Backdating VED is a bad policy
For many years the ETA has discussed VED with the national government among many other issues. Our view has been consistent (not necessarily a good thing) that VED should be replaced over time with a road-user charge. VED should be reduced to the cost of administrating vehicle registration or even be free.
However, until it is abolished, which it should be as soon as possible, there is an argument that VED should have different rates for vehicles with differing rates of pollution and any other attributable cost not paid by the owner – like road damage and road danger. So the ETA, for years, has recommended that VED be banded.
The single most important cost is climate change. Although there is a relationship between VED bands and the potential for a vehicle to produce climate change it is not a direct relationship. Just because a vehicle produces a high level of CO2 per mile does not mean that it will produce more CO2 than a vehicle that produces less CO2 per mile. It depends how much each vehicle is used. However, although VED is not just, it will make people purchase less-polluting vehicles regardless of their use.
But the cost of climate change is already met via fuel duty and the extra VAT on fuel duty – way above the rate for climate change damage itself. Motorists know this to be unfair and as environmentalists we have to find a convincing story as to why motorists should pay generous amounts for climate change damage but home owners to not. And we cannot get away with saying that motorists have a choice to use buses or cycle but home owners have no choice but to live in a house. Rightly or wrongly most motorists would consider that the alternative of using a bus rather than a car is like living in a tent rather than a house – we’ll have to do better than that.
Increasing fuel tax at the moment without reducing the current VAT subsidy on domestic gas and electricity is tantamount to victimising the motorist just because we don’t like them. However, if we said that motorists pay fuel duty because they cause so much death, ill health and road danger then that is another story. But the government does not use that as a justification. Probably because, among other reasons, they would have to start taxing junk food, sugar and sweeteners.
Despite all the above, the ETA still recommends that VED should be banded but it should have been introduced earlier. But we are where we are – that opportunity is missed.
As with all the recommendations we make to government, we believe changes should be introduced gradually – very low rates at first. Give people a chance to see the direction government is going and modify their behaviour accordingly.
In that light, the new VED band rates should have been increased at a lower, more digestible, rate. They should not have been backdated. Buying a new car is not a trivial event for most people so they should have been given more time to make the change. I know many environmentalists think it is fair to backdate VED. I too have the sense of urgency in matters of climate change, but we must deal with the problem in the round and tackle the easier wins first.
When I pay as much tax on the carbon dioxide I produce heating my house as the tax on the carbon dioxide I produce driving my car then we will be getting somewhere. When taxes are seen to be fair people are generally willing to pay more.
Related news articles:
New car tax: How much will you pay in 2009?
Road tax increases will affect 9 million drivers
Previous article: Souless Eco-towns? (Saturday, 5th July, 2008)
Comments
Power to the people?
If these increases ever introduced I can see a mass revolt occurring. If everybody adversely affected decided not to pay ANY road tax as a protest how would the government fair?
Would they (could they?) impound the hundreds of thousands of cars involved and thereby alienate a large slice of the voting populace? I doubt it.
Perhaps an en-masse revolt might be the answer?
Censorship!!
You guys have even less credability than I thought!!
Censorship!!
And you should use a dictionary if you want any credibility of your own.
Unfair Taxes
What a load of rubbish, there were no cars in the ICE Age, guess it was people rubbing stick together who caused the ICE to melt!!
Ban cars and people rubbing sticks together :-(
Typical, useless Labour policy
Typical of this clueless, incompetent excuse for a government that we put up with. Retrospective VED is only going to achieve two things, and neither of these will be to improve the environment.
Here's an example of what will happen:
I own a 2001 Alfa Romeo 156 2.5 litre, value approx £2,500. I'll be the first to admit that it isn't the most economical beast, (but as discussed earlier, it could be a Ford Mondeo and the scenario will still hold true). However, I don't use it a great deal, and last year it covered about 3,000 miles. The thing is, I can't afford to pay the new rate of £455 per annum to tax this car, so I’ll have to sell it. The problem is, no-one else wants to pay £455 per annum either. So the car is now worthless, despite being a perfectly good vehicle. So this is what is going to happen:
I will sell the car at a massive discount. probably to someone who will use it more than me. Now let's say someone is getting 12,000 miles PA out of her. After all, the new owner wants his moneys’ worth! But how does this help the environment?
If I can’t sell the car, which, let’s face it, is the most likely scenario, I'll be paying for one last blast (partly out of spite at having my hand forced) - a track day where I will drive it to destruction, probably averaging around 10mpg in the process. Then I'll tow it to the scrap yard (this isn’t a Ferrari. remember)
Either way, I'll now need another car, and I know this much: it will take years and years for even the most economical car to offset the environmental impact of its own manufacture. Far better to let the older, less economical cars reach a natural end and let people make their own informed choice of vehicle when this time comes.
So what are the two things achieved? 1. A great big pile of perfectly serviceable cars in the scrap yard while car plants are working overtime manufacturing replacements, and 2. A very disgruntled electorate - even those whose cars aren't affected - will be looking over their shoulders for the next sly tax. Yet another thing to remember when voting time comes.
ETA and VED
THe ETA has never liked VED for the reasons you give and others too. However, we have said that if we keep VED we should have banding but like any change it should come gently so that people make adjustments well in advance. The governemnt delayed introducing banded and then delayed the increase. This made the changes ubrupt. As you say, people need the room to plan their lives and getting rid of old cars (especially if they are not used very often) does not do much for the environment.
