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SMMT urges caution from pre-Budget report

The Society of Motor Manufacturers and Traders is calling on the Chancellor to leave company car tax legislation alone, provide greater duty incentives for cleaner fuels, not increase Vehicle Excise Duty - and urges the Treasury to reduce the cost and administrative burden of new regulations.

In its submission to the Treasury, ahead of the Chancellor's pre-Budget report on December 2, the SMMT has urged the Chancellor to help reduce the costs and administrative burden of new regulations and not to de-stabilise the trend towards cleaner cars by over-taxing the motorist.

"The motor industry is committed to reducing CO2 emissions in line with environmental objectives and has made tremendous progress in the development and introduction of new technologies. Government must now deliver clear incentives to motorists in order to increase the take-up of cleaner fuels and greener technologies,” says chief executive, Christopher Macgowan.

"For UK automotive manufacturers, there is a danger of undermining recent improvements in quality and productivity by continuing with cumbersome levels of regulation. The cost to business, in terms of time and resources, puts them on the back foot against their European competitors."

The SMMT, which represents more than 600 companies in the automotive sector, identified the following issues for consideration by the Chancellor in his pre-Budget report.

Company car taxation:

The CO2-based company car tax system has been subject to continuous reductions in its banding and minimum level, down to 140g/km CO2 by 2005/6. This shift has had a significant impact on the motorist's choice of business cars with a surge in supermini and diesel engine models. The SMMT believes further reductions could undermine these gains by forcing more drivers to opt out of company schemes and choosing older, less efficient vehicles, and calls for the current threshold to remain at 140g/km for the 2007/08 financial year.

Fuel duties:

The SMMT believes the introduction of a fuel duty incentive for zero sulphur fuels is important. These fuels must be widely available so that the environmental benefits associated with new technologies can be realised. If government decides that it cannot introduce an incentive, it must take alternative action to ensure the same benefits are gained.

Vehicle excise duty (VED):

Since the introduction of the graduated VED system in March 2001, average new car CO2 emissions have fallen by 4.9 per cent. The message to motorists is clear and the market is on course to meet its emission targets. Further changes will be an unnecessary burden on the motorist. SMMT is working with the Low Carbon Vehicle Partnership to develop a voluntary label for new cars that will reinforce the importance of energy efficiency to consumers.


This has been another successful year for vehicle production and new car registrations but increasing raw material and energy costs continue to make profitability difficult. The SMMT has stressed the need to avoid any further business tax increases and regulatory burdens that would threaten the UK's position as a competitive base in the global automotive industry.

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