Philip Hammond MP: Increases in Vehicle Excise Duty are a "ticking time bomb" under Labour MPs

In the Commons yesterday Philip Hammond, Shadow Chief Secretary to the Treasury proposed this motion:

"That this House notes with concern the increases in Vehicle Excise Duty (VED) imposed in the Budget; notes that between 2006 and 2010 revenues from graduated VED will have more than doubled; observes that the majority of motorists who currently pay graduated VED will now pay more; deplores the Government’s decision to abolish the exemption from higher graduated VED rates for cars that emit more than 186g of carbon dioxide per kilometre and were registered between March 2001 and March 2006, and the fact that this was not stated clearly at the time of the Budget; considers that these changes will hit those on low incomes hardest and be a further burden on hard-working families already struggling to cope with soaring living costs; further notes that, although graduated VED revenues will total £4.4 billion by 2010-11, carbon emissions from motoring are expected to reduce by less than one per cent. as a result of the new VED regime; believes that any increases in environmental taxes should be offset by tax reductions elsewhere; and calls upon the Government to abandon its planned increases in VED."

He went on to say:

"Let us be under no illusion. The measures announced by the Chancellor on vehicle excise duty in the 2008 Budget are a ticking time bomb under his successor for 2009, just as surely as his predecessor’s 2007 Budget was primed to explode under him...  Perhaps the Chancellor’s swingeing increase in vehicle excise duty is set up so that he can abolish it in 2010 just before a general election and get the same kind of reaction that he was obviously hoping to achieve yesterday... The announcement in the Budget speech on vehicle excise duty was significant enough—the creation of a new and complex regime of vehicle excise duty with 13 bands, raising the duty payable on many family cars, and all of it dressed up as an environmental measure aimed at gas guzzlers and nothing whatever to do with filling a bankrupt Treasury or taxing ordinary motorists. That was the clear message.

As far as the measure’s green credentials are concerned, in fact, the percentage increase in duty on a Nissan Micra is larger than the percentage increase on a six litre Hummer or a Porsche Cayenne. In truth, this is an old-fashioned revenue-raising measure. At a time when families are struggling to make ends meet, the Chancellor has hit them with a more than doubling of VED between 2006-07 and 2010-11, from £1.9 billion to £4.4 billion. That is at a time when the average motorist is already contributing more than £1,800 a year on average in tax.

Vehicle excise duty on a Ford Mondeo estate, whether owned in Worcester or otherwise, will go up by 32 per cent. between 2007-08 and 2010-11. VED on a Renault Espace, a largish family car, will increase by 43 per cent. That is bad enough when taken at face value, without having to read between the lines. Conservative Members have become wearily resigned to the fact that the Budget Red Book—let alone the Budget speech—never tells the whole story, but the Treasury has plumbed new depths of cynicism with its presentation of the VED changes. The Red Book assures its readers on page 96: “As a result of these reforms, the majority of motorists will be better or no worse off in 2009.” What it did not say was that, because of the unannounced reversal of the exemption from the highest bands of VED announced in the 2006 Budget for vehicles registered before March 2006, more than 1 million families will see their car tax double over the next two years."

More in Hansard.

John Redwood blogs on the issue.