VED not VAT

Vehicle Excise Duty or Car Tax is the annual fee for putting your car on the road. At the last budget the Chancellor doubled the tax on the cars with the greatest carbon emissions. It was already higher for new cars, but he has extended the tax to all cars up to those that are 6 years-old. Now I should declare a non-interest in this in that my cars are respectively 8 and 17 years-old and won't be heavily taxed, but it does seem to me unfair to retrospectively tax someone for a decision made 6 years ago. It is also a strange decision for a Labour government since poorer people are likely to have an older car, and previously the tax weighed more heavily on those rich people who changed their cars every couple of years.

There are two reasons for taxation. The first is to raise revenue for goods and services we have in common: the Armed Services, public buildings, schools and hospitals, the police and prisons etc. On this basis the fairest taxes are those which insist that those who have more pay more. Income tax is the best example.

The second reason is to change behaviour. Years ago we had a purchase tax of 33% on luxury goods. Since most luxury goods came from abroad, this not only helped the trade deficit (since it discouraged spending abroad) but also concentrated our minds on buying essentials rather than fripperies. Now we have VAT which adds 17.5% to the price of everything except food, children's clothes and educational materials. This is a little more unfair since it taxes essentials that even the poorest must have like domestic heating and transport. The best examples of taxation to change behaviour are taxes on tobacco and alcohol. There is clear evidence that the more expensive cigarettes are the less they are smoked. In the past there have been attempts to discriminate between different types of alcohol. Wine has been heavily taxed (foreign and drunk by the middle classes), but beer (the working man's tipple) and whisky (Gordon Brown is Scotch) less so. Now the booze culture is getting out of hand and the last budget raised taxes on these significantly. The rise in VED is an attempt to make is use cars that produce less CO2. Oil at $135 a barrel is already doing that, but some 53% of the cost at the pump is government taxation. It doesn't carry much weight at OPEC when more than half the oppressive cost of fuel amounts to taxation.

I do not buy into anthropogenic global warming. The world seems to have been cooling since 1998 and if its true that there were grapes growing in Greenland in the Twelfth Century, the theory seems shot with holes. I do believe in markets, though. What is happening just now is largely caused by panic in the futures market creating an oil bubble just as we had a property bubble last year. The oil price will collapse and speculators will get their fingers burnt as usual. By that time the originators of the bubble will have got out of the market. Here's a warning: don't invest in this market; it is already too late.

Nor do I think it worth converting my car to LPG, which is 50% cheaper than petrol and only 15% less efficient. At today's prices it would take me 6 years to recoup the investment. It might make sense if you can pick up an already converted large car that is guaranteed to last, something like a Mercedes, or if you were given such a car it would probably be worth spending the £1750 on the conversion (less if you can do it yourself).

In the meantime why not tax things that it would really be desirable to stop: a large tax on pointed knives, for example, or a much greater tax on vodka-laden soft drinks, or a tax on having a baby if you're not married (instead of the incentive of a local council-provided two bedroom apartment), or a tax on the take-away food wrappings that comprise so much of our street litter. What would you like to tax heavily? I welcome suggestions.