PUBLIC transport schemes designed to tempt motorists from their cars and reduce congestion are being blocked because the Government is reluctant to lose income from road taxes, it has emerged.

Green projects such as bus lanes are falling foul of Department for Transport rules which force local authorities to weigh the loss of revenue from fuel duty and VAT which would result from drivers switching to public transport.

The revelation brought demands for a rethink last night from government advisers. Professor David Begg, chairman of the Government’s Commission for Integrated Transport, called for an urgent review of the policy. He said: “The danger is that too much emphasis is placed on the impact on the Treasury coffers and not enough on the wider economic and social benefits of improving public transport.”

One senior local government planner said that it was hypocrisy for Labour to champion the Kyoto agreement on carbon emissions only to put obstacles in the way of “green” transport plans.

The Government receives more than £42 billion a year in road taxes, including £28 billion in duty and VAT on fuel.

This income falls if public transport improves because motorists will be more inclined to take buses and trains and will therefore buy less fuel.

Under the department’s rules for schemes, the predicted losses from road taxes must be added to the capital costs of public transport projects.

This is inflating the costs and making it much harder for authorities to win government funding for their projects. Authorities submitted more than 60 transport projects last year, but only eight were approved. The department could not say which schemes it had rejected or delayed approving because of the added cost of allowing for tax losses.

The rules have come to light only after the department issued new guidance explicitly stating that “options that increase public transport use are likely to lead to a reduction in indirect tax revenue”.

Professor Begg said: “There are too many public transport schemes which are marginal from a cost-benefit point of view and this policy tips the scales against them.”

Tim Yeo, the Shadow Environment Secretary, said of the disclosure: “It shows the Government in its true colours if tax considerations come before the needs of the British economy and the British people when it comes to making transport policy.

“After eight years of record motoring taxes, congestion on our roads is worse than ever before and while rail fares have risen faster than inflation, trains are less reliable.”

Coventry City Council was forced to add 15 per cent to the estimated cost of a bus scheme to reflect road tax losses. The scheme was specifically designed to tempt motorists out of their cars by investing in new bus lanes, bus shelters and information screens at bus.

The scheme was submitted to the department three years ago but has only just been approved because of a long dispute over the cost. The council has also had to add 20 per cent to the cost of a proposed busway because it would attract thousands of car drivers.

Even road projects designed to reduce congestion, such as removing bottlenecks, are falling foul of the road tax rule. The loss of tax revenue resulting from a scheme to tackle congested A-road junctions in the West Midlands was estimated to be equal to the actual cost of the roadworks. The cost of the scheme doubled and it has failed to win approval.

Colin Eastman, Coventry council’s transport adviser, said: “It is inconsistent of the Government to be championing the Kyoto agreement while raising the hurdle for schemes which will reduce congestion.

“There are many public transport schemes in the pipeline which are being delayed or blocked because the extra cost of taking into account road tax losses makes them less attractive.”

Mr Eastman said that a lorry crawler lane on a motorway had even been delayed because the benefits of more efficient car journeys had to be weighed against the loss of fuel duty resulting from the reduction in traffic queues.

Transport 2000, the lobby group, called on the Government to ignore the impact on tax revenues when assessing public transport schemes. A spokesman said: “If the same absurd rule was applied to smoking, then the Government would do nothing to persuade people to kick the habit because they would make less duty on cigarette sales.”

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