Jun 222012

Treasury Lose with Eco Car Cost

Treasury Lose with Eco Car Cost

The Drive for Eco will Cost

Governments and major car manufacturers have been driving the production and implementation of new technology for eco-cars for some time, but it has now been claimed that the revenue produced by sales of fuel and road tax are not enough to sustain the change. In fact, The Institute for Fiscal Studies and the RAC Foundation have reported that the drive for green cars will cost the UK public an estimated £13bn.

Government Out of Pocket

Since eco-cars have lower emissions, their road tax is much lower than normal cars, and some models are exempt from tax completely. While this is great for consumers and manufacturers alike, it means that as more green cars appear on the roads, the profit lost in road taxes will put the government out of pocket.

Road Tax Revenue Down

The IFS released figures last week stating that by 2029, road tax revenue will decrease by 0.3 per cent, meaning that drivers of eco-cars may have to pay more tax in the future to make up for this. It also stated that fuel duty will decrease by 0.6 per cent, which comes as a surprise, since petrol prices seem to be ever-increasing.

Eco Car Tax?

Director of the RAC Foundation, Prof Stephen Glaister, said that government ministers will have to look into how they can generate more revenue from eco-car drivers. This is, of course, a shame, since their low running costs are one of the main draws of buying such a vehicle.

Reducing C02 Costs Money

Reducing C02 Costs Money

Money has to come for somewhere

Glaister suggested that some of the viable options may be to tax forms of sustainable energy, such as those used in electric or hybrid cars, or to increase petrol and diesel duty. This means either pushing up costs even further for already disgruntled drivers, or causing a huge £13bn loss to the Treasury.

Mileage Tax?

IFS director Paul Johnson suggested that, instead of increasing fuel duty, drivers should be taxed according to their individual mileage and the congestion of the areas they drive in. He said that the drivers in rural areas should not have to pay the same tax as those in urban areas.

How will Eco Cars be Funded?

As more and more consumers make the switch to electric, hybrid and alternative fuel cars, overall revenue from petrol duty is decreasing despite the increase in price per unit, meaning that the Treasury is losing money. This brings the question of where funding for the eco-car industry will come from.

Road Traffic to increase by 45%

It’s been said by The Department for Transport that overall road traffic will increase by almost 45 per cent in 23 years’ time. How many of these new vehicles will be environmentally-friendly, and what costs will they implement on the Treasury? These are the questions that government ministers are now facing in a bid to keep moving forward in the eco-car industry.

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