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Cash-strapped councils paying more than HMRC-approved mileage rate

Workplace car park

One in three councils paid employees who drive their own car for work above the HMRC-approved mileage reimbursement rate in 2016-17.

Bassetlaw Council paid the highest rate: 69 pence per mile (ppm), 53% (24p) above the Government-approved mileage allowance payments (AMAP) rate for grey fleet drivers.

The figures, obtained through a Freedom of Information request sent to every local authority in England, Scotland and Wales by the Taxpayers’ Alliance, show it was one of 173 councils – 38% – that paid more than 45ppm.

However, Bassetlaw has vowed to bring that rate down and says it has already taken action to cut its grey fleet costs. 

It has abolished all essential car user allowances – a cash lump sum paid to certain council staff – and has reduced the cost of employee mileage from £229,000 in 2012/13 down to £156,127 in 2016/17.

A Fleet News investigation previously revealed cash-strapped councils were stumping up an estimated £50 million a year in lump sum payments to almost 43,000 grey fleet drivers.

Classed as ‘essential users’ due to job need or minimum mileage, the employees receive a cash lump sum each year on top of any mileage they reclaim for driving their own vehicle in the course of their work.

A Bassetlaw Council spokesman told Fleet News: “We recognise that the mileage rate is high and, as part of our medium term financial plan, we will be undertaking a review of mileage with a view to bringing it in line with the HMRC rate. 

“The council’s current mileage rate was set as part of a programme that looked at historic terms and conditions and addressed issues of inequality with staff mileage rates.” 

The AMAP rate for cars and vans is 45ppm for the first 10,000 miles and 25p thereafter, 24ppm for motorcycles and 20ppm for bikes. Employers can choose to pay above the approved rate, but they must add anything above the ‘approved amount’ to employee’s pay, and deduct and pay tax as normal. 

The same applies to national insurance. 

Employees who receive less than the approved amount are entitled to tax relief on the unused balance of the approved amount.

‘No excuse’ for excessive rates

John O’Connell, chief executive of the Taxpayers’ Alliance, believes paying above the HMRC-approved rate is inexcusable when town hall budgets are being squeezed. 

He said: “Driving is extremely expensive in Britain thanks to sky-high rates of fuel and vehicle excise duties, but there’s no excuse for councils to pay over the odds. 

“It’s simply not credible for councils to plead poverty and raise council tax while paying excessive mileage rates, especially when the Government has told councils to rein in these payments for the past five years. No local authority should be paying more than HMRC’s approved rate.”

Each council was asked to provide: the rate paid per mile for cars above 1,200cc for casual users in 2015-16 and 2016-17; and the total amount spent on reimbursing grey fleet drivers in 2015-16 and 2016-17.

For simplicity, the Taxpayers’ Alliance asked for mileage rates for ‘casual users’ for the first 10,000 miles or the nearest relevant threshold used by the council. 

It used the rates paid for vehicles with an engine size of 1,200cc (or the nearest size for which the council pays), because 1,200-1,450cc is the upper band chosen by the National Joint Council (NJC), as well as to maintain consistency with previous data.

However, some councils pay a flat rate for all engine sizes and some pay per journey, with the rate varying across a mileage threshold. For example, 40ppm up to 40 miles, and 24ppm thereafter. Where this was the case, the Taxpayers’ Alliance said the initial rate had been used in collating its data.

Some councils also pay the rate agreed by NJC in 2014 for local Government staff, which is 65ppm for the first 40 miles of any journey and 13.5ppm thereafter, and some paid different mileage rates for different staff.

Hampshire County Council, for example, paid 59.3ppm to its lowest paid staff, while those occupying the highest pay grade received 45ppm.

Similarly, employees on salary grade six and below at Ceredigion Council were paid a higher rate of 52.2ppm.

Meanwhile, Croydon and Rochford councils paid higher rates for lower emission vehicles. 

For example, Rochford paid 50ppm for a grey fleet car with emissions between 0-120g/km, 45ppm for 121-225g/km; and 40ppm for anything above 226g/km.  

The figures from the Taxpayers’ Alliance do show some improvement, however. Fewer councils were paying above the AMAP rate in 2016/17, compared to the previous financial year – down from 41% to 38%.  

In fact, more than half (54%) – 215 councils – now pay 45ppm and 8% pay below the AMAP rate, with Pendle paying just 11.2ppm. 

The overall expenditure on grey fleet mileage is also falling. Local authorities made £223m in mileage allowance payments to their employees in 2016-17, down from £231m in 2015-16, and almost half the £427m paid out in mileage allowances in 2009-10.

Lincolnshire Council paid out the most in mileage allowance payments in 2016-17, £6.9m, reflecting the rural nature of the county. 

Car clubs cut costs

Many councils have embraced car clubs in an effort to curb grey fleet mileage. Schemes give fleets access to ‘on-demand mobility’ through a pool of vehicles that are on-site or near their offices, which can be for their exclusive use or shared with other businesses.

Drivers reserve vehicles in the same way they might book a meeting room. Slots can range from less than an hour to a full day.

Fleet costs can be substantially reduced by introducing a corporate car club. Aylesbury Vale District Council has been operating a car club for several years as an alternative to pool cars and some fleet vehicles.

Mileage payments to its grey fleet drivers were slashed from as high as 65ppm to just 15ppm. 

Utilisation of the car-sharing fleet is at 80% as changes to reimbursement rates mean there is little incentive for drivers to cover business mileage in their own vehicles. At the same time, overall business mileage has fallen dramatically as employees think more carefully about whether journeys are necessary.

Alan Asbury, senior energy and fleet consultant at Incgen, a wholly-owned trading arm of Aylesbury Vale District Council, which operates the corporate car-sharing scheme, said: “Before we were spending £220,000 a year on vehicle expenses. This has been cut by £104,000 a year thanks to the scheme, which has also reduced fuel use and emissions.”

A shift to new, cleaner vehicles, including electric cars, has slashed average CO2 emissions by more than half, he added.

Meanwhile, North Ayrshire Council has cut its grey fleet CO2 emissions by 37% – or 9.1 tonnes annually – after introducing its car club service, operated by Enterprise Car Club, just over two years ago.

Councillor Jim Montgomerie, cabinet member for place, said: “We were spending approximately £1.2 million on business miles and that simply needed to change.

“The scheme is about changing the mindset of our staff and making it the norm for employees to book car club vehicles for meetings. Using your own car and claiming mileage should become the exception to the rule. 

“The car pool scheme saves the council money, reduces our carbon footprint and is really positive for staff. It allows them to leave their own car at home which takes away all the hassles of traffic, parking and minimises the wear and tear on their car.

“The scheme has worked very well and the message is getting across to our staff. The feedback from staff using the scheme is always positive. 

Paul McCorkell, Enterprise’s regional business development manager for Scotland and Northern Ireland, said: “The success of an employee car club is entirely dependent on culture. Everyone has to understand the bigger picture and what the club can deliver in terms of real impact. It isn’t change for its own sake.”

 

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Comments

  • Derek Webb - 14/11/2017 20:17

    Call me daft but would it not be right to impose national standards for mileage rates, if Local Authorities can pick and choose their own rates what is the use of declaring them in the first place.

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