9m will feel pain of road tax reforms

(David Sandison)

More than nine million motorists will lose out under controversial road tax reforms, the Government admitted.

Some 43 per cent will see their bills rise by up to £245 by April 2010, compared with fewer than a fifth who will be better off in real terms.

It is the first time official estimates have been disclosed of winners and losers from the changes - which ministers insist are designed to punish high-polluting cars rather than raise revenue.

The figures emerged as Treasury minister Angela Eagle hinted that drivers may be offered cash to scrap their ageing gas-guzzlers rather than sell them on.

The move could form part of a package to ease the pressure on low-earners from the VED reforms, amid cross-party complaints that cars up to seven years old will be hit with huge duty rises next year.

The road tax changes were passed by the Commons earlier this month - but only after Chancellor Alistair Darling promised Labour rebels that there would be moves this autumn to smooth the transition.

The latest figures, revealed by Ms Eagle last night in response to Parliamentary questions, are likely to reignite anger over the reforms.

They predict that tax will be increased on 8.7 million vehicles in 2009-10 - all in the six most-polluting bands.

Overall in 2009-10, "a third of cars will be better off in real terms, and in total, approximately 55 per cent of cars will be no worse off" according to the minister. Just over 44 per cent will pay more.

By 2010-11, 9.4m face higher bills - 43 per cent of the predicted number of vehicles on the road. Some 8.4m will lay out around the same, while 1.4m are set to benefit financially.

Experts calculate that the Exchequer will have received more than a billion in extra revenue by 2011.

The AA said the disclosure "confirms our worst fears" while shadow chancellor George Osborne accused Prime Minister Gordon Brown of misleading Parliament over the information.

Mr Osborne said: "Gordon Brown appears to have misled Parliament. He said that the majority of drivers would benefit from the changes to VED."

"Now even the Treasury have admitted that just a third of drivers will be better off in 2009, dropping to less than 20 per cent in 2010. This destroys the government's defence that this is a green tax and in general gives green taxes a bad name."

"We need the Prime Minister to tell us whether he knew that he was giving Parliament the wrong information and was treating the public like fools, or was it the case that he didn't know the truth about the impact of his own Budget on families?"

AA president Edmund King said hammering so many motorists would be "politically dangerous" for Mr Brown with a general election looming.

"The Treasury has made a mistake and must now scrap the 'retrospective' nature of the tax disc changes for older vehicles," he said.

"This is not a green tax but a mean tax that will hit millions of hard-up families.

"Coupled with the record pump prices this will bring double misery to millions of motorists."

However, giving evidence to the Environmental Audit Committee today - shortly before the new details were released - Ms Eagle denied the Government was merely trying to raise revenue.

"I would just say that there are much simpler, easier ways of raising revenue if we were interested in doing that," she said.

She insisted reforms to road tax were never going to be popular, and suggested those in for bigger bills were simply making more noise.

"I think that we have heard a lot from people who are worried about the changes. I don't think we have heard anything from people who benefit from the changes."

Mr Darling has been condemned for failing to mention the plans in his Budget speech in March, and putting them in the "small print" of the Red Book.

However, Ms Eagle insisted there had been no effort to hide the reforms.

"It is a pretty bad stealth tax I would say, given all the publicity that is about," she said.

She refused to comment on hints from Justice Secretary Jack Straw that there could be a major climbdown on the road tax reforms, insisting only: "We have set out our stall on the direction of policy."

Currently, the maximum road tax for a vehicle registered between March 2001 and March 2006 is £210.

However, from April 2010 that will increase to £455 for the heaviest polluters.

Vehicles such as Range Rovers and some people carriers emitting more than 255g of CO2 per kilometre will pay up to £440. Cars with smaller engines face a £100 rise.

Sheila Rainger of the RAC said: "It is shocking that the Treasury has taken so long to acknowledge the full impact of these budget changes. Nine million motorists will be worse off under the new scheme. Drivers of very modest cars will be hit by increases, which, added to soaring fuel prices, will plunge family budgets into the red.

"Far from being a green tax, this scheme will take £1.2 billion off the motorist and put it in the Treasury's coffers. The Chancellor must think again. Any changes must apply to new purchases only, and must be revenue-neutral, balancing higher charges for more polluting cars with bigger incentives to buy the 'best in class' the most efficient car which meets the motorist's needs. If every motorist was able to buy the 'best in class' then CO2 from vehicles would fall by one quarter."

Friends of the Earth's economics co-ordinator Simon Bullock said: "Three times more second hand cars are bought each year than new ones - so upping VED on old, very polluting cars will encourage people to choose greener vehicles, cut fuel bills and lower carbon dioxide emissions.

"But we do believe people should be given a helping hand. We are calling on ministers to help people switch to a cleaner vehicle by paying them to scrap their old gas-guzzlers and replace it with a greener car that uses less fuel.

"Ministers must stand firm on their VED plans and do more to encourage greener travel - such as backing tough fuel efficiency standards for new vehicles and investing in alternatives to the car such as rural public transport and faster, cheaper rail. This will also cut transport's contribution to climate change."