13 March 2010

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The 2008 Budget and its effects

Alistair Darling’s first-ever Budget as Chancellor has been dubbed the ‘green Budget’ in some circles, while other environmental enthusiasts believe it did not go far enough. So what impact has the Budget had on green motoring and how advantageous is it to drive green?

Change in road tax bands

One of the most notable developments in the Budget was the change to the road tax regime to offer more support for low emission vehicles.

Vehicles will now be banded on a sliding scale of 13 tax bands – A-M. The cars that appear in tax band A, such as electric vehicles with zero emissions will be exempt from road tax, while those in tax band B will pay just £20 annually.

By contrast, those vehicles appearing in the highest tax band will pay around £455 annually. This applies to cars emitting more than 255g of CO2 per km.

There is further bad news for drivers of the so-called Chelsea tractors such as Toyota Land Cruisers and Land Rovers, along with high-performance vehicles such as Porsches. These drivers could be a hit with a so-called ‘showroom tax’ and be charged as much as £950 in their first year. By contrast those buying the leanest, greenest cars will pay no vehicle excise duty for a year.

The Chancellor has stated that this is an effort to crackdown on the dirtiest cars, which are responsible for around 22 per cent of the country’s carbon emissions.

Typical family cars have been punished too. Take for example, the two-litre Ford Mondeo – drivers of this car will pay £260 a year from April 2009 onwards, a leap of £90. From 2010 the first year’s tax on a Ford Mondeo will be a whopping £425.

The changes come into effect from the 2009/10 tax year onwards – here is a summary of the new tax bands:

Band M – (255+ CO2 g/km) – £440 road tax
Band L – (225-255)- £415 road tax
Band K – (200-225) – £300 road tax
Band J – (181-200) – £260 road tax
Band I – (171-180) – £205 road tax
Band H – (161-170) – £175 road tax
Band G – (151-160) – £150 road tax
Band F – (141-150) – £120 road tax
Band E – (131-140) – £110 road tax
Band D – (120-130) – £90 road tax
Band C – (120-110) – £30 road tax
Band B – (110-100) – £20 road tax
Band A – (-100) – no road tax

The effects on company cars

Employers are also being encouraged to offer their staff more environmentally friendly vehicles with a reduction in the capital allowances companies can claim on fleet cars with the highest pollution levels.

There will be a significant leap for vehicles with emissions higher than 160g/km. As a consequence it is hoped by many green car enthusiasts that some of the highest polluting vehicles will completely fall away from the company car sector.

Road pricing

There was more support for road pricing throughout the UK despite the concept being unpopular with many motorists. There is new funding to explore local congestion schemes that may encourage drivers to think about when and where they drive, along with charging for car travel.

Rise in fuel duty

Most motorists will feel relieved that the rise in fuel duty has been postponed. However, the reprieve is only temporary because the 2p/litre rise is scheduled to be implemented from October onwards. Fuel duty will increase by 0.5p/litre in real terms from 2010.

Any rise in the cost of motoring is bad news for drivers already reeling from a 20p/litre rise in pump prices in the last year. The spiralling cost of oil means that the Government is already pocketing in the region of £10 per month, per motorist, just in VAT and there have been calls to scrap the 2p rise altogether.

Nevertheless, the changes will unquestionably force drivers to think green when they buy a vehicle. The greenest cars are generally the most economical and some vehicles are now capable of achieving in excess of 600 miles per tank. Consequently, even if a green car costs more to buy initially the long-term money saving effects at the pump could make more drivers think green in the showroom.

Did the Budget go far enough?

Despite the changes that have been implemented there is still some concern that the Government did not go far enough to tackle the green issues of motoring.

Some car insurance providers have complained that there is not enough incentive for drivers to think green with their insurance policies. Though there are discounts for green car drivers due to them generally being considered a lower risk thanks to responsible motoring, green car consumers can still pay more due to higher repair costs for hybrid cars, etc.

As a consequence some insurance groups have called on the Government to make green car drivers exempt from the insurance premium tax.

Why it pays to go green

Not only did the Budget offer support for green motoring initiatives, there is clearly more support for consumers to think green in their every day lives.

There is encouragement for customers to move away from single-use plastic bags in their shopping, while revenue in air passenger duty is set to increase. There will also be an extra £26bn made available to support green home schemes.

It clearly pays to think green in all aspects of your life but particularly in motoring. Driving a green car can save you money at the pump, in road tax and clear you from congestion charges. The gap between the most environmentally friendly and the highest polluting vehicles is now higher than ever so make sure you consider all things green when shopping for a new car. Check out the listings at thegreencarwebsite.co.uk for more information.

Author: Lee Sibbald, April 2, 2008

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