A UK government committee has suggested a scrapping scheme to entice drivers to replace high-emissions cars with more efficient models.
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The “car scrappage scheme” should be considered by the Treasury, the Environmental Audit Committee said in a report.
But its report, ‘Vehicle Excise Duty as an environmental tax’, concluded there was nothing intrinsically unfair or unusual about setting new ‘road tax’ rates for cars that have already been purchased.
In this year’s budget it was announced that VED rates are to rise for existing cars with higher emissions registered since 2001. Attention has since focused on the 1.1m high CO2-emitting cars, registered between 2001 and 2006, that will see attract VED more than doubled from GBP210 to GBP430 or more in a move that has attracted strong criticism from motoring lobby groups and newspapers.
It has been claimed the tax hikes, while raising revenue for the government, will make little difference to CO2 emissions here in the UK.
The committee suggested it made sense to re-band existing cars, since this could influence buyers of second-hand cars to choose models with lower emissions. “This is especially important given that three-quarters of all car sales are second-hand,” the report said.
The committee acknowledged concerns over the financial effects of raising car tax on existing vehicles owned by lower income households but claimed there was a lack of hard evidence on how many would be disadvantaged by these changes.
The committee criticised the way the Treasury presented these changes to VED at the time of the budget and recommended the finance ministry pays far more attention to communicating the details and objectives of VED – and other environmental taxes – in the future.
“The committee is also disappointed that the Treasury had not calculated what the impacts of the Budget would be on emissions from second-hand cars, when this was one of the main objectives of the changes,” the report said.
According to the Treasury’s own projections, the changes being made to VED will have only very limited environmental benefit and the committee has called on the Treasury to examine the case for a more ambitious reform of VED.
It argued this might enable the government to offer bigger tax discounts for low emissions vehicles, as well as leading to higher carbon savings.
Chairman Tim Yeo MP, said: “The differentials between high and low carbon cars are still nothing like wide enough to make a big impact in practice. According to the government’s own figures, these changes will only have a very limited impact on the environment. The Treasury must be more ambitious, matching increased charges on high carbon cars with discounts or rebates on low emissions vehicles.
“The Treasury must also urgently work to ensure these changes are not unfair to vulnerable groups. This includes looking at paying people to trade in their existing high emissions cars for more efficient models.
“Making revenue neutral-tax changes, or explicitly hypothecating some of the revenue raised from green taxes towards spending on the environment, would be more effective environmentally and more acceptable to the public. A failure to advertise green tax details to the public, or explain them in a timely manner to parliament, breeds suspicion about their objectives, increasing the perception of them as revenue-raising measures with no environmental purpose.”
