UK increases tax on diesel cars

Europe’s only government that does not tax diesel fuel more favourably than petrol has gone a step further by increasing tax on diesel engine cars while leaving it unaltered for petrol cars. In his annual budget speech, the British chancellor of the exchequer (finance minister) said new diesels that failed to pass the strictest emissions tests would pay more tax each year. T&E said the announcement was more important for its symbolism than its financial impact.

After many years of diesel fuel being taxed more favourably than petrol, governments have recently started to narrow the gap as evidence emerges about diesel’s environmental impact, but until now only the UK had equal taxation for both fuels. From next April, diesel cars that have yet to pass on-road emissions tests will move to a higher band for their annual tax.

The chancellor, Philip Hammond, said: ‘The tax system can play an important role in protecting our environment.’ He also announced a 1% rise in company car tax for diesels, and said the extra income from diesel taxes would fund a clean air fund. Analysts said the cost to the car buyer would be negligible – about €22 for a new Ford Focus.

T&E’s clean vehicles director Greg Archer said: ‘This constructive move to increase road tax on new diesel cars is entirely symbolic but clearly signals that most are still dirty. The very modest increase for new buyers will not discourage anyone from buying a diesel but it signals that it’s environmentally irresponsible and is likely to dissuade more drivers. Perhaps as important is the UK declining to subsidise yet more car buying through a diesel scrappage scheme.’

T&E also welcomed another announcement in Hammond’s budget: his decision to increase taxes on the more expensive air tickets for long-haul flights. The UK has operated an ‘air passenger duty’ since the 1990s, which will remain the same for short-haul flights and all economy class passengers, but those flying longer distances in premium, business and first class will pay more. From April, the tax for long-haul flights in these classes will increase by €18, while those travelling by private jet will pay €60 more from April 2019.

The UK government decided to maintain a freeze on fuel duty, a decision criticised by T&E member Campaign for Better Transport. ‘As rail and bus get dearer, car use will get cheaper, as the Chancellor again refused to increase taxation on fuel, and boasted about the £46bn this freeze had cost,’ it said in a statement.