H.M. TREASURY NEWS RELEASE

HM Treasury News Release

143/99

8 September 1999

GRADUATED VEHICLE EXCISE DUTY SYSTEM FOR NEW CARS

As announced in the Budget, work is getting underway to introduce a Graduated Vehicle Excise Duty (VED) system for new cars based primarily on their emissions of the greenhouse gas carbon dioxide.

The Driver and Vehicle Licensing Agency (DVLA) will shortly be opening technical discussions with a range of bodies so that the environmental information upon which the new system is to be based can be collected when a new car is registered and then used in the new VED system.

As announced by the Chancellor in his March Budget, the system will apply to cars first registered from Autumn 2000, and will be introduced on a revenue neutral basis. It forms part of the Government's effort to encourage motorists and manufacturers to buy and make greener vehicles.

As the Government proposed in a consultation document last November, there will be four VED rate bands according to their rate of emission of carbon dioxide -- which is linked directly to fuel efficiency -- with the potential for example to reward less-polluting fuels.

Cars first registered before the new system is introduced will continue to be taxed under the existing engine size-based system.

Details of the scheme will be announced in next year's Budget in advance of the system's introduction.

Notes to Editors

1. In his 1998 Budget, the Chancellor announced that there would be significant reform of the VED system to encourage smaller, cleaner cars. A consultation document, 'Reform of VED to ensure a cleaner environment', was issued last November.

2. The consultation document outlined options for graduating car VED to reflect the environmental impact of different vehicles, assessed primarily on the basis of their fuel efficiency. For new cars, the document suggested graduating VED rates primarily according to their carbon dioxide emissions - which is closely correlated to fuel efficiency. For the existing fleet of cars, where emissions data is not recorded on the registrations database, the document explained that the best available proxy for fuel efficiency was engine size.

3. Following this consultation, the Chancellor introduced a reduced VED rate of £100 for cars with engines up to 1,100cc in the 1999 Budget. This meant 1.8 million motorists of smaller cars made a £55 saving on their VED bill. The November 1998 consultation document and Budget press notices setting out more detailed background are on the HM Treasury web site:

http://www.hm-treasury.gov.uk

4. DVLA has now begun to put into place systems to record emissions data for new cars on their register. It will also be working closely with a wide range of bodies responsible for supplying emissions data and registering vehicles (such as manufacturers, motor traders and fleet operators). The Driver and Vehicle Licensing Northern Ireland (DVLNI) will undertake a similar programme of work.

5. Carbon dioxide emissions are measured in grams emitted per kilometre driven (g of CO₂ per km). These are measured as part of a vehicle's type approval test, conducted by manufacturers and the Vehicle Certification Agency prior to its first registration. The results of these type approval tests are published in a booklet published every six months by the Vehicle Certification Agency so that individuals can check on the emission rate and fuel efficiency of the vehicle model they may purchase. This information is also available on the Internet at http://www.roads.detr.gov.uk/vehicle/fuelcon/index.htm.

6. The system will be built with the potential for example to reward the use of less polluting fuels.

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