Blog: Dave LeggettScrap annual road tax and stick it all on fuel

Dave Leggett | 4 August 2008

The UK government's car tax proposals that are designed to encourage car buyers to gravitate towards smaller and greener cars that will incur a much lower annual 'road tax' charge look worryingly crude to me.

A crude tax on your vehicle is fine if it is simple to understand and fairly small. You just pay it and move on. But suddenly, things are getting a lot more complex and even relatively innocuous looking cars come out very badly on the calculations in terms of proposed taxation increases.

This won't be popular with the typically hard-pressed family already being squeezed on household bills and then discovering that the government has decided the family transport is killing the planet. 

If a tax comes across as fair and in everyone's interests, most people will accept it. This one doesn't look all that well thought out. Stick and carrot on vehicle purchase to encourage people to go for smaller cars is fine, but it's a question of how much stick and on what timescale. The proposals as they stand appear to unfairly punish many owners of vehicles who could not possibly have foreseen that they would be so heavily taxed on ownership on such a short timescale. If the tax is to be retrospectively applied, there's an issue of transition. 

But the underlying problem is with CO2 bands, where they are set and the fact that they take no account of vehicle usage. That's a very blunt instrument.

The obvious answer is to abolish the annual road tax (and save on all the admin) and put the tax on fuel instead. You will then be taxed according to the fuel you burn - a perfect combination of your choice of vehicle and usage. How neat is that?

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