Car tax changes not enough - MPs

The projected carbon savings from the introduction of new VED bands were "far less than they could be", the report from the House of Commons Environmental Audit Committee stated.

The report continued: "We are surprised that the Treasury has risked provoking such political opposition for an environmental measure which, according to its projections, is of limited benefit."

The committee was also disappointed "that the Treasury had not calculated what the impacts of the (VED) Budget (changes) will be on emissions from second-hand cars, when this was one of the main objectives of the changes".

MPs said a failure to advertise green tax details to the public "breeds suspicion about their objectives, increasing the perception of them as revenue-raising measures with no environmental purpose".

The Treasury should pay more attention to communicating the details and objectives of VED and other environmental taxes in the future, and should examine the case for a more ambitious reform of VED, the report added.

The committee was looking at the whole question of VED following the announcement in this year's Budget that VED rates were to rise for existing cars with higher emissions registered since 2001. The committee said that attention had since focused on the 1.1 million high-carbon cars, registered between 2001 and 2006, that will see their VED more than double, from £210 to £430 or more.

The MPs said they strongly supported the Treasury's use of VED as an environmental tax and welcomed the changes announced in the Budget. But their report said: "However, we are seriously concerned that even the projected differentials between VED bands remain too small to be effective and, in consequence, the projected carbon savings are far less than they could be. We also believe that both the proposed changes in VED rates and the objectives of VED as an environmental tax, have been poorly explained and communicated."

MPs also said that the Treasury should consider a "car scrappage scheme" to offer drivers of high-emission cars a payment to trade in their vehicles for more efficient models. And the committee welcomed the so-called "showroom tax" - a series of new, first-year rates of VED - higher than standard rates for high-emissions cars, lower for low-emission cars.

The MPs said they agreed with the Treasury that new VED bands for cars bought since 2001 was not retrospective taxation and that there was "nothing intrinsically unfair or unusual" about it. But the committee said there were real concerns over the financial effects of raising car tax on existing vehicles owned by lower income households, although it noted there was a lack of hard evidence on how many will be disadvantaged by these changes.