THE Treasury has dismissed as 'pure speculation' claims that it is to introduce a graduated vehicle excise duty regime based on engine size. Rumours have been rife over how the Government plans to implement its lower rate VED of £100 per year for 'smaller and cleaner' cars, ever since Chancellor Gordon Brown announced the environmentally-driven proposals in his March Budget.

He failed to define 'smaller and cleaner' at the time, and said a consultation paper would clarify the issue, although this has still to be issued despite pencilling in September as a publication date. This paper is likely to contain details for a cut-rate VED for smaller cars, and also a higher rate for so-called gas-guzzlers.

The average engine size of cars on UK roads is 1.3 litres, and speculation suggests that the Treasury will maintain the £150 annual VED for these cars, while introducing a lower rate to incentivise smaller cars, and a penal rate for larger cars. Using engine size as a basis for an environmentally-based VED system would be simple - and the Driver and Vehicle Licensing Agency does hold cars' cubic capacities on its database - but would also be crude and primitive, having little bearing on either a car's fuel consumption or the cleanliness of its exhaust emissions.

A Treasury spokesman rejected as 'unfounded' an article which appeared in the Mail on Sunday on October 18 suggesting VED would range from £100 to £250 depending on a car's engine size.