Owners of gas-guzzling cars with the highest carbon dioxide emissions will have to pay a new higher rate of Vehicle Excise Duty (VED) in an environmentally-friendly move by Chancellor.
The measure will affect drivers of cars with big engines, such as the Rolls-Royce Phantom and the Aston Martin Vantage, but it will also hit many of those with 4x4 "utility" vehicles - the so-called Chelsea Tractors. Drivers of such big "dirty" vehicles will pay a new higher tax rate of £210 a year - although Mr Brown conceded only one per cent of vehicles would attract the higher level of duty.
At the other end of the scale the Chancellor announced a zero rate of tax for a small number of cars with the lowest carbon emissions and £40 duty for vehicles with the next lowest emissions. The rates are zero, £40 and then £100, £125, £150, £190 and £210, for the most environmentally unsound vehicles, as of yesterday.
The Chancellor appeared to undermine his green credentials by freezing fuel duty for the fourth year running. The usual inflation rate increase was deferred until 1 September at the earliest. Mr Brown said that around five million cars will have their vehicle duty cut and that the duty paid will be either frozen or reduced for 50 per cent of cars. Instead of just 300,000 motorists paying £100 a year or less, three million will now pay £100 or less, he said.
The Chancellor predicted that 5 per cent of all petrol will be made from bio-fuels by 2010, further reducing carbon emissions.
Stephen Joseph, director of Transport 2000, said the Chancellor had listened to environmentalists "but only with half an ear". He said: " The increase in tax on gas guzzlers is derisory and will hardly pay for the new paperwork. Drivers of big cars and 'Chelsea tractors' have got off lightly. This is a Budget that will see salesmen in 4x4 showrooms rubbing their hands in glee."
Simon Hart, chief executive of the Countryside Alliance, however said he feared the increase vehicle duty "directly discriminates against rural Britain with no significant environmental impact". John Carroll, editor of 4x4 Magazine, said there had been considerable misinformation about the effects of 4x4s on the environment portraying the whole range as " gas-guzzling monsters", which was not the case. We are pleased that the higher level of duty has been applied fairly across all vehicles that emit higher levels of CO and that owners of 4x4s have not been singled-out."
Edmund King, executive director of the RAC Foundation, said the Chancellor's "radical" tax disc reforms cleared the way for cleaner motoring. "Reduced tax for cleaner vehicles is a great incentive to help motorists choose the most environmentally friendly model suitable."
Paul Watters, the AA Trust's head of roads and transport policy, said: " We were happy to accept a marginal increase in VED for high-polluting cars to encourage car owners to switch to cleaner versions, but people who need these types of vehicle, such as the rural communities and large families, will be hit by an extra £45 tax. These drivers already contribute more to the Treasury in fuel duty as their vehicles consume more."
The Freight Transport Association chief economist Simon Chapman welcomed the Chancellor's decision not to add to industry's fuel costs by further increasing diesel duty. However, it is unfortunate that he did not bite the bullet and extend the freeze for a full year and thus establish a little more stability into transport operating costs."
Friends of the Earth said the rise to £210 was "utterly inadequate". A spokesman said: "This will not result in the widespread uptake of cleaner vehicles, and will, therefore, not reduce the rising contribution to climate change from the transport sector. However, the decision to cut the lowest two bands for the cleanest vehicles is very welcome."
Chris Grayling, Shadow Transport Secretary, said any measure that encouraged people to use more environmentally friendly cars was welcome and the abolition of car tax for very low emission vehicles was a step in the right direction. "But the trouble is that this announcement looks as if it is more about the Chancellor trying to get headlines on green issues rather than the kind of long term strategy for change that we will need if we are to tackle climate change."
On the eve of the Budget Mr Brown's green credentials were questioned by an all-party group of senior MPs.
Revenue from environmental taxes had fallen to its lowest level for more than a decade, according to the Commons Environmental Audit Committee. From a peak of 9.8 per cent in 1999, the total tax take had dropped to 8.3 per cent in 2004, the committee's report said. The Treasury was accused of " institutionalised inertia" in the face of the mounting threat from climate change.
Case Study, The 4x4 driver: 'It's ridiculous to put up road tax on 4x4s'
Toby Cox works for an engineering form fitting cranes to lorries. A proud owner of a Nissan Navara pick-up truck which he uses to travel on average about 12,000 miles a year. He is also chairman of the UK's All Wheel Drive Club.
Lives He lives alone in Devizes in Wiltshire and is unmarried and has no children.
Income £31,000 a year.
Outgoings He does not receive any government benefits and rents his home for around £700 a month. His council tax is just under £100 a month and he spends around £200 a month on domestic fuel bills. He doesn't smoke and drinks about three or four beers a week and a couple of glasses of wine.
Politics He didn't vote in 2005 and although he doesn't necessarily approve of Labour policies he doesn't think there is a party offering much of an alternative who could do a better job.
Hopes for the Budget "We already pay more than enough for fuel, so I don't want to see any rise in that. Alcohol is an easy target for tax but people don't need to buy it. I think it is ridiculous that they want to put up road tax on 4x4s. There are a huge number of cars out there which are a lot less economical than four-wheel drives."
Effect of Budget He will be better off to the tune of around £15. Despite a £25 a year rise on road tax he will gain £38 on income tax and £15 on national insurance.
Reaction "I welcome this Budget in terms that nothing has really gone up. The increase in fuel duty has only been deferred - whether that is a policy of appeasement as Blair appears to be going through a rocky period at the moment remains to be seen. £210 for the most polluting new big cars is something I can live with. A £20 a year increase is not something I can argue with, especially as it he has not singled out 4x4s as was feared. He has targeted all cars that pollute whether they are 4x4s or not and I can live with that."Reuse content