‘Green’ road tax on the horizon

Motorists face having to pay increased road tax. The Treasury is said to be planning to ‘claw back’ hundreds of millions of pounds in revenue that will be lost as drivers choose ‘green’ cars. Government officials have begun private discussions with the motoring industry and drivers’ groups about an overhaul of the Vehicle Excise Duty (VED) rules.

The talks come as ministers try to prevent a fall in tax revenues, caused by more motorists choosing smaller, ‘cleaner’ cars that incur a lower rate of duty. Ministers say that, while they have not finalised their plans, changes may be necessary to ensure the “sustainability of the public finances”.

One source involved in the discussions said ministers have made it clear that the consultation will lead to higher tax rates for some motorists. “Revenues are under threat, and it’s pretty clear that the Treasury needs to do something to increase its tax take or face losing a lot of money,” the source said. VED raises almost £6 billion a year for the Treasury, but official forecasts show that the revenue from the tax will fall as more people choose low-emission cars. Models like the Toyota Prius or the Nissan Leaf attract a zero rate of VED.

Professor Stephen Glaister, director of the RAC Foundation said, “Buying a car is a big deal for drivers. They can do without constant changes to tax which could alter their purchasing decisions. If nothing else, there needs to be certainty over motoring taxation.”