Budget Aftermath: Car lobby counts cost of squeeze on motorists

ALARM spread through the car lobby yesterday as the full implications of the Chancellor's tax squeeze on the motorist began to sink in.

The Royal Automobile Club said that motorists faced a 'road of misery ahead' ahead following the Budget increases in fuel duties and vehicle excise duty.

The Society of Motor Manufacturers and Traders, meanwhile, warned that the direct tax increases planned from next April could affect the fragile recovery in car sales.

The SMMT also attacked the 3p per litre increase in fuel duties and the planned introduction of electronic motorway tolls and warned that the new 3 per cent tax on car insurance premiums could lead to an increase in the already high numbers driving without insurance.

A spokesman for the RAC said that changes in VED and fuel duties would cost the average motorist pounds 52 a year. 'We are concerned that it will hit those who can afford it least, particularly those in rural areas who rely on their cars because there is little other transport available.'

An even greater worry was Kenneth Clarke's plan to increase road fuel duties by at least 5 per cent in real terms in future Budgets. 'Already 72 per cent of the price of road fuel is tax and that is obviously going to get worse. The fact is that price increases do not reduce the need to travel so they often do more to fuel inflation than to save the environment,' the spokesman said.

The AA predicted that higher petrol prices combined with the rise in vehicle excise duties would drive many people off the roads. A spokesman said: 'It is a huge increase with massive implications for motorists. It will seriously affect 60 per cent to 80 per cent of motorists and the worst affected will be middle and low earners.'

Mr Clarke said the measures, which will raise pounds 750m next year, would help Britain to meet its commitment to reduce emissions of carbon dioxide to 1990 levels by the year 2000, as the Government agreed at an international convention in Rio last year. However, the UK vehicle leasing industry said his measures were bad for private motorists and for the environment.

The SMMT and Highway Vehicle Leasing, a private leasing company, attacked the increase in fuel duties across the board for failing to widen the price differential between leaded petrol and unleaded or diesel fuel. A spokesman for HVL said: 'There is a greater, more favourable, differential in terms of diesel in other EC countries which means that the UK is still out of line.'

The Freight Transport Association said that Mr Clarke had delivered a damaging blow to industry, adding that the measures will raise transport costs by pounds 300m a year. The FTA's director, David Green, said it had been a 'pay more, get less' Budget. Mr Green said a company with 10 38-tonne trucks would pay pounds 11,000 extra a year.