End this green dogma

We all have a duty to use resources more efficiently, but taxing top-end cars out of the market is short-sighted politics that could damage the UK economy, says Jim O’Donnell


It is astonishing how quickly the environmental agenda has moved forward. I remember in the early 1990s, when I was sales director, being called to Munich to see forthcoming models. The first questions I would ask are ‘What is the power output?’ ‘What are the 0-60 figures?’ ‘What is the top speed?’ And finally, ‘What is the planned price positioning?’

Today it is ‘CO2 emissions? Fuel consumption? Price positioning?’ The performance parameters are now a given with BMW.

The political, social and environmental issues have altered my attitudes and business behaviour enormously. I do not regret this nor rail against it. We all have a duty to use resources more efficiently and it is in the best interests of our planet.

I believe the EU and the UK are trying to take a cohesive approach to emissions standards. We have the overarching EU legislation for CO2 emissions, which will come into effect between 2012 and 2015. This, once it has been negotiated, is a clear target for all carmakers and forms the basis for all European product development.

Within the EU the UK government was the first to put in place considered proposals to encourage a shift to lower-emitting vehicles. Prime minister Gordon Brown revamped the company car tax criteria to encourage the switch to ‘cleaner’ cars when he was chancellor.

This was followed by changes to the CO2-graded vehicle excise duty (VED) charges that are a logical extension of this policy. We may argue about where the levels are set, and we might take issue with opportunistic scale charge rises, but it is basically a fair means of taxation and a good customer guide.

Fuel duty is another self-regulating mechanism, even if the Treasury resolutely sticks to its surcharge on diesel, thereby making it more expensive than petrol despite its better CO2 performance.

There is no doubt in my mind that our tax regime provides a huge incentive to drive more efficient cars emitting less CO2. Somehow it seems these incentives have gone unnoticed by our green lobby.

The government’s well thought out and effective strategy is called into question as soon as there is a whiff of a general election.

As the government is the leader of environmentally friendly initiatives in the EU it was surprising in the run-up to the party conference season, and to what many commentators believed would be a November general election, that a leaked Labour proposal touted a £2,000 purchase tax for band H cars or a massive increase in VED for higher emitting cars.

The Lib Dems countered with their own reductions in CO2 to 95gms in 2020 and a total ban on petrol engines by 2040. Bringing up the tail, the Tories suggested green showroom taxes that could add as much as 10 per cent to the price of a car as well as VAT.

This game to determine who wore the greenest mantle died with the turnaround in the parties’ fortunes. Sir Menzies Campbell resigned, Brown declined to hold an election, the Tories retook the poll lead from Labour and chancellor Alistair Darling preferred the Tories’ new clothes for his first pre-Budget report, which made no mention of increasing car taxes.

Since then the government seems to have regained its equilibrium. Ruth Kelly published a strategy document recently highlighting the importance of economic growth as a prerequisite for developing policies to reduce carbon emissions. We welcome this approach to achieving a well thought out and balanced approach, free from political dogma.

It is easy to vilify a car that emits, say, more than 225gms/km. Relatively few people drive them and they are an easy target. Nevertheless, I believe our political leaders need to give more than a nanosecond’s consideration to the positive characteristics of top-end cars. These are not just large, they are often technology leaders — this is certainly true of the BMW 7 Series. Expensive new safety and efficiency measures tend to find their way first on to larger luxury saloons and coupés. ABS, DSC, catalytic converters, air bags, telematics, head-up display, night vision, navigation, lane departure warning and many more all started in high-end models.

As demand grows these features trickle down to smaller, less expensive cars. The enforced demise of such cars will slow down the development of such technology.

Also, a determination to tax larger cars out of existence threatens smaller manufacturers such as Jaguar and Land Rover.

Do our political leaders really want to kill off major contributors to the UK economy and major employers? Or is their forward planning confined to the current electoral term rather than the long term?

I don’t know the answer but I do know that poor management, unrealistic unions and the apathy of successive governments towards the industry has resulted in the demise of a once-strong indigenous industry. The UK needs both Jaguar and Land Rover as strong competitors in the global marketplace.



Jim O’Donnell is managing director of BMW (UK). This is an extract of his speech to the BMW Group Annual Press Dinner