Chancellor told: Grasp opportunity to abolish car tax

Saga, the retirement experts, has today called for the Chancellor of the Exchequer to replace Vehicle Excise Duty (VED) with a small rise in fuel duty.

There’s no better time for the change with fuel at a relatively low price, the company says in a pre-Budget letter to the Chancellor.

The case is that with successive Budget changes VED is too complex – with a potential 27 different rates in the first year of the new regime starting next April, while tax nudges to drive greener have driven down the Treasury’s take.  The new rules also remove the incentive for those who do not wish to drive an electric car to choose something with modest emissions such as a hybrid vehicle over a gas guzzling 4x4.

Saga suggests six powerful reasons for replacing VED with an increase in fuel duty:

• It would be administratively simpler and easier for people to understand.

• It would be cheaper to collect, administer and enforce.

• It would eliminate VED fraud – approximately 560,000 vehicles in the UK avoid paying VED.

• It would raise significant extra revenue from foreign drivers on British roads.

• It would provide a far stronger ongoing incentive for motorists to drive cleaner, more fuel-efficient cars.

• It would be a fairer way of raising taxation, particularly for older drivers.

Saga’s Director of Communications Paul Green:  “Car tax is a complex and unfair” way to raise money and it has a significant impact on older drivers.

“Currently, the average motorist drives about 12,000 miles a year but as people grow older they drive less and so they are contributing an unfair slice of the pie to motor taxation overall.

“Motoring plays a vital role in keeping people over 50 mobile, independent and engaged in social activities.  

“Making this change would eliminate the unfairness created by those drivers who avoid car tax as well foreign cars and lorries that currently take a ‘free ride’ on the back of the taxes paid by British motorists.”

The Saga Manifesto 2015 called for the replacement of VED and instead raising the same amount by increasing fuel duty.  Based on analysis by Centre for Economic Business Research (Cebr) if fuel duty went up by 10.9 pence per litre car tax could be abolished.  Younger drivers aged 21-29 would be on average £11.22 per year better off and older drivers in their 60s would gain an average £21.20. Drivers over 70 would gain £84.70 per year (or about £281 million). This is because many over 70s use their car for essential but short journeys and currently they pay a disproportionate amount in VED.