The Chancellor of the Exchequer today made the following announcements about taxes on motorists and their cars:
"Britain’s 30 million cars, vans and lorries together account for 22 per cent of total carbon emissions.Over the last 20 years new cars have become 50 per cent more efficient. And new technology will bring further improvement.
Today, I am publishing Professor Julia King’s review of low carbon cars in which she examined new technologies which could help cut carbon emission.
Professor King found that by simply switching to the cleanest cars on offer, motorists could save 25 per cent of their fuel costs.
She also found that manufacturers needed to be encouraged to bring new technology to the market.
And I am asking the European Commission today to set a tighter target which reduces the cap on emissions from cars from 130 grams per kilometre of carbon dioxide to 100 grams per kilometre of carbon dioxide by 2020.
The road tax system should do more to support the use of more carbon-efficient, and therefore less costly cars.This will help reduce average carbon dioxide levels in new cars.
Firstly, from April 2009, I am proposing a major reform to Vehicle Excise Duty to encourage manufacturers to produce cleaner cars and by introducing new bands, there will be an incentive to encourage drivers to choose the least polluting car.
And as a second stage for new cars, from April 2010 there will be a new first-year rate based on carbon dioxide emissions of the car.
Cars that emit less than the proposed 130 grams per kilometre European standard of carbon dioxide emissions will pay no car tax at all in the first year.
But a higher first year rate will be introduced on the most polluting cars.
Cutting taxes for those who cut carbon emissions.
But it is right that if people choose to buy a more polluting car that they should pay more in the first year to reflect the environmental cost.
The changes will provide a real incentive to manufacturers and motorists.
We must encourage sustainable biofuels. Therefore the biofuel duty differential will be replaced by the Renewable Transport Fuel Obligation.
I am also reforming capital allowances for business cars to increase the incentive to move to lower emitting cars. "