Tens of thousands of cars will be reduced to nothing more than their scrap value now that Alistair Darling has decided to rip up the old car tax system and raise road tax on older car models with higher carbon dioxide emissions by up to £245 a year.
During this year's budget the Treasury quietly 'scrapped' the exemption from higher road tax rates for cars that emit more than 225g of CO2 per km and were registered between March 2001 and March 2006. The new system is set to affect families who will see their vehicles rapidly lose value as road tax could now cost half as much of the value of the vehicle itself.
CAP, supplier of data on residual values to the used car industry, claimed that larger cars would be hugely reduced in value as they stumble into a higher tax bracket being introduced for high-emission cars next April.
Mark Norman, CAP's development manager told The Times: “When people find out that it could cost half a car's value just to tax it each year, its value will plummet. Many of these cars particularly saloons, will be reduced to their scrap value. The sad thing is that perfectly usable cars will be scrapped, which could perversely increase overall CO2 because of the emissions from manufacturing new cars”.
He added “Poorer families who need a bigger car to transport children and luggage will find their car has lost up to £1,000 of its value overnight. They face an impossible choice because many will struggle to pay the higher road tax but won't able to afford to buy a more fuel efficient car with a lower road tax rating”.
According to The Taxpayers’ Alliance, 88 per cent of motorists will pay more road tax under Alistair Darling's controversial blueprint and a mere 9 per cent will pay less. Chief executive Matthew Elliott of the Alliance said: “This was supposed to be about punishing extremely lavish cars, but in reality it is going to increase tax on the vast majority.”
Alistair Darling protests that the greenest cars will pay no tax, but upon closer inspection only two cars qualify: the Volkswagen Polo 1.4 BlueMotion and Seat Ibiza 1.4 Ecomotive. The road tax for well known family motors, however, will sky-rocket. For example, what happens if you own a 2001 Hyundai Lantra (trade value of £850)? The rules buried in the small print of March's budget state its road tax will increase from £210 this year to £300 next year and £430 in 2010.
Vehicle Excise Duty (VED) is a massive revenue-earner for the Treasury. The additional cash-flow generated by new Vehicle Duties on cars in 2009-10 will be £465m - second only to the charges in alcohol tax - bringing the total raised by VED to around €5.5bn. Critics said Labour's unhinged strategy was exposed by the road tax on a Nissan Micra escalating by 24 per cent, while the bill for a gas-guzzling Hummer will rise only 14 per cent. The treasury has now admitted that the VED was “not explicitly explained” at the time of the budget. This has added to the British public's fury who were promised by Gordon Brown only last year that the Government would not backdate the CO2 charge on family cars to before 2006.
So out-the-window goes the old regime that gently ushered car buyers towards the least polluting cars. Now we have a sytem that actively demands you buy an environmentally friendly car - one that doesn't disgorge huge quantities of carbon dioxide. Unfortunately, as motorists of older vehicles sell-up to purchase the latest VW BlueMotion or Seat Ibiza Ecomotion, car manufacturing companies worldwide will be churning out unprecedented amounts of CO2 during the production of these so-called 'eco-friendly' cars. Despite the anguish and hostility towards the road tax hike from the British public, Alistair Darling insists that once the new system is fully in place in 2009, the higher VED will help all of us in creating "an environmentally sustainable world".
