Wednesday March 12, 03:55 PM
UK BUDGET Darling hits gas guzzlers; delays fuel duty rise UPDATE
(Update recasts, adds further reaction)
LONDON (Thomson Financial) - The UK Chancellor has targeted the buyers of gas guzzling vehicles with changes to car tax from April 2009 in his first budget, while he also postponed a planned
2 pence a litre rise in fuel duty until October because of high oil prices.
Chancellor Alistair Darling said he would increase the number of vehicle duty excise bands based on carbon dioxide emissions to 13 from seven in April 2009, as a further incentive to customers to buy the least-polluting vehicles.
A second step a year later will see a new rate for the first year of ownership of new vehicles to encourage buyers to pick models which pollute less.
'Cars that emit less than the proposed 130 grams per kilometre, the European standard of carbon dioxide emissions, will pay no car tax at all in the first year,' he said. 'But a higher first year rate will be introduced on the most polluting cars.'
The motor industry welcomed the introduction of new vehicle bands, but said sales taxes on new vehicles would have little effect on emissions and would create an unwelcome market distortion.
'Since the introduction of CO2-based road tax in 2001, there has been a clear trend towards lower CO2 new cars,' said Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders (SMMT).
'However, introducing what is effectively a sales tax for many new cars is a retrograde step,' he said. 'Trying to force people out of high-value cars has no environmental merit and will be seen as a smokescreen for revenue-raising.'
The SMMT said buyers of new cars with CO2 emissions above 160g/km, will pay a supplement to excise duty from 2009, and for buyers of cars emitting more than 255g/km the total charge will rise to 950 stg, of which 455 stg will be car tax.
The road transport lobby, meanwhile, welcomed the Chancellor's decision to defer the planned 2 pence a litre increase in fuel duty.
Darling said he was going to postpone the 2p rise in fuel duty until October 'to support the economy now and help business and families'.
A 1.84 pence a litre rise in duty from April 2009 is still on the cards, however, and Darling noted that he will increase fuel duty by 0.5p per litre in real terms from 2010.
The Freight Transport Association (FTA) said it welcomed the postponement of the increase, bearing in mind this week's increase in the price of oil to 110 usd a barrel and forecasts that it will rise further.
But the FTA said the increase should have been put off for at least a year while the market remains so turbulent.
FTA's director of external affairs Geoff Dossetter said: 'The high price of fuel impacts on not just the transport industry but the whole of UK industry as world prices go though the roof. In turn these increased prices must be passed to consumers. For the Chancellor to have added to this pain by seeking further taxation would have been unthinkable.'
Andrew Tinkler, chief executive of Stobart Group (LSE: STOI.L - news) , said the announcement would come as a welcome relief to consumers around the country.
'Whilst the Stobart Group works with our customers to share the burden of rising fuel prices, increases are always felt most by ordinary consumers during their weekly shop, as our customers are forced to pass on the rising cost of fuel,' he said.
Environmental group Friends of the Earth said the Chancellor fell a long way short of his promise to put sustainability at the heart of toady's budget.
Another freeze in fuel duty will further undermine the Governments already weak green credentials,' director Tony Juniper said.
'The cost of motoring has fallen over the past 10 years, and carbon emissions from road transport have risen. Raising fuel duty would encourage people to choose greener transport options. And the money raised could have been used to cut taxes on people and jobs, and helped to fund a range of green initiatives.
The Chancellor also said he was setting aside new funding to develop technology that could underpin national road pricing, inviting tenders from companies to test the technology, with the results expected next year.
If we are to remain competitive over the next 20-30 years, we have to take more radical steps to reduce congestion on our roads, Darling said.
|
Send Article by Email
