Millions left worse off by road tax reform

Twice as many people will lose out from the Government's decision to increase road tax than from the abolition of the 10p tax rate.

The discovery, by the Tories, will add fuel to a Labour backbench rebellion in the Commons today against the controversial decision to backdate rises in vehicle excise duty (VED) for cars up to seven years old.

Despite a £2.7bn compensation package announced in May, the abolition of the 10p band has left 1.1 million low-earners, on incomes between £6,635 and £13,355, worse off by up to £112 a year. But the retrospective changes to VED will leave 2.3 million worse off by between £100 and £245 a year.

More than 50 Labour MPs have criticised the retrospective nature of the road tax shake-up, which was buried in the small print of the Budget in March. They fear the move risks becoming "another 10p" because the change could hit low-income families.

Some Labour MPs will join forces with the Tories during a debate on the Finance Bill, which implements the Budget. Alistair Darling, the Chancellor, has promised to listen to the concerns of MPs, but is refusing to announce an immediate climbdown.

Justine Greening, the shadow Treasury minister, said: "Families can't afford to wait a year for Labour MPs to force another government U-turn. They should end the uncertainty now and vote down these unfair and retrospective VED rises."