan said: "There is simply no justification to increase this fee by 52% for buyers of new cars and commercial vehicles. The truth is that due to fraud and evasion some 1.75 million cars fail to pay their duty each year and it appears that this is a back-door way of recovering the money.

"In addition to the added cost to consumers, there will also be an extra burden on manufacturers and dealers who will have to change advertising and marketing materials to reflect this surprise new tax.

At a time when new car prices have fallen by up to 20% and the car market is under considerable pressure, it is outrageous that a tax hike of this kind has been approved."