COMPANY car tax levels could be increased in the November 26 Budget as Chancellor Kenneth Clarke bids to put the Conservative government into a general election winning position.

Tory motoring MP Iain Mills this week predicted that the 35% company car tax rate could be increased by 2%-2.5% - the rate of inflation is currently 2.1% - to a maximum of 37.5% as the Chancellor looked to raise extra cash to settle compensation claims from the farming and shooting lobbies, reflecting the BSE and guns furore, and to fund increased NHS and education spending.

Mills, who is joint chairman of the House of Commons All Party Motor Industry Group, said: 'I think it is very likely that the Chancellor will increase all sorts of benefit-in-kind taxes by the rate of inflation. My submission to him is not to increase company car taxation because if tax levels do increase, it will threaten sales in what is the most vibrant part of British new car sales.'

Fuel prices will increase by a minimum of 5% above inflation and Mills believes the Chancellor could move to further penalise diesel fuel to appease the environmental lobby. And, once again, vehicle excise duty will also increase.