You wrote to the Paymaster General on 20 December 2005[13] informing her that the above document remains under scrutiny and asking to be kept informed of any further developments. As the Financial Secretary informed you on 30 April 2007, the Austrian and Finnish Presidencies chose not to discuss the dossier, but negotiations resumed under the German Presidency. I am pleased to provide you with an update on the progress of these negotiations.

  The German Presidency held an informal discussion of the dossier at ECOFIN on 8 May, at which it did not receive a clear political steer for future work in this area. Nonetheless, the Portuguese Presidency has sought to make technical progress on the document, holding four Working Group meetings in preparation for a formal discussion at the 13 November ECOFIN.

  The Commission proposal had three elements: abolition of registration taxes, inclusion of a CO2 element in the tax base, and a scheme to enable tax to be refunded when a resident of one Member State moves permanently to another. The Portuguese Presidency went some way to recognising the subsidiarity concerns of many Member States by removing elements to bring about the abolition of registration taxes, and reducing the commitments required from Member States to introduce a CO2 element. However, there was not a clear political steer in support of the revised proposal at ECOFIN, and the Portuguese Presidency decided not to pursue further work on this dossier.

  The Government's position has not changed since the Paymaster General's letter to you of 8 November 2005. There is nothing to prevent Member States from choosing to base their car taxes on CO2 if they so wish. Therefore the proposal adds little value. Furthermore, the Stern review highlighted the importance of maintaining flexibility in the use of policy measures to tackle climate change, particularly to keep the costs of mitigation manageable. We therefore welcome the Portuguese Presidency's decision not to pursue further work on this dossier.

  I will keep you informed of developments on this dossier. At present, the incoming Slovenian Presidency has not indicated plans to hold further discussions on this dossier.

10 December 2007