Tim Yeo, the Shadow Transport Secretary, told Retail Motor Industry Federation members at their annual dinner that the difference in car purchase VAT rates could be as much as £2,000 for cars with the same pre-VAT price but very different environmental performances under a Conservative policy.

Speaking to The Times newspaper before the event, Mr Yeo said: “I’m interested in sending a strong price signal to drivers to think about emissions when buying a car.” He said the existing system of varying Vehicle Excise Duty (VED) according to a car’s emissions was having very little impact on people’s choice of vehicle. The difference between the top and bottom VED rates is only £90.

Only a handful of cars qualify for the bottom rate of £75, while more than half of vehicles sold in Britain are liable for the top rate of £165.

Mr Yeo added that a Conservative government would reinforce the benefits of buying a greener car by introducing discount rates for congestion charges and road tolls.