Telegraph – “‘Green’ car tax will hit poorest hardest”

‘Green’ car tax will hit poorest hardest

Telegraph | July 10, 2008

New “green” car taxes will hit hundreds of thousands of the poorest families, new figures show, as Labour backbenchers told the Government it was heading for a repeat of the 10p tax revolt.

About 400,000 of the lowest earners will pay an average of £80 a year more following changes to Vehicle Excise Duty (VED), according to calculations based on official Treasury data. Of those, 140,000 will pay at least £100 a year more in car tax and for some, bills will increase by up to £245.

This means that in total, Britain’s poorest families – defined as those on an income of £15,000 or less – will pay a total of £32 million extra in VED in the next two years.

The analysis, carried out by Justine Greening, a Tory frontbencher, led MPs to warn of a rerun of the 10p tax row, when the decision to scrap the lowest income tax band alienated millions of Labour’s core voters.

A back-bench rebellion forced the Government to rethink the plans and opponents of the car tax changes have called for another climbdown before the parliamentary summer recess.
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The Treasury admitted the scheme would leave a total of 9.4 million motorists significantly worse off and another 8.4 million no better off, with only 4.1 million benefiting. This was despite Gordon Brown telling MPs last month that a majority of drivers would benefit.

The Daily Telegraph has campaigned against the tax changes since they were disclosed in the Budget in March.

Miss Greening said the latest figures demonstrated that Mr Brown had lost touch with ordinary families.

“How does he expect those earning less than £15,000 a year to suddenly find £245, much less the thousands of pounds it would cost to buy a new, lower emission car?

“This government is bleeding low-income families dry, just as they are most under pressure from rises in the cost of living.”

Mr Brown faced his gravest political crisis when Labour MPs rebelled against his plans to scrap the starting rate of income tax, leaving more than 5 million people worse off.

Ronnie Campbell, the Labour backbencher who has led back-bench opposition to the car tax proposals, has said they would hit Labour’s “core vote” the hardest.

Asked if the road tax plan could hurt Labour in the same way the 10p tax move did, Mr Campbell replied: “It could get that way. Nine million, it’s about the same level.”

He added: “These are working people, they need their cars to get to work.”

Jane Kennedy, a Treasury minister, admitted that poor people would be hit by the tax changes. “Clearly, low-income families who have motor vehicles will be among those affected, but I do not have exact figures,” she told MPs.

The Treasury figures intensified pressure on Alistair Darling, the Chancellor, to bring forward a rethink.

Almost 50 Labour MPs have signed a Commons motion criticising the scheme, and threaten to defeat parts of the tax plan in parliament.

Last week, the prospect of a revolt forced Mr Darling to promise angry Labour MPs that he would look again at the reforms in the autumn. The events of the past few days have reignited the row.

Some ministers believe Mr Darling must ditch the scheme before the summer recess.

Peter Kilfoyle, a former Labour minister who opposes the plans, said Mr Darling should set out his plans before the Commons rises in 10 days.

“It does hit poorer people more because they are the ones that buy older cars, cheaper cars. It’s a fact,” he said. “There is a hope right across the Government and the party that he will say something before the summer.”

Sources close to Mr Darling have insisted he would not be rushed into a hasty decision, but some ministers want him to make a public concession before the crucial Glasgow East by-election on July 24.

“I know he’s in a difficult position, but he should say something soon, certainly before the by-election,” said one Government source.

The disclosure in the Daily Telegraph that nine million motorists would be left worse off by the car tax plans triggered a Commons row between Mr Brown and David Cameron. The Conservative leader demanded the Prime Minister apologise for “misleading” MPs over the impact of the tax changes.

Vehicles registered between March 2001 and March 2006 cost a maximum of £210 for a year’s road tax. But from April 2010 that will rise to £455 for the most polluting cars. Cars such as Jaguars, Range Rovers and even some people carriers emitting more than 255g of CO2 per kilometre will pay up to £440. Other cars with smaller engines will face a £100 rise.

The higher tax rates will raise an extra £430 million for the Treasury next year and £700 million the year after.

Last month, Mr Brown told Mr Cameron in the Commons that if he looked at the VED plan, “he will see that the majority of drivers will benefit from it”.

The Tories say that means Mr Brown misled MPs. Mr Cameron said: “”Will he now correct himself and apologise to the House for getting it wrong?”

Mr Brown ignored Mr Cameron’s demand and defended the tax package.

He said: “I have spoken to this House on this matter on a number of occasions. Our policy is fair to those people who have the least polluting cars.”

Downing Street rejected suggestions that Mr Brown had misled Parliament, and pointed out that in earlier Commons statements, the Prime Minister had said the majority of drivers would be no worse off under the plans.

Adding to Mr Brown’s troubles, former Cabinet colleague has launched a scathing attack on his performance, saying he has done “extraordinarily badly” as Prime Minister.

Clare Short, the former international development secretary, said: “Gordon Brown and I worked closely with each other for a long time and he has always been a control freak and a spinner. However, I thought that when he became Prime Minister he would do better on content than he has.

“I didn’t have any illusions that he was going to solve all problems, but I thought he might have done better. He has done extraordinarily badly and he has changed remarkably little.”

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Published in: on July 11, 2008 at 10:41 PM  Leave a Comment  

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