Environmental Audit Committee praises car tax changes

The Environmental Audit Committee (EAC) has said the government could still do more to help those 'adversely affected' by car taxes.

A 'car scrappage scheme' should be considered by the Treasury, according to the EAC. This would offer drivers of high carbon cars a lump sum to trade in their vehicles for more efficient models.

The EAC published a report yesterday, entitled 'Vehicle Excise Duty as an environmental tax'. The conclusion made by the EAC is that there is nothing intrinsically unfair about new VED rates for cars that have already been purchased.

Indeed, the EAC says it makes sense to re-band existing cars - this could influence second-hand car buyers to go for lower emission vehicles to avoid extra VED charges.

Despite a lack of 'hard evidence' on how many people will be hit hard by the changes, the EAC says there are concerns over the impact on lower income households.

The EAC says exemptions should be extended to all disabled drivers.

The chairman of the EAC, Tim Yeo MP, said: "The changes to car tax announced in the Budget are a step in the right direction.

"Raising the rates on high emissions cars that are already on the road could encourage sales of more efficient models in the second-hand market.

"Meanwhile, the first-year rates being introduced for new cars will create a kind of 'showroom tax', that could be used to influence buyers of new cars to choose the most efficient model in each class.

"However, the differentials between high and low carbon cars are still nothing like wide enough to make a big impact in practice. According to the government's own figures, these changes will only have a very limited impact on the environment.

"The Treasury must be more ambitious, matching increased charges on high carbon cars with discounts or rebates on low emissions vehicles.

"The Treasury must also urgently work to ensure these changes are not unfair to vulnerable groups. This includes looking at paying people to trade in their existing high emissions cars for more efficient models, and reviewing whether all disabled drivers could be exempted from paying car tax.

"In all, the Treasury must do far better in communicating the details and benefits of its green tax policies. Making revenue neutral-tax changes, or explicitly hypothecating some of the revenue raised from green taxes towards spending on the environment, would be more effective environmentally and more acceptable to the public.

"A failure to advertise green tax details to the public, or explain them in a timely manner to Parliament, breeds suspicion about their objectives, increasing the perception of them as revenue-raising measures with no environmental purpose."