The UK Budget 2007: one whopping red herring

Published: 03 June 2007

Today's crackdown on the most polluting cars is all smoke and mirrors, reckons Ben Oliver

So Gordon Brown has doubled the top rate of car tax to £400 in 2008. How many people do you think will be deterred from buying a ‘gas-guzzler’ as a result? I think I can tell you. None. Not a single one. An extra two hundred quid makes absolutely no difference in the calculations of those buying cars costing twenty grand, or a lot more. Even an extra grand in tax over five years of ownership is only the cost of upgrading to xenon lamps, or a slightly smoother grade of leather trim. This isn’t a pro-car, anti-green rant; it’s a simple financial fact. Brown himself emitted more hot air announcing the change than it will ever save.

So why do it? To those who haven’t done the maths and with an irrational hatred of the four-wheel drive, a doubling of tax sounds good and wins votes. And the Treasury gets more cash. For Brown to pretend that the increase will have any other effect is deceitful. The ‘matching’ 30 percent reduction in band B tax he announced – saving Prius drivers a whole 15 quid a year – will also sound good to voters, but will inspire precisely nobody to buy one and leave the Exchequer substantially better off.

So what should he be doing? Using the tax system to offer meaningful incentives to companies developing and selling less polluting cars and those considering buying them. Encouraging specific technologies like Delphi’s engine stop-start system which are simple and cheap and can make a big difference to city air quality if installed in enough cars, but which price pressures mean the manufacturers are reluctant to include. And encouraging greater fuel efficiency in the cars that sell the most; not just targeting tiny but high-profile market sectors like hybrids and the very powerful.

But that would involve cutting taxes, and if it works, cutting them for a large number of ordinary drivers and not just a tiny minority. Brown isn’t green enough to do that.

By Ben Oliver

Contributing editor, watch connoisseur, purveyor of fine features