Budget 2011: Green cars cost £500m in lost taxes
Fuel efficient cars are costing the Treasury £500m in lost tax as drivers fill up less often.
Some 400,000 new cars were bought under the scrappage scheme, which offered drivers a £2,000 subsidy when they traded in a car that was more than 10-years old. Photo: Reuters
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The Office for Budget Responsibility (OBR) has adjusted its estimates for fuel duty revenues because "average efficiency is higher than was expected in November", its last update. The effect has been to lower forecast tax take by £500m annually from this year.
The OBR, the Government's official forecaster, was made the adjustment "to reflect increased purchases of more fuel-efficient cars because of the car scrappage scheme of 2009-2010". It added that "higher pump prices may also be driving this change".
Some 400,000 new cars were bought under the scrappage scheme, which offered drivers a £2,000 subsidy when they traded in a car that was more than 10-years old.
The OBR also found that people simply don't want to drive as much as had been expected. This estimated "permanent shift in demand" will reduce fuel duty revenues by an additional £400m annually by 2015, it said.
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