To ask the Chancellor of the Exchequer what estimate he has made of the likely change to revenue to the Exchequer arising from the first year rate tax on new motor vehicles in each of the next three financial years. (322362)

[holding answer 16 March 2010]: Differential first-year rates of vehicle excise duty (VED) will encourage the purchase of more fuel-efficient cars, by providing a strong signal to the consumer at the point of purchase.

There are 13 different standard rates of VED. From April 2010, under differential first-year rates:

cars in bands A to D—emitting up to 130 grams of carbon dioxide per kilometre (g/km)—will pay no VED in the first year;

cars in bands E to G—emitting between 130 g/km and 165 g/km—will pay the same as under the standard rate; and

cars in bands H to M—emitting over 165 g/km—will pay a rate higher than the standard rate. Only around a quarter of new cars are forecast to fall into this category and only 2 per cent. of new cars are forecast, to fall into band M and face the top rate of £950.

From 2010 onwards, the Exchequer will therefore see reduced revenue from new cars in bands A to D, but increased revenue in bands H to M. The net impact of both of these changes, against a standard rate baseline, is:

This will contribute to cutting carbon dioxide from motoring.

Full details of VED rates for 2010 are available at:

http://www.direct.gov.uk/en/Motoring/OwningAVehicle/HowToTaxYourVehicle/DG_172916