ENGINE size and possibly car age will be the basis for establishing Vehicle Excise Duty rates for the 22 million private and light goods vehicles already on the road. The consultation document suggests different VED bands for engines: A, up to 1,250cc; B, 1,251- 1,600cc; C, 1,601-2,000cc; and D over 2,000cc.

Alternatively, it says, VED could be charged at a fixed rate per cc, rounded to the nearest £5. Any engine-sized based system will hit diesel cars already on the road, because diesel engines tend to be larger than petrol units. The consultation document does, however, acknowledge that because of this, there may be no need for an additional VED charge for diesels, to mirror the VED supplement suggested for the CO2 based system.

But the engine size-based system fails to recognise the environmental strengths of vehicles such as the Mitsubishi Carisma 1.8 GDi, which produces 152g CO2/km, the same as a 1.0-litre Nissan Micra. The Mitsubishi would incur the same VED as a normal 1.8-litre car, despite its hi-tech engine, and pay significantly more than the Micra even though their CO2 emissions are identical.

The consultation document also suggests age bands for existing cars - pre-1973; 1973-92 (when catalytic converters were introduced); 1992-95 and post-1995.