Gas-guzzling car owners may get cash help

Aug 4 2008 Liverpool Daily Post

Petrol pump (200)

MOTORISTS facing punishing hikes in road tax should be paid up to £1,000 to replace their “gas-guzzling” cars with greener models.

The Government is to explore a taxpayer-funded “car scrappage scheme” – already tried out in France, Italy and the United States – to ease the pain of vehicle excise duty (VED) increases for more polluting cars.

The looming shake-up has created another crisis for Gordon Brown, with scores of Labour MPs demanding a U-turn before its introduction next April.

Last month, it was revealed that around 2.3m people will be made worse off – twice the number of people still losing out because of the scrapping of the 10p tax rate.

Hardest hit will be owners of older, Band F family cars – such as Citroen C8, the Renault Espace and the VW Passat – who will see their £210 car tax rise to £430 or £455 by 2010. Now the Commons environmental audit committee has backed the changes – including backdating to all cars registered since 2001 – but called for financial help to make trading-in more affordable.

In Italy, grants of up to £1,000 are being considered as an incentive to scrap an old car while, in Texas, more than £1,500 is made available.

The idea, proposed by Friends of the Earth, could provide a way out for the Government, which has hinted at a rethink to Labour MPs without explaining what that might be.

The pressure group said the Treasury could easily afford such a scheme because it will rake in an estimated £735m by 2010-11 – a figure that has fuelled criticism the shake-up is a revenue-raiser, not a “green” tax.

But Walton MP Peter Kilfoyle, who recently met Chancellor Alistair Darling to press for a U-turn, said: “It is an idea worth exploring, but these changes will still unfairly fall disproportionately on the low-paid. The bottom line is the Govern- ment should not be going back in time to try to change the behaviour of people who have already bought these cars.”

In evidence to the committee last month, treasury minister Angela Eagle, the Wallasey MP, said of the French scheme: “It is certainly something we would not be averse to looking at.”

Publicly, No.10 has insisted there will be no climbdown, but significant changes are expected in the pre-Budget report, in October or November – possibly phasing in the higher taxes over a longer period.

Tim Yeo, the committee’s Conservative chairman, urged the Government to be “more ambitious”, with bigger VED rises on high-carbon cars matched by larger rebates on low-emission vehicles.

He added: “The Treasury must also work to ensure these changes are not unfair to vulnerable groups. This includes looking at paying people to trade in their existing high-emission cars.”

However, the committee rejected a call from one of its members for the VED hikes to be shelved.