...but the Lib Dems would prefer the tax route

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An increase of 3p per litre on petrol and diesel duty was proposed yesterday by the Liberal Democrats as part of a package of measures for a "green edge" to next Tuesday's Budget to curb so-called "gas guzzlers".

The increase in fuel duty would allow the Road Fund Licence fee to be slashed from pounds 140 to pounds 10 a year on smaller-engined cars and persuade more motorists to give up cars with bigger, more polluting engines.

And switching the tax on motoring from the road licence to petrol duty would cut fraud on car tax discs.

Liberal Democrat MP Matthew Taylor, denied it would increase the tax burden. He also called on firms to shift down to fleets of cars with 1,500cc engines.

"It would cost just 3p a litre, lower than the increases the Government has been putting through anyway. In that way you encourage people to own 1.5 litre vehicles or lower that are less polluting in the first place. And it means people pay per journey, rather than on ownership of the car.

"So the elderly person who needs to have a car to get around at all and is probably doing low mileage would be much better off," said Mr Taylor.

But the Government was not impressed."It is tax on rural communities," said a Tory spokesman. "The Liberal Democrats are trying to be all things to all men."

Mr Taylor pointed out that the Chancellor has imposed higher-than-inflation increases in petrol duty. He also called for a carbon tax on fossil fuels.

He rejected Government claims that it would lead to higher domestic fuel costs, providing it was done gradually.