Panel of MPs backs green car tax

Patrick Wintour and Andrew Sparrow
The Guardian,
Monday August 4 2008

Government plans to impose green vehicle excise duty rates on previously purchased cars have been endorsed by a Tory-led environmental audit select committee.
The all-party committee rejects claims by a narrow majority that the levy can be seen as a retrospective tax. It urges the Treasury to go further to provide a more ambitious reform of the tax and to show how it might impact on the poor.
The committee has a Labour majority but is chaired by Tim Yeo, whose endorsement of the duty clashes with the Tory frontbench position that the changes should be dropped. Two Conservatives on the committee and a Liberal Democrat said they were ineffective and amounted to retrospective taxation.
The reforms were announced in the budget by Alistair Darling, but will not be implemented until next year. Some Labour backbenchers were dissuaded from rebelling on the issue after they were given assurances the reforms would be phased. The reforms have been attacked by the motoring lobby and newspapers such as the Daily Telegraph.
In a report today, the committee proposes the Treasury examine the case for a car-scrapping scheme that would provide payments for taking high-emission cars off the road . It suggests the Treasury should publish research on the effects of widening the differentials. The March budget introduced six duty bands, which apply to cars registered after 2001.
The committee dismisses a Tory charge that the reforms were a retrospective tax. "The secondhand car market dwarfs the market for new cars, with around three vehicles sold for every one sold new each year. Rebranding existing cars could therefore have a bigger effect than increasing the differential for new cars," it says.
But the committee says that it is "seriously concerned" that the gap between the lowest and the highest rates of VED remain "too small to be effective" and that as a result "the projected carbon savings are far less than they could be".
It says that the Treasury should have taken "greater care" to explain its plans when Darling presented his budget.
And it suggests that changes to the VED regime would be "more acceptable to the public" if they were introduced in a "revenue-neutral" way, with the extra money raised from high polluters being matched by discounts for low polluters.
Explaining his committee's thinking, Yeo told the BBC today: "This is quite an urgent issue – emissions from cars are increasing, people are buying cars all the time.
"We don't want them to stop driving, but we want them to choose the greenest car.
"They need the biggest possible incentive, that's why the government should be even bolder – really penal rates for high-emission cars and really attractive 'carrots' so that tax is almost nothing on the greenest models."