Memorandum from the Society of Motor Manufacturers
and Traders Ltd (SMMT)
RESPONSE
TO
SPECIFIC
QUESTIONS
FROM
THE
ENVIRONMENTAL
COMMITTEE
FOLLOWING
THE
SMMT'S
ORAL
EVIDENCE
SESSION,
24 MARCH
2004.
1. For several years, fuel duties have only
been increased by inflation and the real cost of motoring is still
falling. Under what circumstances, if any, do you think the Government
should consider re-instating above-inflation increases in fuel
duties?
SMMT does not believe that above inflation increases
in fuel duty are appropriate. The fuel duty escalator proved a
relatively blunt policy instrument for influencing tranport demand.
Increased costs impacted negatively on industrial competitiveness
and had a disproportionate impact on those on low incomes. By
contrast incentives provided by differentiating rates of fuel
duty have shown to be effective in encouraging the use of cleaner
fuels.
2. Do you consider that the Alternative Fuels
Framework and the specific commitments on fuel duties contained
in the Budget give sufficient certainty for investment?
Ahead of Budget 2004 SMMT sought stability and
greater certainty from the Chancellor in respect of transport
taxation. The commitment within the Alternative Fuels Framework
to a rolling three year period of fixed duty differentials is
very encouraging. Industry would prefer to know the actual rates,
but acknowledges that this is a substantial improvement on the
year to year uncertainty that has traditionally prevailed. SMMT
believes that companies do now have a sounder basis for investment
decisions.
3. What impact do you think the increases
in LPG will have, given the fledgling state of the market for
that fuel? If the LPG market does stall, would this have any impact
on investment in other new fuels?
Those companies offering LPG vehicles have been
concerned about the uncertainty that has surrounded the future
rates of fuel duty and purchase incentives offered through the
Powershift Programme for LPG vehicles. The one pence per annum
reduction in the fuel duty incentive for LPG should not undermine
the market for this fuel. New fuels that require dedicated vehicles
and distribution systems take time to establish a commercially
viable market. The automotive industry has articulated a clear
view about the potential for the use of renewable hydrogen in
the future, this would suggest that Government should begin to
consider how a supporting infrastructure might be developed.
4. Is there a case for increasing the differentials
for VED much more dramatically to promote increased take-up of
small cars?
SMMT's recently published report on new car
CO2 emissions shows clearly that consumers are purchasing a higher
proportion of smaller cars. The combination of graduated VED and
company car tax linked to CO2 emissions is having the desired
effect. SMMT does not believe that increasing rates for higher
emitting vehicles would have a significant impact on the purchasing
decisions made by new car buyers, but it could limit the choices
of lower income motorists. It is important to remember that vehicles
have a long life and the relative importance of VED increases
as the value of a vehicle depreciates. Industry needs to be able
to offer a full range of vehicles to ensure its long term economic
sustainability and would oppose significant change to VED rates.
5. Are there any specific measures which
you would like to see the Treasury take to promote environmental
objectives and the take-up of lower emission cars?
SMMT would like the company car tax regime to
provide clearer support for cars with very low CO2 emissions.
Currently some specific vehicle technologies that emit 20g/km
CO2 or more below the minimum threshold are entitled to apply
the scale charge at less than 15% of list price. In most cases
this involves a complex calculation and is open to relatively
few vehicles. SMMT would urge the Chancellor to simplify the system
so that all vehicles with low CO2 emissions qualified for a reduced
scale charge.
April 2004
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