Car tax row hots up

The debate over plans for a drastic hike in car tax is starting to get interesting, amid increasing fears within government that the revised scheme could prove as politically damaging as the storm over the abolition of the 10p income tax band.

The plans, announced in Alistair Darling's first Budget back in March, will create six additional car tax bands and introduce an up to £950 graduated ‘showroom tax’ on cars in the upper tax bands.

Despite being spun as a 'green' move that will persuade people to buy lower-emission, lower-taxed cars, the Treasury has already admitted that once the revised system is in force more than £700m extra a year will be delivered into the government's coffers.

A very clear indication from the horse's mouth that people will not, in fact, switch to the lower-emissions cars that attract reductions in the tax rate and the scheme is therefore largely useless in 'green' terms (but clearly very useful in government fundraising terms).

No surprise, then, that Chancellor Alistair Darling decided to try to introduce the scheme regardless.

Money or popularity?

Already reeling from severe public slapdowns in recent elections, ministers and MPs are now starting to worry that both the scale of the increases combined with the number of people set to be affected to some degree will be an explosive recipe, capable of triggering a further dramatic slide in the government's popularity.

Justice Secretary Jack Straw and Business Secretary John Hutton have been the first to break ranks with the Prime Minister and his puppet Chancellor to suggest that it may not be the best plan to pile severe extra costs on people right when they're feeling the pinch.

They have hinted that the Autumn pre-Budget statement would be a good opportunity to take a 'fresh look' at the plans.

Backbenchers are also asserting themselves over the issue, with 35 Labour MPs (and others to make 42 in total) so far having backed a Commons motion by Ronnie Campbell MP urging ministers to reconsider.

Retrospective tax on older cars

A particular target for review is the most controversial element of the scheme - to impose tax at the new highest rate retrospectively to cars bought between 2001 and 2006.

A host of family cars bought before March 2006, many used everyday for the school run, will see their road tax double from £210 to more than £430 unless the plans are changed.

This double-whammy aspect of the scheme will hit those who bought cars in good faith a few years ago, not knowing the government would drastically increase the road tax on them. And make it harder for those people to switch to lower-emissions cars, as the new excessively punitive tax rate will severely cut their existing car's value.

Good time for pause

Given his already pretty significant woes, and the growing controversy over out-of-control fuel prices, does Gordon Brown really want to further wind up 18m 'middle Britain' car users?

As the 'consensus' over climate change is brought ever further into doubt by severe wintery conditions across the globe and growing lists of scientists contradicting the man-made global warming orthodoxy, now would be the perfect time for Brown to demonstrate responsible leadership and pause for a re-think.