Personal Finance

Diesel car drivers could face tax hike

Drivers of diesel cars could face a hike in road taxes and fuel duty in the coming years to combat a rise in pollution, the Transport Secretary has hinted.

In an interview with the London Evening Standard, Patrick McLoughlin said tax cuts by the previous Labour government had been a “mistake” and that taxation incentives to deter the use of diesel were something Chancellor George Osborne would “need to look at in due course”.

Gordon Brown cut the fuel duty on low-sulphur diesel by 3p a litre in 2001. He also linked road tax and company car levies directly to carbon emissions, effectively cutting taxes for diesel cars.

Since the changes, there has been a massive increase in registrations of diesel cars, with The Times estimating as many as 11 million may have hit Britain’s roads. Think-tank Policy Exchange said last year that the vehicles now make up 36 per cent of the UK’s car fleet, up from 14 per cent.

Diesel cars typically produce less carbon dioxide and the cuts were designed to help the UK meet targets to address climate change. However, they emit around four times more nitrous oxide and 20 times as many particulates, both of which are linked to thousands of deaths each year.

All of the UK’s major cities breach EU rules on air quality and diesel cars have been found to be consistently emitting more pollution than shown in official tests.

“In fairness, [Labour] thought they were doing the right thing,” McLoughlin added. “The consequence of what they did was to bring about a reduction in carbon.”                              

The tax benefits for diesel company cars have been unwound in recent years – and in fact, a surcharge of three per cent is now applied.

However, diesels remain on average cheaper to run as duties are the same as for petrol cars but fuel economy is typically better. Vehicle tax is still guided primarily by carbon emissions so costs are still often less for diesels.

A new regime from next year, which will increase the road tax payable on new cars, does not introduce any diesel surcharges.

Some taxes are already coming to tackle particulate pollution, including the “ultra-low emission zone” in London that from next year will increase the cost of bringing diesel-powered lorries and vans into the capital.

Policy Exchange has said any tax change should only apply to new cars in order to avoid penalising existing diesel drivers who bought their vehicles in “good faith”. It has also suggested a discount scrappage scheme to get older cars off the road. 

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