Totally agree
I've felt for years that VED is unfair, uneconomical and should be scrapped. Better to add to the tax at the pump - it's impossible to evade and you pay as you go, rather than get one hefty bill. My other gripe is the fact that if you do want to sprad the cost by buying 6 months tax you are heavily penalised - WHY!!!!
My own idea would be to scrap the VED and replace the tax disc with an insurance disc - thus you still keep tabs on the cars and if they are MOTed but you remove a whole tier of legal requirements and add a check on insurance - which is far more important.
People have been calling for this for years - when is someone in government actually going to listen?
VED
A Vauxhall Corsa doing 30,000 miles p.a. will emit more carbon than a Range Rover doing 3,000 miles p.a.
This maybe an extreme example, but it does illustrate why the new VED regime won't work. We need to tax vehicle use, not vehicle ownership - i.e. increase fuel duty, and scrap VED.
Extreme Example
Yes, it is an extreme example but it usefully illustrates your point. However, research shows that VED rates do encourage people to buy less polluting vehicles (or if they do not it raises more revenue for the government) and if distance driven remains constant the overall pollution will reduce.
At the ETA we firmly believe that even taxing vehicle use per se is wrong. In this regard the national government should only tax problems - noise, climate change, noxious exhausts, road danger, congestion etc. If someone designs a car that has no detrimental effect on others then the owner should not pay anything. Although paying nothing is unlikely - there will always be policing and road maintenance.
Hundreds of years ago Jean Baptiste Colbert said “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing." The modern electorate is far more sophisticated and informed than in the past. Therefore to reduce the hissing the national government has to be seen to be fair. The current form of taxation on motoring is unfair and thereby undermines the introduction of justifiable environmental taxes.
Backdating VED
Congratulations on a very well thought out article. I'm very cross that, as the driver of a little Fiat Punto which I bought partly because it does a lot of mpg - well over 50 on a long run - I will nevertheless have to pay more VED next year in spite of having an average annual mileage of around 5000. You're absolutely right: this is an unfair and illogical tax and I resent paying it. I'd much rather pay a carbon tax for the gas used to heat the house (yes, I've a small house with lots of insulation!).
Sarah Richards
Fiat Punto
As far as I can see from the VCA data, the only Fiat Puntos which will have to pay higher road tax are the Speedgear, Sporting and HGT. In other words the three highest performing, worst economy versions of the whole Punto range... and the increase in cost for the Speedgear and Sporting is £5 - hardly breaking the bank. (The HGT is going up £50 but that's a 1.8 petrol - and does 34mpg hardly a small engine / good economy in a little car!).
Your are not alone
Many ETA members have been caught by these changes. The implementation of the new VED has sent out all the wrong signals even to people who have taken extra care in their environmental purchasing decisions.
Confused by ETA's stance!
Changes to VED have always been backdated. Nobody still running a twenty year old car would expect to pay the VED rate that was charged in 1988!
If VED isn't backdated when changes are made, two identical models, emitting the same emissions registered a day apart would end up paying different rates - does that make sense? It would mean hugely more administrative costs.
Since March 2001 Goverment has made VED rate dependent on CO2 emissions - clearly signalling it was doing this to encourage people to buy lower emitting vehicles. Since then they have gradually increased the difference in price between bands - exactly as you suggest - to allow people to modify their behaviour.
And where does the £245 figure come from? According to your own information on the proposed changes, the biggest increase over current VED that I could find was if you owned a 185g/km or 225g/km car in which case you face a £90 increase.
Under these changes anyone owning a car producing less than 150g/km is better off!
idiot
that is exactly what is happening.
My car identical to one made 2 days earlier pays £250 less than me
Yes it is
Sorry to cause confusion - VED has nearly always been the same for any vehicle of the same class irrespective of age. So in that sense VED has always been backdated. But of late big changes have not been backdated - the new high bands introduced in 2006 only applied to new vehicles (no backdating there) so people could avoid buying them in the first place. Some of these changes are high at 73% a year in real terms (see more recent blog entry at www.eta.co.uk/node/10869 ) that is quite a jolt. I do not call 73% gradual. My car VED is going down so I'm fine. I just do not like unnerving people. They have enough to worry about as it is.
Embodied energy
There is another reason, as I understand it, why backdating VED could cause more harm than good. I have a fairly fuel-hungry Subaru Impreza (non-turbo at least!). It will not be affected by these changes as it is 1997. The main reason I have not changed it is that it runs well and as cleanly as it could, and that the manufacturing energy has already been used, so per mile the energy output decreases with age.
I am not sure of my figures / sources, but I think that it takes as much energy to produce the average car as it will use in its lifetime, in which case taking it beyond its average lifetime mileage (assuming it still runs well) will significantly decrease the whole-life per mile energy consumption.
If this is correct, encouraging people to scrap their older, by definition usually larger, cars, thereby also supporting the new-car industry, will be rather counter-productive. Never mind hitting the poorest car-owners the worst.
older cars last longer
My 20 year old 1400cc volvo (140k) still runs well and to replace it with a short life ,expensive to repair new car will increase co2 emissions. I object to the government able to deduct money from my bank account for so called congestion!
Please explain
I can agree with both of your points but do not see the link.