gas-guzzlers-targeted-in-budget money budget2008 Virgin Media

Drivers of "gas-guzzlers" paid the price in Alistair Darling's first Budget as Chancellor.

Mr Darling set out plans to overhaul the Vehicle Excise Duty system and introduce a new "showroom tax" to hit the drivers of the most polluting vehicles.

The Chancellor said the changes from April 2009 should encourage manufacturers to produce cleaner cars and by introducing new tax bands, encourage drivers to choose the least polluting car.

And as a second stage for new cars, from April 2010 there will be a new first-year rate based on carbon dioxide emissions of the car.

Cars that emit less than the proposed 130 grams per kilometre European standard of carbon dioxide emissions will pay no car tax at all in the first year.

But a higher first year rate will be introduced on the most polluting cars.

Mr Darling said: "It is right that if people choose to buy a more polluting car that they should pay more in the first year to reflect the environmental cost."

There was also a warning that he would legislate next year to impose a charge on disposable plastic bags unless the retailers took action to curb their use.

But a planned 2p increase in fuel duty due to come in April would be delayed.

Mr Darling also announced the biofuel duty differential will be replaced by the Renewable Transport Fuel Obligation.

And capital allowances for business cars would be reformed to increase the incentive to move to lower emitting cars.

Mr Darling announced that £26 million will be made available next year for a Green Homes Service and also pledged to roll out smart meters to medium and large firms over the next five years.

He announced that new non-domestic buildings will become zero-carbon from 2019.

The Climate Change levy will increase in line with inflation from April.

He said: "We recognise the contribution of aviation to the UK economy. That is why we support the expansion of Stansted and Heathrow."

But he added the industry must meet its environmental costs and "that is why we want aviation in the European Union Emissions Trading Scheme".

He announced revenue from plane duty will be increased by 10 per cent in the second year of operation because of the growth in flights.

Mr Darling said he was asking the European Commission today to set a tighter target which reduces the cap on emissions from cars from 130 grams per kilometre of carbon dioxide to 100 grams per kilometre of carbon dioxide by 2020.

The Chancellor said the first three five-year carbon budgets, which will set the amount of carbon the economy is allowed to use to 2022, will be announced alongside next year's Budget.

"Few doubt the science. The need to take action is urgent. There will be catastrophic economic and social consequences if we fail to act," he said.

But environmental groups said the measures the Chancellor was taking did not match up with the rhetoric of what he was saying needed to be done about climate change.

Friends of the Earth director Tony Juniper said: "The Chancellor promised to put sustainability at the heart of today's announcement, but he has merely tinkered in the margins.

"Mr Darling should have used this Budget to tackle climate change - the biggest challenge the world faces - by making it cheaper and easier for people to go green, including tax breaks for greening the home, and grants for renewable energy."

Mr Juniper said while a number of welcome green initiatives were introduced, such as an increase in air passenger duty, the overall package fell a long way short of what was required.

"Another freeze in fuel duty will further undermine the Government's already weak green credentials," he said.

Green Alliance's head of policy Russell Marsh said: "Despite all the pre-Budget spinning from Treasury, this was not a green Budget and fell painfully short of what was required.

"The Chancellor says that our greatest obligation to future generations must be to tackle potentially catastrophic climate change, but there is nothing in this Budget to indicate that he means it."

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