Darling announces 2p fuel duty hike

There was mixed news for drivers in Alistair Darling's Pre-Budget announcement.

The Chancellor has been accused of "giving with one hand and taking away with the other" after his 2p rise in fuel duty from December 1 will effectively wipe out any reduction that would have taken place following the planned 2.5% VAT reduction.

Drivers will also face a 1.84p increase in fuel duty in April 2009, a likely rise at the end of 2009 when VAT reverts back to 17.5% and a further fuel duty increase of 0.5p above the inflation rate in April 2010.

But Mr Darling did announce a more gradual and less-taxing introduction of new vehicle excise duty (VED) car-tax rates, with charges only going up £5 per vehicle in 2009.

However, the Government is to press head with the so-called "showroom tax" where the most-polluting vehicles pay a special first-year VED rate.

The Chancellor also announced he will bring forward certain money to help ease congestion on roads and rail, with £535 million being advanced to ensure the quicker arrival of 200 new rail carriages. Motorway widening schemes will be accelerated as part of a £3 billion capital spending package brought forward from 2011 to begin straight away.

Mr Darling said that from April next year, there would be six new VED bands taking the total to 13. But rates would not increase by more than £5 for any car in 2009.

From April 2010, there will be different rates for each of the 13 bands, with different first-year rates for new vehicles.

In the original proposal, some cars would have seen increases of up to £90. But now the increase for the more polluting vehicles will be up to a maximum of £30. And less polluting cars will see no increase or a cut of up £30.

Also, cars that emit more than 225gm of carbon dioxide per one km, but were registered between March 1, 2001, and March 23, 2006, will be moved into the new VED band K in 2009 and stay there in 2010. This will mean that they maintain their exemption from the top rate of VED.

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