Green taxes come under fire

The government is today facing fresh calls to scrap planned increases to green taxes as a group of Labour MPs demand the repeal of a £200 increase in road tax and hauliers protest against soaring fuel prices.

More than 30 Labour MPs have signed a Commons early day motion demanding that planned increases in vehicle excise duty, due to be introduced from next year, are scrapped.

The group, who are threatening a full blown rebellion similar to that which recently forced the government into a u-turn over the scrapping of the 10 pence tax band, are arguing that the changes represent an unacceptable retrospective tax that would undermine the popularity of green taxes with voters.

Under the proposed changes, designed to encourage drivers to purchase more fuel efficient vehicles, all cars emitting 150g of CO2 per km or less would see road tax cut with band B cars such as the Toyota Prius paying just £20 a year. However, all band G to M cars, which emit more than 150g of CO2 per km, will see annual vehicle excise duty increase with purchasers of the most polluting vehicles having to pay almost £1,000 a year. Controversially, the changes apply not just to all new cars, but also all cars registered since 2001.

Rob Marris, parliamentary private secretary to Northern Ireland secretary, Shaun Woodward, who has joined the group of backbenchers, told Radio 4's PM programme yesterday that the move was "undesirable" and would slap a £200 tax bill on many medium sized cars.

"It will hit a vehicle which produces 180g of CO2 per km with a 50 per cent increase," he said. "That is for a car which has already been in the fleet for up to seven years. In that sense it is retrospective taxation which is undesirable."

Marris also warned that the move would risk making green taxes increasingly unpopular. "I am in favour of prospective green taxes to change people's decisions when buying a new car," he added. "But taxing them heavily on a car which may have been bought seven years ago does not seem a good way to go and will discredit the concept of green taxes."

The group of backbenchers secured a degree of support from environmental lobby group Greenpeace, which claimed that the retrospective nature of the changes were a "mistake". A spokesman for the company said that the higher rates of tax should only be applied to new cars, but should also be a lot tougher on the most polluting cars with vehicles in the top bracket being charged £2,000 a year.

Nigel May of accountancy firm MacIntyre Hudson warned that the government was risking a repeat of the "10 pence tax fiasco". "Given the political back drop many MPs in marginal seats are going to see a large one off charge on medium sized cars as politically explosive," he said, adding that the government should have been more open about the implications of the changes.

"When the changes were announced they were positioned as a "showroom tax"," he said. "When the government introduces green taxes they need to be clearer about the impact they will have."

The backbench rebellion comes as hauliers and business leaders are calling on the government to further defer a planned two pence increase in fuel duty for October.

Lorry drivers are today staging a slow-moving protest through central London demanding a rebate on fuel duty. The protest follows warnings from the British Chambers of Commerce that businesses are being forced "to the edge" by rising fuel prices.

"Sending a positive message to business would make a huge difference, and the Government should start by announcing that they are scrapping the next 2p hike in fuel duty, planned for October," said Chris Hannant, head of policy at the business group. "The Treasury is already receiving a massive windfall from above expectation oil prices, which makes any extra fuel levy totally unjustifiable."

With the government a long way down in the polls Ministers are said to be considering deferring both tax increases. However, they are also reported to be concerned that such a move would undermine their green credentials, with Environment minister Joan Ruddock warning that the government "could not lose sight of the environment agenda".

Environmental groups urged the government to stick to its guns and defend the principle of green taxes. A spokesman for Greenpeace said that it supported the fuel duty escalator which would result in above inflation increases in fuel duty designed to make the cost of motoring more expensive. However, he added that the receipts from fuel duty should be used to improve public transport options.

May agreed that despite overseeing a reduction in the proportion of revenue raised through green taxes the government should not turn its back on green taxation. "It is clearer and clearer that something must be done to control use of fossil fuels," he observed. "And while green taxes are a blunt instrument they are still an instrument that can be effective."