The fleet industry and policy analysts comment on George Osborne's emergency budget.
James Stamp, head of transport at KPMG UK comments on the Chancellor’s commitment to invest in UK roads. He said:
“In the last budget, the Government announced a major road investment program worth £15billion. Today, the Chancellor announced that road tax (VED) income will be "ring fenced". This provides some clarity about where funding for the ambitious road projects will be found.
“However, we note that while road tax raises around £6 billion per year, this is dwarfed by income collected from fuel duty which is around £27 billion. We believe that more of this income should be reinvested in roads and transport infrastructure in line with the Chancellor’s statement that money raised from drivers should be spent on the roads they drive on.”
Simon Dixon, transport partner at Deloitte said: “More fuel-efficient and low-emission vehicles, lower car ownership, particularly in cities and amongst young people, along with the rise of car sharing and new technology, mean that it will be increasingly difficult for the revenue raised to cover all the road expenditure needed.
“Allocating specific money, and ring-fencing long-term capital expenditure, will enable Highways England - and their devolved equivalents - to make sensible long-term plans for major maintenance and improvement works.
“However, this may still require a future government to seriously consider some form of road charging with increasing pressure on the network, new travel patterns emerging and limited funding available.”
RHA chief executive Richard Burnett said the freeze on fuel duty was positive, but that the Government could have done more: "The freeze on fuel duty continues the very positive policy of the last government and will give a massive boost to business confidence not only in the road haulage industry but the economy as a whole.
"We would have preferred a 3p a litre cut in duty, to boost both jobs and growth but it was essential that duty was not increased. Our hauliers already pay by far the highest diesel duty in the EU and twice as much as many of our competitors."
James Hookham, FTA’s deputy chief executive, agreed: “The Chancellor has listened to the voice of industry by keeping fuel duty at current levels, which is to be welcomed. However, the Government has emphasised that its primary objective is to protect the UK economy. We believe that reducing fuel duty would make a huge contribution to this objective and we will continue to campaign with FairFuelUK for a 3 pence per litre cut in order to stimulate economic growth.”
RAC Business spokesperson Jenny Powley said the new VED bands could impact the take up of low emission, non electric vehicles.
“The changes to VED bands will have an impact on the total cost of ownership, which will have to be picked up by the company when fleet managers are purchasing new cars from 2017.
“Fleet managers have been proactive in encouraging drivers to think about cleaner cars by going for vehicles with low C02 emissions which have zero or very low rates of road tax.
“But there is now a big question mark over how the new changes will affect company car drivers’ inclination to go for low carbon dioxide emitting, fuel efficient vehicles.
“For the first year of ownership of a new vehicle, incentives will still exist to select low emitting vehicles but thereafter, a flat rate will apply to most vehicles. This may raise questions about how companies will make purchasing decisions when it comes to new vehicles in the future.
“We hope the new regime doesn’t undermine the major progress that we are making in reducing carbon dioxide emissions.”
John Pryor, ACFO chairman, said: “Reform of Vehicle Excise Duty was always a possibility as it was obvious that under the current system government revenue would decline as more low emission and ultra-low emission cars were purchased.
“The changes to first year VED rates are therefore understandable as they continue to incentivise the uptake of the ‘cleanest’ cars from an emission standpoint.
“However, the standard rate for all cars, with the exception of zero emission models and those with a list price above £40,000, is less easily understood.
“Successive government has remained focused on driving down vehicle emissions and improving air quality. Therefore, a standard rate of VED during a vehicle’s lifetime except in the first year of ownership appears not to be in tune with such a philosophy.
“ACFO believes that it is equally important to encourage second owners to drive low emission cars and therefore would favour a graduated standard rate of VED.”
Phil Harrold, automotive partner at PwC, said: "The change in road tax banding will accelerate the pre-existing trend towards the manufacture and purchase of low emission vehicles. The increased tax on more expensive vehicles may put a brake on such vehicle sales in the UK but it is unlikely to materially affect production as the vast majority of such vehicles are exported. While it has been indicated that the Vehicle Excise Duty raised will be spent on roads, this would be at odds with the historical treatment of VED which has been added to general taxation rather than ring fenced for road building.
"The announcement on the annual investment allowance may make some marginal difference to lower tier component suppliers but will have little impact on original equipment manufacturers or their suppliers given the amounts involved."
Kyle Truman, marketing director at Epyx, added: “Potentially the most interesting development in the Budget from a fleet point of view is the proposed extension of the first MoT from three to four years. Effectively, this would mean that the majority of cars owned by fleets would never need to be MOT’d because they are on shorter cycles than four years, which is a definite gain in terms of both costs and reduced hassle surrounding defleeting.”
Insurance premium tax
John Pryor, ACFO chairman, said: “Increasing Insurance Premium Tax from 6% to 9.5% - a rise of more than 50% - seems to be extremely penal in respect of vehicle insurance, which is a legal requirement.
“Unlike some other insurance policies, where consumers have a choice as to whether they opt for insurance or not, the law dictates that all vehicles must be insured.
“ACFO fears that such an iniquitous increase in respect of vehicle insurance could herald a rise in the number of uninsured drivers on the UK roads.
“It also places an increased onus on fleet decision-makers to ensure that employees who drive their own cars on business trips are suitably insured for the purpose.