Officials have considered a new “two-tier” road tax system as part of a Government review of transport funding, it emerged yesterday.
The scheme would see drivers who only drive locally and stay off major roads paying a lower rate of Vehicle Excise Duty than those who use motorways.
Ministers are reviewing the future of VED as the sums it raises for the Treasury fall. The tax is related to the engine emissions of cars, and the move towards smaller, greener cars is reducing tax revenues.
The two-tier tax system is understood to be one of several options that have been considered as part of that review. Insiders insisted that no decisions had been taken and that ministers remained unconvinced by the proposal.
Enforcing a two-tier system would require transport authorities to monitor all vehicles using the motorway system to see if they had paid the higher rate of tax. That could possibly be done using the automatic numberplate recognition system now in use on many major roads.
Motoring groups including the AA warned ministers not to adopt the two-tier system. The AA suggested that as many as a third of motorists would be priced off the motorway system and forced to take longer journeys on smaller roads.
"We don't want a first and second class system on the roads," said AA spokesman Paul Waters. "There would certainly be more traffic. It will lead to slower journeys and more congestion."
Ministers have considered a number of other options for reform of VED, including imposing a large one-off tax of several thousand pounds on new cars with the dirtiest engines, while offering a subsidy on the cleanest.
The Daily Telegraph revealed earlier this year that government officials have begun private discussions with the motoring industry and drivers’ groups about an overhaul of the VED rules.
The talks come as ministers try to prevent a fall in tax revenues as more motorists choose smaller, cleaner cars that incur a lower rate of duty. Labour has accused the Coalition of planning a “stealth tax” on drivers, effectively punishing them for going green.
Ministers say that while they have not finalised their plans, changes may be necessary to ensure the “sustainability of the public finances”.
Annual VED charges currently raise almost £6 billion a year for the Treasury, but official forecasts show that the revenue from the tax will fall as more people chose to drive low-emission cars.Road tax rules give drivers a financial incentive to choose low-emission vehicles, as cleaner cars qualify for lower rates of VED.
The Office of Budget Responsibility this year cut its forecast for VED revenues by £100 million a year from 2014/15 to reflect the move towards cleaner cars.