Road tax changes – a response04 Aug 2008

Greening the fleet is vital if motoring is to meet the environmental challenges ahead, but there are other and better ways to achieve this than the measures recommended by the Committee.

While the RAC Foundation has supported graduated VED since its introduction, it a matter of basic fairness that changes should only apply to future purchases, not to vehicle choices made up to seven years in the past. And retrospective changes cannot give incentives to purchase greener new cars after those decisions were made.

The Select Committee is simply wrong to say there is nothing “unfair” or “unusual” in retrospective tax changes, which will distort the second-hand market and leave motorists driving inefficient cars with many suffering a loss in resale value. It is only when a car is taken off the road and scrapped that there is an environmental gain.

The recommendation to investigate a car scrappage scheme is welcome.

A year-one showroom tax, also endorsed by the committee, could act as a disincentive to switch to more efficient newer models.

The RAC Foundation agrees with the Committee that Government should ensure that there is better evidence that tax changes would be effective in changing behaviour as claimed, that they are understandable and properly explained. This episode is one more example of the need for a root and branch review of road taxes and charges.

Commenting on the report, Sheila Rainger, Head of Campaigns, said:

“It a matter of basic fairness that significant VED changes should only apply to future purchases, not to vehicle choices made up to seven years in the past.

“It is beyond belief that the Treasury introduced these changes without any research into the likely effects on the second-hand market, or a clear understanding of how they would affect low-income households, which already spend a disproportionate amount of their family budgets on transport.

“These reforms will take £2 billion from motorists already struggling with high fuel costs, and risk making transport less affordable for any but the rich. The Government must go back to the drawing board and come up with a tax system which genuinely promotes greener motoring.”