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Gordon's mixed messages

Date: 04 April 2007

Guy Bird is our editor-at-large and political columnist

The Budget's latest tax measures proves the Chancellor Brown can't make his mind up on clean diesel and biofuel, writes Guy Bird

Ahhh, I can feel spring in the air. Birdsong, daffodils, another car-bashing Budget and whingeing motoring lobbies chanting the same old tired line: "the beleaguered motorist pays enough tax already" they cry in unison.

Barely anyone listens - certainly not Gordon Brown anyway - as there's tax to be collected and a largely inefficient public sector to fund. With a collective shrug of the shoulders we grudgingly pay up and move on.

But beyond the fairly predictable rises in fuel duty and road tax, plus concessions for cars or technologies that don't yet exist, there were two items tucked away in the Budget that were not so much unpleasant as lacking in consistency with the Government's own slightly warped view of the world.

Inconsistency no.1: Diesel tax treatment

The national papers' headlines may have been stolen by the massive VED hikes for cars with the temerity to emit more than 225g/km, but there was also a slight gesture of goodwill to diesel-engined cars with the immediate alignment of rates for petrol and diesel cars as, to quote the Budget report directly, "the differential in nitrogen oxides and particulate matter emissions for new cars is expected to fall to close to zero once Euro5 and 6 emissions standards become mandatory."

Fair play you might think, if a little before the majority of diesels have reached Euro5. After all, even if the new level playing field is only achieved at the expense of raising VED for petrol-engined cars by more than diesel ones, it still creates an important premise that, in the eyes of the UK Government at least, diesel and petrol are equal once more.

“You'd expect to hear an announcement that the 3% penalty for diesel cars within the company car tax system (allegedly slapped on due to their worse non-CO2 emissions) would also be dropped. But no, that remains because, err, well it does.”

Guy Bird

Following that logic through, you'd expect to hear an announcement that the 3% penalty for diesel cars within the company car tax system (allegedly slapped on due to their worse non-CO2 emissions) would also be dropped. But no, that remains because, err, well it does.

A ring to the HM Treasury press office bears no fruit at all. After a few unhelpful conversations one affable official tells me it's because a lot of work was being done with VED this Budget so it made sense to make the diesel/petrol parity changes at the same time, while any changes to company car tax were "frozen for this year". However, there was the announcement that biofuel would get a 2% tax break come 2008, of course, and a further look at AMAPs. "Oh yes, well, anyway we're not changing company car tax regarding diesel and petrol this year."

In fact, delve a bit deeper and the Government declares it is gearing up to "incentivise the early uptake of Euro5 (mandatory January 1 2011) and Euro6 (mandatory September 1 2015) technology through company car tax and other instruments". But it's already 'let off' the diesel VED crew now? It's simply inconsistent and daft, as is how it treats biofuel.

Inconsistency no.2: Biofuel tax treatment

Their boy Miliband talks about saving the planet. Saab, Ford, and to some extent Peugeot and Renault have come up with public-roads-ready biofuel-powered vehicle options that promise to help, but all the Government does in return is keep the duty rebate for all biofuels at a rate which will incentivise no more than a few eco loons to purchase, and promises a 2% company car tax break for next April. Without a further fuel duty tax break neither will speed uptake of the biofuel the Government bangs on about so fervently - in fact, long out of favour LPG is still much better provided for in terms of tax breaks.

Anyone would think Brown is simply waiting to give all the tax breaks to a future cellulosic biofuel that Britain might have more financial stake in developing and producing, rather than getting on with the job of CO2 reduction and buying from the French meantime. Surely not?