Tim Bowden, head of operations, Hitachi Capital Vehicle Solutions, said: “The rise in VAT will have ramifications across the fleet industry, both on leasing providers and their customers. It will impact the former as the VAT liability on vehicle disposals will have been calculated based on the current rate of 17.5 per cent, meaning an additional unplanned tax liability from returned vehicles. Customers are likely to face increases in leasing rates, not just from the effects of the VAT increase but also from the effects of reduced Writing Down Allowances, the latter however continuing to favour vehicles with emissions less than 160g/km CO2.
“While the Chancellor announced no further increase in fuel duty, the planned increases in October 2010 and January 2011 remain in place and there will be a further impact from the rise in VAT. There is some encouragement however that the Office of Budget Responsibility is to undertake a review of oil price variations, which we hope will lead to some form of fuel price stabiliser which was in Cameron’s manifesto.
“The 25 per cent cut in government department expenditure could have a considerable impact on our local authority customers – assuming this leads to a corresponding 25 per cent cut in vehicle expenditure, it will have a significant consequence on fleet numbers. This, along with the rise in VAT incurring further cost to fleets, makes it more important than ever that leasing providers find ways to help local authorities reduce their overall fleet-related costs where possible.
“Despite recent commitments in its manifesto, we await further news on government investment in green technologies, particularly the fate of the £250m electric vehicle grant. This will no doubt be under review as costs need to be cut but we would sincerely hope that green technologies are higher on the agenda in March 2011.”