The AA's Budget Response

Chancellor joins the ranks of motoring tax-guzzlers

The Chancellor has joined the ranks of tax-guzzling politicians who will, however inadvertently, use road tax band G as a tool to punish large families – who are not just being gas-guzzlers, but whose circumstances require them to have larger vehicles to function – says the AA in response to today's budget.

Highest-ever road tax increase

The doubling of the band G road tax in the next two years breaks the understanding that it usually moves with inflation or to signal change, rather than punish. The acceptance of the AA's call for removal of the road tax surcharge on diesel (nearly 40 per cent of cars in the UK) is welcome, and rewards drivers who have invested around £1,000 extra to buy cars that use up to 20 per cent less fuel. However, a £15 increase in road tax for petrol bands C to F is cynical.

The 5.8-pence-a-litre rise in fuel duty over the next two years means the Chancellor is storing up trouble for the government if the fuel price soars as it did last summer. Then, the Treasury's three-year freeze on fuel duty allowed the government to avoid any blame for pressure on family budgets and inflation. It will be completely different with oil price volatility continuing.

AA Public Affairs' response

"The AA urges the government to keep these proposed increases under review so that motorists and business can be protected from duty increases adding to unexpected fuel price shocks," says Paul Watters, head of AA Public Affairs.

"Band G drivers will now be paying unreasonably much more for their motoring as every mile they drive already provides the Chancellor with more revenue due to the fuel they consume.

"Today's huge increase in road tax, the highest-ever, will shock these car owners who bought band G vehicles because they needed one and now face a massive turn of the screw they could not have anticipated. Not only does it cut into the spending power of many, but reduces the exchange value of their current vehicle. In the end, they either hold on to the vehicle they've got or buy an older one – an environmental own-goal."

AA recommendations

The AA called for the creation of a band H, with an emissions threshold of 250 grams per kilometre, up from the current 'gas-guzzler' threshold of 226. This would have placed virtually all new models of people-carrier, by definition efficient transport for drivers with large numbers of passengers, into a lower and less punitive tax band.

(22 March 2007)