Budget aftermath: Motorists on the long road to bigger bills

DRIVERS will face bigger bills in the coming years as the Government attempts to unclog city streets and curb growing pollution.

Tuesday's Budget - which mixed petrol price hikes with a cash boost for public transport - demonstrated the benefits for ministers of pursuing such a strategy: bringing in more than pounds 1bn in extra taxes and delivering environmental benefits.

Gavin Strang, the transport minister, described it as the "most far-reaching package of measures to promote cleaner vehicles and fuels the country had seen". Economists were quick to point out that drivers had ensured the Budget was fiscally neutral. "Along with cutting relief for the married couple's allowance and smokers, motorists paid for it," said Paul Johnson, deputy director of the Institute of Fiscal Studies.

Petrol went up by more than 5p a litre - costing the motorist an extra pounds 60 a year on average, and the Chancellor criticised the oil companies for not passing on the drop in world-wide fuel prices. This has brought an immediate response. BP, the oil giant, cut the cost of petrol by 2p a litre in rural areas.

But for Britain's drivers, the devil is in the detail. Although next year will see a new pounds 100 tax disc for the "smallest and cleanest cars", no upper limit has been set on a possible excise duty for gas guzzlers. This could see large increases for those motorists who choose to use huge- engined cars.

This "graduated" duty is the norm on the Continent. Drivers of the Suzuki Swift - the most fuel efficient car on the road - would only pay pounds 66 in road tax in Belgium. However, a motorist in Brussels who drives a Ferrari F50 - which manages a mere 10.6 mpg - pays pounds 1,080.

Company car owners also thought they had escaped with just a phasing out of their free fuel subsidy. This will cost the executive with a two- litre Mercedes pounds 150 extra a year and will raise more than pounds 500m by 2001 for the public purse.

"We are looking to encourage the production of fuel-efficient vehicles. Fuel duty increases and changing excise duty schemes will encourage that," said a civil servant.

But in the small print lurks another change for company car users. The Government quietly announced a review of the tax breaks which provide "a perverse incentive to drive extra business miles".

More measures are sure to follow in this May's transport White Paper. This will include proposals which could see councils fining motorists who spew fumes into the atmosphere as well as charging drivers for entering congested town centres.

A leaked draft of the paper showed that ministers will introduce a tax, to be collected by local authorities, on "private non-residential parking", mainly staff car parks provided free by employers or customer spaces offered by shops. A ministerial aide said that unless current policies were changed "it would be difficult" to meet the air quality standards for 2005 set by the previous administration.

This has not impressed the motoring lobby. The AA took out full page newspaper adverts today to question the Government's agenda. "The Chancellor talks of fairness and that must mean motorists get what they pay for," reads the ad.