Policy: Fuel Taxes

Among the most important policy synergies is between VED and fuel taxes (Potter and Parkhurst, 2005; Kunert and Kuhfeld, 2007). By 2000, the UK policy to redirect tax from vehicle purchase towards vehicle use through the fuel duty escalator had begun to achieve results. VED reform could have been an important supporting measure. However, with the fuel duty escalator reversed in 2000, the VED reform in 2001 was viewed to be a weak stand alone measure (Potter and Parkhurst, 2005). Recent VED reforms announced in the UK Budget 2008 aims to align VED and fuel tax including a £15 or £20 discount applied for alternatively fuelled vehicles in 2009 - 2010, and £10 in 2010 – 2011 (HM Treasury, 2008).