That Gas Guzzler Tax

Far be it for me to say that this government has actually got anything right: so I won't, but I will point out that they're being (very slightly) unfairly criticised.

The "green levy" on motorists announced in Alistair Darling's first Budget will double car tax revenue to £4 billion but reduce vehicle emissions by less than one per cent, Treasury figures have showed.

Yes, of course it's just a tax grab. What we actually care about (if we care at all that is) are the emissions, not the vehicles that are being used to make them. There's no obvious reason why someone driving 5,000 miles a year in a Chelsea Tractor should be penalised more than someone doing 30,000 in a Polo. Indeed, rather the opposite is true: we want simply to tax the emissions, not the travel or the car itself.

Thus we should tax the petrol as that's the closest (it's pretty much a 100% fit actually) fit we have to the emissions.

Yes, this does bring other problems with it, for example, my oft repeated assertion that petrol taxes are already too high in the UK to deal with the effects of emissions, but that's a slightly different story.

The justification for this tax is that people who buy big cars are rich bastards and we want some of their cash. That's it.

However, the unfairness comes here:

There are almost 30 million cars registered and the number increases by about 500,000 annually. Therefore, only a small amount of the extra tax take is down to a rise in vehicle numbers.

We already know that petrol consumption is highly inelastic in the short term (there's a technical meaning to this but take it as price changes don't change consumption very much) but in the long term, well, pretty much any economist will insist that everything is price elastic in the long term. New car sales are around 2.5 million a year so very roughly, we expect the total stock to turnover once every 12 years (clearly not true, as there are always old bangers on the road, but close enough for us).

The true effect of this higher taxation (and the showroom tax as well) will only really be known in 2020. So it's a little unfair, if delightful, to state that the reduction in emissions will only be 1%: it's 1% by when? which is the important question.

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