The infinite monkey theorem states that, given an infinite amount of time a monkey randomly hitting a keyboard is almost certain to produce the collected works of Shakespeare. Obviously we don’t have an infinite amount of time to put this to the test, but there is no mathematical reason for it not to happen. Which begs a simple question: If a monkey can write Hamlet why can’t the Department of Transport write a coherent transport policy?
On the 1st of April the car tax regulations are changing significantly so, alongside the existing questions surrounding emissions, fuel economy, and the like, the thousands of people expected to buy a new car over the coming months have yet another financial minefield to negotiate.
The Government has been under pressure to eliminate the tax incentives for diesel cars following recent studies that show significant increases in nitrous oxide levels in urban areas. While carbon dioxide may be bad for the planet, nitrous oxides are worse for people and can cause serious health issues. Unfortunately the biggest emitters of nitrous oxides are the diesel cars successive governments have been telling us to buy. Consequently, we know have talk of scrappage schemes to help people swap their diesel for a more environmental option, charges to drive a diesel into town, and the Transport Secretary suggesting people ought to be wary of buying a diesel. It remains to be seen how this will play out, but given how many times I just wrote “diesel” in that last sentence there’s no doubt the landscape of the automotive industry is shifting towards the green bit of the spectrum.
The idea behind the new tax bands is to encourage people to opt for smaller, more economical cars or even better, to dive in to a steadily growing sector and buy an electric vehicle. The basic premise is that the first 12 months tax will still be based on CO2 emissions and then you will pay a flat fee each subsequent year which is determined by the fuel type. The amount of tax paid in the first year also depends on the fuel type with petrol and diesel carrying slightly more tax than a hybrid or bio-ethanol/LPG model. For example, a petrol or diesel car producing around 120g/Km of CO2 would cost £160 in year one then £140 per year thereafter. An alternatively fuelled car would cost £150 and £130 respectively.
Except it isn’t that simple because what this has actually done is to make small, economical cars a lot more expensive to run. My Mother-in-Law drives a 10 year old Toyota Yaris that currently costs £110 to tax. If she replaced it with a similar car under the new rules it would cost an initial £160 then £140 per year. It’s even worse if you drive a car that currently sits in the £20 per year bracket: the reward for your environmental empathy is that a replacement registered after 1st April will cost you £120 per year more. If you want to persuade someone to drive a more efficient and less polluting car I don’t think charging them a premium is the way to go.
This is especially poor timing coming on the heels of the recent government ruling that changes the way insurance claims are calculated and which will see premiums rise across the board. The increased costs to the insurance industry are expected to push the average premium up by around £50-£75 per year, with younger drivers paying up to £1000 per year more than they already do, and older drivers being hit for potentially an extra £300 annually.
In fairness, if you do take the plunge and buy an electric or hydrogen vehicle then you will save money. CO2 emissions are zero so there’s no tax to pay in the first year and the subsequent annual tax for electric cars is also zero. That makes sense, except back in the real world where industry figures show of the 174,564 new cars registered in January only 7,279 were alternative fuel vehicles. That’s up 19% on 2016 but still represents just 4.2% of the market. What about the other 95.8%? There’s nothing fundamentally wrong with promoting greener vehicles through tax incentives, but this is a bit like introducing council tax on the moon: It’s a bit premature.
It’s clear that a mass take-up of electric vehicles is inevitably coming but it’s quite a few years off yet. In the absence of the network of recharging points and hydrogen fuel stations required to make them a viable alternative to traditional fuels their use will inevitably be restricted. Credit where it’s due, the government is proposing a transport bill that includes measures to promote the widening of the infrastructure and ensure standardisation, and various manufacturers are developing battery and hydrogen fuel cell technology that should see production costs begin to fall over the next few years. The future may look slightly rosier, but we aren’t there yet and in the meantime the cost of taxing a new car has just got more expensive. Not only that, but there’s another catch you need to take into consideration.
If you’re done quite well for yourself career-wise and you have the funds to indulge your desire to go electric you might consider buying a Tesla, and I wouldn’t blame you. When it comes to electric cars Tesla are currently sitting at the top of the pile, a shining example of how an electric car can be beautifully designed, elegant, luxurious, well engineered and ludicrously fast. A Tesla Model S is the electric equivalent of those big executive saloons the German’s are so fond of. It also carries the price tag to match. In fact, any electric vehicle with a list price of more than £40,000 carries a price tag large enough to trigger the catch in the new car tax, and there are a few more of them than you may think.
Any car registered after 1st of April with a list price in excess of the magic £40,000 will be liable for an extra lump of tax to the tune of £310 per year for the first five years. I imagine this was designed to discourage people from buying big powerful cars that would have previously sat in the top tax bracket but I fear it may have missed the point.
Imagine two people registering new cars on 31st of March. One decides to pay £60,000 for a Tesla Model S, and because it has zero emissions rightly pays absolutely no car tax. The other decides to spend £30,000 on a Ford Mustang with emissions of 225g/Km and consequently pays £295 per year. Now imagine those same two people registered the same two cars just 24 hours later. Once the first year’s CO2 based tax is paid the Mustang driver now saves £155 per year while the Tesla driver is facing an additional outlay of £310 per year. The cars haven’t changed, the emissions haven’t changed, so why is the electric car, the cleaner option suddenly £170 more than the big, thirsty muscle car?
I know it’s not a direct comparison but the point remains that somebody clearly hasn’t thought this through. To say the message is garbled is unnecessarily polite. The government says don’t buy a diesel because they are dirty and probably going to be scrapped, but they still use CO2 to calculate the tax so diesel is still a bit cheaper. Do buy an electric car because they won’t cost you anything to tax but there’s nowhere to charge or refuel them, unless you spend too much in which case you’d be better off with a Mustang. Do buy an economical little city car because they are much cleaner but by the way we just made them more expensive to tax. Very little of it makes sense.
It might just be me but this muddled policy message sounds suspiciously like the brain-child of a monkey given unsupervised access to a typewriter. Yet that can’t be the case because the laws of mathematics tell us that a monkey can come up with, “To be, or not to be” so it’s surely within the bounds of reason to expect a group of educated human beings to offer something a bit clearer when it comes to decisions on “to buy, or not to buy”.