Clarity on diesel tax anticipated in Budget

Chancellor Philip Hammond is under pressure to use Wednesday’s Budget statement to put in place ‘bold fiscal policies’ to combat air pollution, with some groups calling for increased taxation on diesel cars and fuel.

Reports have suggested that the Chancellor is considering raising tax rates on the purchase of new diesel vehicles as part of the government’s strategy to improve air quality.

Chancellor Philip Hammond will be detailing the government’s Budget on Wednesday (22 November)

Such a move could be backed by local authorities, many of whom are keen to see a reduction in the number of diesel vehicles used in polluted parts of towns and cities.

However, motoring bodies have warned that by making newer, lower emission diesel cars less attractive to consumers, efforts to tackle air pollution could be affected.

Diesel vehicles are known to emit lower levels of CO2 than petrol vehicles, thus helping to reduce the impact of transport on climate change, and have historically benefited from favourable levels of vehicle excise duty to help meet greenhouse gas reduction targets.

However, many models, in particular those built prior to 2009, also emit higher levels of air pollutants such as nitrogen oxides, which can worsen air quality and harm human health.

‘Opportunity’

Organisations including the Chartered Institute of Environmental Health (CIEH), have described Wednesday’s Budget as a “a unique chance for the Chancellor to show that he is serious about addressing some of the vital issues such as the deteriorating state of air quality in our cities”.

CIEH has called for an increase in tax on diesel fuel

CIEH has called for an increase in tax on diesel fuel, coupled with a reduction in taxation on petrol, in a bid to encourage a shift away from diesel. Both diesel and petrol are currently subject to a Fuel Duty of 57.95 pence per litre.

The professional body has also called for financial support for measures to reduce plastic consumption and increase recycling.

Tony Lewis, head of policy at CIEH said: “Air quality, plastic consumption, and recycling, are three of the biggest environmental issues facing this country right now. With the health of the nation being deeply affected by the deteriorating situation, it is vital that the Chancellor puts the environment first in his budget.

“We want to see measures taken to curb diesel usage, to promote the sharp reduction in plastic consumption, and to provide the resources to clear our waterways and seas of discarded plastics. Time really is of the essence if we are to avoid an environmental calamity.”

Scrappage

Oxford city council — which is proposing measures to limit the use of petrol and diesel cars through the establishment of a ‘zero emission zone’ within the city centre has also called for an increase in vehicle excise duty on new diesel vehicles from April 2018 to fund a scrappage scheme to “help people move away from diesel to a cleaner option”.

Leader of the city council Councillor Bob Price has written to the Chancellor demanding ‘bold’ policies to discourage diesel-usage.

He wrote: “Air pollution is at crisis levels in our towns and cities. Road vehicles contribute about 80% of nitrogen dioxide pollution at the roadside and diesel vehicles make up a big part of this.

“Children born this year are likely to face another 10 years of poor air quality under current plans. This could have a devastating effect on their health — it could stunt their lung growth and leave them with long term health problems.

“Not only is diesel harmful for our health, it’s expensive — it’s estimated that air pollution is costing the Treasury around £20 billion a year. I urge you to use this Budget to put in place bold fiscal policies that will help tackle this health crisis.”

SMMT car registration data, November 2017

In recent months, vehicle registration data has suggested that there has been a decline in demand for diesel cars, with sales having fallen around 12% in 2017 compared to 2016.

This has been attributed in part due to fears over potential bans for diesel cars from towns and city centres as local authorities respond to concerns over air quality, as well as the announcement of a ban on the sale of diesel and petrol-only cars from 2040 (see airqualitynews.com story).

Ahead of Wednesday’s Budget, the motoring body RAC has warned that a potential ‘surcharge’ on new diesel cars could prompt drivers of older, so-called ‘dirty diesels’ to stick with them rather than swapping their cars.

‘Clean’ diesel

RAC chief engineer, David Bizley warned: “We might be just over 20 years from the government’s own deadline for ending the sale of new diesel and petrol vehicles, but it seems intent on dissuading as many of us from opting for diesel as possible.

“We are concerned that those who drive long distances, business drivers especially, might consider sticking with their older diesels given the superior economy they offer.

“The irony is that the next generation of diesel engines which manufacturers are developing right now are likely to be as clean as their petrol equivalents – so while a new tax might be logical in the short term, this logic will likely not apply within a year or so.”

Ahead of Wednesday’s Budget, environment minister Therese Coffey has hinted that the government will be consulting on a ‘targeted’ scrappage scheme for some polluting vehicles later this year.

In a written statement to Parliament last month, she confirmed that the measure is one of a number of potential proposals being examined to support motorists affected by plans to tackle air pollution in towns and cities across the country (see airqualitynews.com story).