Diesel car owners escaped punitive fuel tax rises in the Budget, but the car industry is furious at what it sees as a missed opportunity by the Chancellor to reduce pollution.
A feared tax on the fuel did not materialise, with Philip Hammond instead unveiling plans to ramp up vehicle excise duty (VED) by one band on sales of new diesel cars that do not meet what he called the “latest emissions” standards.
The change affects only new cars – not vans – which do not meet new “real world driving” emissions tests and only for their first year on the roads.
Motorists buying a new diesel car that does not meet these standards, which require NOx emissions of less than 80mg of NOx per kilometre, will be bumped up a VED band.
This will result in a charge between £20 and £300, depending on how far above the 80mg limit their car is. Mr Hammond said the higher VED rates would encourage car manufacturers to “bring forward the next-generation, cleaner diesels that we all want to see”.
However, car companies have hit out at the measure, saying it will only create more confusion among motorists who are already shying away from diesel vehicles under what the industry is describing as “demonisation”. They point out that the latest diesel engines emit the same – and sometimes lower – levels of NOx pollution as petrol engines. Diesel engines also produce less CO2 than petrol.
Putting an extra tax on new vehicles will do nothing to encourage motorists driving the most polluting, older diesel vehicles, trade body the Society of Motor Manufacturers and Traders said.
With relations between industry and the Government already fraught over the “demonisation” issue, manufacturers were reluctant to go on the record.
However, one industry source described “fury” among some at the Chancellor’s plan. Another described the Government as having “shot itself in the foot”, pointing to confusion about the detail of the new standards the Chancellor was referring to.
Jaguar Land Rover, Britain’s biggest car manufacturer, which produced 544,000 cars at its three UK plants last year, registered its “disappointment”.
In a statement, the company – which says about 85pc of its cars in the UK are diesel powered – said: “It’s disappointing the Government is only adding extra taxation to new diesel vehicles and so discouraging consumers to adopt the latest clean diesel technologies.”
Our greatest concern is the continuing mixed messages around diesel, which will only deter and confuse the public further
Mike Hawes, SMMT chief executive
“Our greatest concern is the continuing mixed messages around diesel, which will only deter and confuse the public further,” said Mike Hawes, SMMT chief executive.
There were also questions about how much impact the change would have on the car industry, which works to international standards. Fewer than half of the 2.7m cars sold in the UK last year were diesel powered, and the Budget change is unlikely to drive an acceleration of work solely for UK legislation.
Prof David Bailey, a car industry expert at Aston University, said: “Unless we see similar moves across the whole of Europe, I doubt this will change manufacturers’ behaviour much.”
The Chancellor said the money generated by the measure – £185m by 2020/21 – would help fund the Government’s air quality plans.
Mr Hammond also confirmed widely trailed plans to support the development of electric and driverless cars, pledging £400m to support charging infrastructure for battery vehicles, an extra £100m for the plug-in-car grant, £40m for charging R&D, and £75m for artificial intelligence research.