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Conservatives offer 'green' car VAT incentives

Tim Yeo, the Shadow Transport Secretary, told Retail Motor Industry Federation members at their annual dinner that the difference in car purchase VAT rates could be as much as £2,000 for cars with the same pre-VAT price but very different environmental performances under a Conservative policy.

Speaking to The Times newspaper before the event, Mr Yeo said: “I’m interested in sending a strong price signal to drivers to think about emissions when buying a car.” He said the existing system of varying Vehicle Excise Duty (VED) according to a car’s emissions was having very little impact on people’s choice of vehicle. The difference between the top and bottom VED rates is only £90.

Only a handful of cars qualify for the bottom rate of £75, while more than half of vehicles sold in Britain are liable for the top rate of £165.

Mr Yeo added that a Conservative government would reinforce the benefits of buying a greener car by introducing discount rates for congestion charges and road tolls.

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