43% of drivers will pay more VED tax

* Extent of VED road tax changes revealed * Top rate will hit 455 by 2010 * Parliamentary row kicks off...

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Jim Holder
10 July 2008

43% of drivers will pay more VED tax

Treasury figures have revealed that VED road tax changes scheduled for next year will leave 43% of motorists worse off by April 2010.

The changes, which will lead to tax rates rising up to a maximum of 455 a year, will also result in 18% of drivers benefiting from decreased charges for lower-emitting cars.

The Treasury's admission has also caused a row, because last month Prime Minister Gordon Brown told the House of Commons that the 'the majority of drivers will benefit from the changes'.

Stern reaction
George Osborne, the Tory shadow chancellor, said that Mr Brown 'misled' parliament, and called on the Prime Minister to explain his remark.

The Treasury figures have intensified pressure on Chancellor of the Exchequer Alistair Darling for a rethink on the plans. The Chancellor has already assured angry Labour MPs that he will look again at the reforms in the autumn.

'These figures demonstrate why this is a policy that has to change,' Martin Salter, a Labour MP, told the Daily Telegraph.

'It is right and proper to provide incentives for green choices in motoring, but the whole scheme needs restructuring to give people much more time to switch to low-emission vehicles.'

Full extent of the plans
The full Treasury figures showed that of the 21.9 million cars that will be on British roads by 2010/11, 43%- or 9.4 million - will pay higher VED in real terms than they do now.

Another 39% - 8.4 million - will be left no better off. Just 18% - 4.1 million - will actually benefit.

Of the 9.4 million who will be worse off, 1.18 million motorists will be dragged into the highest two tax bands, where the annual cost is upwards of 400.

The higher tax rates will raise an extra 430 million for the Treasury next year and 700 million the year after.

The tax changes are also expected to wipe thousands of pounds off the value of cars registered after March 2001.

Estimates suggest that the cars affected have already fallen by 10% in value, and will continue to depreciate sharply.