But, he adds, it is important not to increase the overall burden of taxation on the motorist, arguing that the carrot approach needs to feature “as much as, if not more than, the stick”.
“An imaginative tax regime, covering the VED charge, petrol prices and benefit-in-kind business user taxation, can and should be an important incentive in stimulating the use of greener cars,” says Yeo.
Speaking at last month’s RMI annual dinner, he added: “Should we consider variable rates of VAT on new car prices as a way of stimulating demand for the least polluting vehicles?”
Yeo called on the Labour Government to liberalise the market, giving retailers greater control over their gross margins and consumers greater information on pricing and specification.
“I want to encourage a fair balance between the interests of manufacturers, retailers and consumers – a balance that can only be achieved if Government understands that its job is to provide the vision ad strategy, and not micro-management,” he said.
Yeo said he would focus on partnership between public and private sectors to create a safer, cleaner environment for Britain. High on his list is the need to cut CO2.