Gordon Brown was accused of “sleepwalking into another 10p tax fiasco” after the government admitted nearly nine million motorists will have to pay more car tax under reforms aimed at reducing carbon emissions.
Despite previously claiming the reforms would leave the majority of motorists better off, the Treasury has now admitted that 44% of drivers with cars made since 2001 will pay up to £245 more in road tax.
In response to a Parliamentary question, Treasury minister Angela Eagle admitted that the Vehicle Excise Duty reforms will leave a third of drivers better off in real terms, with 55% no worse off in 2009/10.
However, she added that 8.7 million vehicles - 44% of cars - will pay more.
The Conservative Party accused the government of misleading the public. Shadow chancellor George Osborne said: “The government is sleepwalking into another 10p tax fiasco.”
Opinion over the Vehicle Excise Duty reform has been divided within the Labour Party, and mutinous calls from MPs have prompted Brown to agree to re-examine the controversial plans. It is rumoured that the issue will be re-visited during the autumn's pre-Budget.
Ashton Berkhauer, insurance expert at uSwitch.com, says the car tax reform means drivers of the best-selling cars in the UK will pay 12% or £25 a year more on average.
She adds: “It's not just the typical gas guzzlers or luxury cars that will take a hit. From 2009/2010, the new road tax reforms will cost drivers of popular cars like the Vauxhall Vectra an extra £90 a year - a 43% hike.”
Drivers of older cars face the higher increases in tax. For example, a 2001 Volkswagen Golf will cost its driver £206 a year under the new road tax system.
"Increased road tax is another bitter pill for motorists who are already forking out an extra £18 every time they fill their tanks at the pumps,” Berkhauer adds. “Filling up now costs £67 a time on average - or £1,758 a year - so just where does the government think this extra money will come from? Insurance premiums have also risen by 5.8% over the last year.”
Reforms to Vehicle Excise Duty were announced in the 2008 Budget, as part of the government's plans to reduce CO2 emissions by rewarding drivers of green cars - and punishing gas guzzlers.
From 13 March this year, cars falling in tax bands C to F have had to pay £5 more a month for a 12 month tax disc, while cars in tax bands A and B have remained the same at zero and £35 respectively. Motorists in band G - the most polluting vehicles - have seen their bills increase to £400.
From 2009, the current tax band will increase from seven to 13 - from A to M - with "green" cars (those emitting less that 100g/km of CO2) exempt from car tax. And from April 2010, people who buy new "gas guzzling" cars will have to pay a special tax.
Impact on most popular cars:
|Most popular cars in 2007||Tax change 2009/10|
|Ford Fiesta 1.2 P Zetec||No change|
|BMW 3 Series 2.0 D 320D SE||+ £18 |
|Ford Focus 1.6 P Zetec Climate||+ £5|
|Vauxhall Zafira 1.6 P Life E4||+ £35|
|Land Rover Freelander 2.2 TD4 GS||+ £60|
| Source: Society of Motor Manufactors and Traders Ltd |
Impact on all cars (2010/11):
|Tax Band||Percentage paying less tax||Percentage paying same tax||Percentage paying more tax|
|B||100%||n/a ||n/a |
|D||100%||n/a ||n/a |
|E||100%||n/a ||n/a |
|I||n/a ||n/a ||100%|
|J||n/a ||n/a ||100% |
|K||n/a ||n/a ||100% |
|L||n/a ||n/a ||100% |
|M||n/a ||n/a ||100%|
| Source: House of Commons |