Treasury’s diesel car tax ‘a light touch’

The motoring body RAC has described the Vehicle Excise Duty rise for diesel vehicles announced in yesterday’s Autumn Budget statement as ‘light touch’.

Chancellor Philip Hammond announced a series of measures aimed at tackling air pollution in his Autumn Budget yesterday, including a £220 million Clean Air Fund, which could partially cover some of the cost of scrapping some older, more polluting vehicles (see airqualitynews.com story).

RAC has warned that VED tax proposals for diesel cars could discourage some drivers from removing their older vehicles from the road

Among the measures aimed at raising revenue to pay for these initiatives are plans for new diesel cars to go up one Vehicle Excise Duty (VED) band in their first-year rate from April 2018.

The charge will not apply to ‘next-generation’ clean diesel cars that meet the Real Driving Emissions Step 2 standard, the government has said, and will be brought in alongside a rise in the existing diesel supplement in Company Car Tax which will increase by 1%.

Diesel

However, responding to the measures, the RAC’s head of external affairs, Peter Williams has described the proposals as ‘relatively light touch’ and warned that they could discourage some drivers from removing their older diesel vehicles from the road.

He said: “Any new diesel car registered from 1st April 2018 will be hit with a higher first year tax rate unless they conform to the latest real world driving standards. So current beleaguered owners of diesel cars can breathe a sigh of relief that they will not be punished further by the Treasury — but they will need to keep their eyes on local authorities who may be introducing clean air zones in the near future.

“The side effect of today’s announcement however might be that there is a risk therefore that it might encourage some to stay with their older diesel vehicles.

“His decision to increase the diesel surcharge on company car tax appears to be more about revenue-raising rather than using tax to encourage drivers to opt for a particular type of vehicle.”

Neil Parish MP, chair of the Commons EFRA Committee, welcomed the proposals, but called for further measures to encourage ‘greener transport’.

The TX eCity, range-extended electric taxi

He said: “Diesel cars contribute significantly to the dangerous levels of pollution experienced throughout the UK, but many people bought them in good faith. The government’s announcement that it will make further attempts to tackle the use of diesel vehicles is welcome, and it must be matched by a legislative drive to encourage greener transportation including through support for low emission vehicles.

“It should also, where possible, not disadvantage those currently using diesels who are not in the position to change their vehicle in the short term.”

Electric taxis

Yesterday’s budget also included plans that are likely to boost the uptake of electric taxis, which will be exempt from the supplementary VED charge — taking affect from April 2019.

The current VED regime means that an electric taxi is classed as a luxury vehicle — and any cab driver buying an electric taxi has to pay a supplementary level of VED — which does not apply to drivers buying a diesel taxi.

However, yesterday government pledged to remove this supplementary charge from April 2019 onwards.

The proposals have been welcomed by the London Electric Vehicle Company — manufacturer of the TX eCity range-extended taxi — which it claimed will incentivise more taxi drivers to ‘go electric’.

A spokesman for the company said: “The Chancellor has listened to our request to remove electric taxis from the ‘luxury car’ tax bracket. The change to Vehicle Excise Duty announced today will, in the long-term, incentivise more cabbies to go electric, contributing to reduced emissions and improved air quality across the UK. However, we will be making the case to Treasury to bring forward these changes to reward early adopters for making the electric switch.”