Diesel company cars could fall foul of emission standards for clean air zones (CAZs) if local authorities decide to follow the Chancellor’s lead.
Philip Hammond launched a two-pronged attack on diesel cars in the Budget based on a version of Euro 6 which is not due to be introduced until 2020.
Diesel cars that do not meet the new standard by next April, called Real Driving Emissions Step 2 (RDE2), face an increase in vehicle excise duty (VED) and benefit-in-kind (BIK) tax.
RDE2 is the second phase of a series of real-world emissions tests; the first stage was introduced in September, replacing laboratory tests with a real-world element.
However, manufacturers are in the early stages of developing the technology required to achieve the tougher standard and, even if cars do meet the required emissions limits, the certification for RDE2 does not yet exist, making it impossible to prove a car is exempt.
Its use by the Chancellor was labelled “grossly unfair” by fleet representative body ACFO and has left some concerned that local authorities could similarly use the RDE2 standard as a threshold for CAZs.
Christopher Snelling, head of national policy at the Freight Transport Association (FTA), said: “With the first clean air zones due to be implemented from April 2019, FTA firmly believes that Euro VI/6 will remain the requirement for the initial phase.”
However, it expects the standard for all CAZs to be reviewed once reliable data is available about the impact of the first zones.
Snelling is concerned about this second phase of the CAZ programme. “Our main worry is that councils may decide to implement much more stringent standards, such as RDE2, without giving operators time to adapt,” he said. “This would, in effect, force the majority of diesel vehicles out of urban areas.”
Chris Chandler, principal consultant at Lex Autolease, added: “There is a logic which suggests it could be factored in, because it’s a measure the Government is now looking at.”
But, whatever measure local authorities decide to use, Chandler said it was imperative fleets were given early notice and there was consistency across the country.
In addition to London, which will launch its ultra-low emission zone (ULEZ) from April 2019, there are five other cities – Birmingham, Derby, Leeds, Nottingham and Southampton – which will have to introduce CAZs by 2019.
The Government has also identified a further 23 local authorities in its air quality plan where CAZs could be introduced to drive down emissions.
A CAZ framework, published in May, suggests Euro 4 petrol/Euro 6 diesel for cars and vans, and Euro VI for trucks as minimum standards, with local authorities needing to set out their initial plans by the end of March.
Leeds became the first local authority to give details on its proposed CAZ last week. It has ruled out charging diesel car and van drivers, choosing instead to penalise older buses, lorries and taxis.
Lucinda Yeardon, Leeds City Council executive board member for the environment, said the council had examined the likely impact of charging diesel cars and found it would improve air quality “but the cost economically and socially of doing that would have been significant”.
The council is consulting on a charging system covering the area inside the outer ring road, with trucks, buses and coaches not meeting the latest emission standards facing charges of up to £100 a day. Taxis would be charged up to £12.50, with only hybrid and fully electric exempt.
In contrast, London’s ULEZ, which will replace the new £10 toxicity charge (T-charge), will target cars. It will cover the same central area as the T-charge, alongside and on top of the congestion charge, but will operate 24 hours a day, seven days a week, 365 days a year.
The daily charge for non-compliant vehicles will increase from £10 to £12.50 (for cars, vans and motorbikes) and £100 (buses, coaches and lorries).
A Transport for London (TfL) spokesman confirmed the existing Euro 6 standard will be used when the ULEZ is enforced from April 8, 2019. However, a tightening of the emission rules will be inevitable as it aims to employ a zero emission zone in central London by 2025 and a London-wide zero emissions zone by 2050.
Mayor of London Sadiq Khan is currently consulting on expanding the ULEZ in 2021, which could affect 100,000 cars, 35,000 vans and 3,000 lorries a day.
The area covered by the expanded ULEZ would include all roads within the north and south circular roads. The consultation closes on February 28.
Khan said: “I am determined to take the bold action needed to protect the public from London’s poisonous, deadly air.”
It is those same air quality concerns which led the Chancellor to target diesel cars in the Budget, by increasing the diesel differential BIK tax rate from 3% to 4% from April 6 next year for cars that do not meet the RDE2 standard. The move is estimated to cost around 800,000 company car drivers an extra £70m in total a year.
VED for the band above
He also introduced a VED supplement that will apply to new diesel cars first registered from next April, so their first year rate will be calculated as if they were in the VED band above.
For example, a Ford Focus diesel (CO2 emissions 91-100g/km) will now be subject to an additional £20 in the first year, a Volkswagen Golf (CO2 emissions 111-130g/km) an additional £40, a Vauxhall Mokka (CO2 emissions 131-150g/km) £300 and a Land Rover Discovery (CO2 emissions 171-190g/km) £400, according to Government figures.
A survey from CLM Fleet Management reported that 59% of respondents said they were less likely or much less likely to buy or choose a diesel as their next new car as a result of the rise in VED.
Almost three-quarters (73.3%) of respondents to a Fleet News poll said that it was not a good Budget for the fleet industry.
ACFO deputy chairman Caroline Sandall suggested that fleet decision-makers should look at bringing forward diesel company car replacement cycles as soon as RDE2 models become available to enable drivers to reduce BIK tax bills and employers to potentially save on Class 1A National Insurance contributions.
She said: “The measure penalises drivers for a choice they made with the best of intentions, which is bad news for drivers and bad for the concept of company cars, which are newer and cleaner than many other vehicles on the roads.”
Sandall urged fleets to communicate the impact of the tax rise on drivers and, ideally, illustrate the cost on an individual basis. “Managers should study the impact on their own fleets, particularly as the increase will impact the most on higher emissions cars,” she said. “It is another trigger to encourage fleets to go down the low CO2 route.”
Colin Tourick, professor of automotive management at the University of Buckingham business school, was similarly unimpressed with the Chancellor. He told Fleet News that the announcement around BIK was probably the most unfair tax-raising measure he had seen.
“If you chose a new diesel-engined 99g/km CO2 company car a year ago you knew your BIK tax bill would rise by 9.5% next April,” Tourick said. “That’s now going to be 14.3%, a jump of more than 50% in the increase you were expecting.
“This reverses the long-term arrangement of drivers knowing what tax they would be paying before they chose their car. At a time when wages are rising more slowly than inflation this just makes people poorer. It’s outrageous.”
However, while Chandler was surprised by the Chancellor’s move, he suggested it was “logical” as diesel emissions were key.
He also believes RDE2 could actually bolster the credentials of diesel. “Once we can demonstrate in real world driving that diesels are clean, the supplement and VED increase will actually go,” he said. “It gives us the definition of a clean diesel which is potentially a good thing.”