[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:
Additional revenue (£ million) 2010-11 60 2011-12 45 2012-13 15
Additional revenue (£ million)
This will contribute to cutting carbon dioxide from motoring.
Full details of VED rates for 2010 are available at: