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Chancellor urged to avoid motoring tax hikes as data shows motoring provides 10% of UK tax-take

A week ago, 73% of a Populus poll of 25,810 AA members said they fear a post-election rise in motoring taxes. Among blue-collar workers, that worry rises to 83%. 

Although the Chancellor promised that the fuel duty freeze since 2011 is set to continue in September, the AA is concerned that urban emissions scare-mongering will be used as an excuse for raising fuel and car ownership tax (VED). 

It added that, for the past three months, the Treasury has been getting at least an extra 0.5p a litre in VAT from non-business diesel drivers. Although the wholesale price of diesel has been the same or as much as 3p a litre lower than the cost of petrol, fuel retailers have been charging up to 6p a litre more for diesel at the pump – 20% of which is VAT.

Of the £582.6 billion raised in UK taxes last financial year, almost 10% came from motorists. 

Rather than an even greater burden of tax, the AA calls on the Chancellor to be more innovative in using more of the existing tax haul to influence motoring behaviour – helping government to meet CO2 and other emissions targets while potentially generating more tax in the short-term. 

Examples include:

  • Stimulating the electrification of the ‘second’ family car;
  • Not jumping on the local tax bandwagon, which exploits the demonising of diesel, but offering fiscal encouragement for converting the main urban emissions polluters to hybrid or electric alternatives;
  • Ploughing more of the tax haul into road improvements that would improve the efficiency of the road network, reducing emissions from snarled-up traffic.  

Edmund King, the AA president, said: “The AA does not want a U-turn on the promised continued fuel duty freeze for September and reminds government that, if it is planning future rises, it is a tax related more to mileage than means. Owners of high performance cars pay extra for the vehicle’s higher fuel consumption but it also stunts the income of less well-off drivers for whom mileage may be the difference between having and not having a job. 

“For that reason, fuel duty should remain frozen and other motoring avenues, that generate tax but also stimulate development, should be tried. A scrappage scheme could pay for itself through VAT and could serve the dual function of raising tax and meeting national emissions targets.“Simply piling on more fuel duty when high pump prices undermine demand will backfire on the Government. It mirrors some London boroughs’ barely-disguised local tax grab from parking permit holders, and misses an opportunity to stimulate a green change in transport – and a tax windfall to help settle the country’s books.”

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.