Fleet News

Pre-Budget Report 08: Initial feedback - GE Fleet Services

Gary Killeen, commercial director, GE Capital Solutions, Fleet Services UK, said:

“From initial impressions, whatever the effects of the pre-Budget report on the overall economy, the specific benefits for the fleet industry and those who operate company cars and vans appear to be mixed.

 

"From a positive perspective, the reduction in VAT applicable to used car disposals is welcomed in what is currently a very challenging market.

"In addition, the postponement of the VED changes is also welcomed in an economic climate where customers across all industry sectors are challenged with containing the cost of car provision.

"However, the fundamental rationale for reform of the VED system as a mechanism to reduce CO2 and drive the right type of behavioural change should not be lost.

 

"The temporary reduction in VAT will have little more than a marginal overall effect.

"If a new car is taken on a three year lease running from December 1, the VAT cut will only apply during for one third of the vehicle life, assuming a 36 month contract, and then only as a 50% allowance, so the ultimate benefit is small.

"The VAT changes will also create administrative problems for all fleets which, in themselves, will create costs to businesses.

 

"Additionally, the way in which fuel duty has been increased to offset the VAT reduction strikes us as potentially short sighted.

"If the last few months has shown anything, it is the instability of the global fuel market and it is difficult to predict with certainty that petrol and diesel prices will continue to remain low.

"We would ask that the chancellor commits to reduce fuel duty if prices do start to increase in the near future and also clarifies what will happen to fuel duty when the full 17.5% VAT rate is reinstated in January, 2010.

 

“The way in which fuel duty and VAT is being handled could also create problems with the new Advisory Fuel Rates which come into effect on January 1, especially if, as rumoured, these will be reduced to take falling petrol and diesel prices into account.

"Prices could easily start to rise instead.

 

“However, the real measure of this PBR is whether it will successfully restore a worthwhile measure of confidence to the economy.

"The emphasis of Government measures are focussed on impacting in 2009 which suggests the recession will be short-lived.

"Let's hope that indeed proves to be the case."

 

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