A planned hike in fuel duty, due to take effect next month, has been cancelled by the Chancellor, Rishi Sunak, in the Budget.

It is the eleventh consecutive year duty has been frozen and, according to the Government, cumulatively has saved the average car driver £1,600 compared to the pre-2010 escalator.

However, the Treasury says that future fuel duty rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050, suggesting it may be the last time fleets can expect a freeze.

Ashley Barnett, head of fleet consultancy at Lex Autolease, told Fleet News that the affordability of electric vehicles (EVs) is a “key barrier” towards mass adoption for some people, so a petrol or diesel vehicle remains their only option.

“Against the backdrop of the pandemic, many people are still using cars as a safer mode of transport and any rises would feel counterproductive at this moment in time,” he said. 

“As momentum continues to shift away from petrol and diesel, a future rise in the 10-year fuel duty freeze feels inevitable and will help fund investment in greener alternatives.”

Sir Mike Penning MP, chair of the All-Party Parliamentary Group (APPG) on Road Freight and Logistics and former roads minister also welcomed the freeze on fuel duty.

He explained: “Freezing fuel duty will be a real boost to Britain’s hauliers who have been the unsung heroes of the pandemic, but the Chancellor must go further and investigate the need for an essential user rebate for UK hauliers. 

“Our haulage industry will be vital to our economic recovery and the Chancellor must ensure that they are not held back by paying highest rate of fuel duty in Europe.”

The APPG had called for an essential user rebate on fuel duty, which would cut the effective level of fuel duty to that of Germany.

In a recently launched APPG report, it suggests the rebate would provide a reduction in fuel duty of around 15 pence per litre for road haulage operators.

The one-year freeze in fuel duty (2021-22) will cost the Treasury £795m. That will rise to £885m the year after, £910m in 2023-24, £925m in 2024-25 and £945m in 2025-26.

There was no mention of future benefit-in-kind company car tax rates.

Barnett said: “It’s encouraging to see that no changes have been made to the company car tables outlined by the Chancellor last year, however a long-term visibility of company car rates beyond 2025 would have given decision makers the clarity they need to invest in green fleets now. 

"Fleet replacements typically operate in four-to-five-year-cycles and without sight of future tax liabilities, it’s significantly harder to make purchasing decisions with confidence.”

ROAD PRICING

There was also no mention of road pricing as a potential replacement for fuel duty and VED. However, the Budget did contain an announcement around a series of consultations the Government will launch this year, publishing a ‘Command Paper - Tax policies and consultations (Spring 2021)’ on March 23.

Fleet News has revealed how fleets are split over the merits of replacing fuel duty and road tax with a new road pricing regime.

Fewer than half (45%) of the respondents to a Fleet News survey said they were in favour of an alternative pay-as-you-go taxation scheme based on miles driven. However, more than a third (36%) said they were not.

Barnet said: “With EVs continuing to perform well in the market and with changing behaviour, we need an updated taxation system that accurately reflects the future of mobility – especially with the 2030 ban on ICE vehicles on the horizon. 

"Although any specific details remain to be seen, we welcome the announcement of a Command Paper on tax policies and consultations on 23rd March. 

"A clear, simple and easy to understand system will give much-needed reassurance to would-be EV drivers and encourage further EV uptake.”

VEHICLE TAXES

The Budget does reveal that there will be an uprate in VED rates for cars, vans and motorcycles in line with RPI from April 1.

To support the haulage sector and pandemic recovery efforts, however, the Government will freeze VED for heavy goods vehicles (HGVs) for 2021-22 and will suspend the HGV Levy for another 12 months from August 2021.

Furthermore, from April 6, fuel benefit charges and the van benefit charge will increase in line with CPI.

ECONOMIC SUPPORT

The Chancellor said that as restrictions are lifted, it is important that the Government continues to offer economic support UK-wide as the country fights the virus.

Overall, the Budget provides further support of £65 billion in 2020-21 and 2021-22.

Taken together with the direct support for the economy provided in response to Covid-19 to date, this represents around £352bn across 2020-21 and 2021-22.

Once also accounting for support provided at Budget 2020, which included a step change in capital investment, it comes to £407bn - the largest peacetime support package for the economy on record.

Sunak said that the Government’s support package is one of the largest and most comprehensive in the world.

The Government believes that the UK's rapid Covid-19 vaccine roll-out will foster a "swifter and more sustained" economic recovery.

Official forecasts predict the UK economy will grow 4% this year and get back to its pre-pandemic size six months sooner than previously expected.

Sunak’s confirmation that the he will extend the furlough scheme until the end of September is also expected to limit job losses.

However, he warned that repairing the long-term damage to the economy "will take time".

The Government's independent forecaster, the Office for Budget Responsibility (OBR), expects the pace of growth to strengthen to 7.3% in 2022.

TAX RISES

Having borrowed to support workers and households, businesses and public services through the most challenging stages of the pandemic, the Government says it is committed to tackling the challenge of repairing the public finances over the medium term.

The fairest way to continue to fund public services, it says, is with the highest earning households contributing more and companies contributing in recognition of the support they have received from Government.

Sunak announced in the Budget that he would maintain both the personal allowance and higher rate threshold, which will mean “nobody’s take-home pay will be less than it is now”.

In 2023, the main rate of corporation tax, paid on company profits, meanwhile, will increase from 19% to 25% for firms with profits over £50,000.

SUPPORT FOR APPRENTICESHIPS

The government says it will provide an additional £126m in England for “high quality” work placements and training for 16 to 24-year olds in the 2021/22 academic year.

Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

It will also extend and increase the payments made to employers in England who hire new apprentices. Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme.

This is in addition to the existing £1,000 payment the government provides for all new 16 to 18 year-old apprentices and those aged under 25 with an Education, Health and Care Plan, where that applies.

Furthermore, it says it will introduce a £7m fund from July 2021 to help employers in England set up and expand portable apprenticeships.

BUSINESS RATES RELIEFS

The Government says that it will continue to provide eligible retail, hospitality and leisure properties in England with 100% business rates relief from 1 April 2021 to 30 June 2021.

This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2m per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.

Nurseries will also qualify for relief in the same way as other eligible properties.

When combined with Small Business Rates Relief, the Treasury says that this means 750,000 retail, hospitality and leisure properties in England will pay no business rates for 3 months from 1 April 2021, with the vast majority of eligible businesses receiving 75% relief across the year.

Local authorities will be fully compensated for the loss of income as a result of these business rates measures and receive new burdens funding for administrative and IT costs.

The Government says it will also legislate to ensure that the business rates relief repayments that have been made by certain businesses are deductible for corporation tax and income tax purposes.

This will ensure that these businesses are no worse off from a tax perspective than if they had paid the business rates in the first place. This will apply for repayments made to the devolved administrations as well as to those made in relation to England.  

Peter Golding, managing director of FleetCheck, said: “This was a Budget that was very much designed to keep the economy moving as we emerge from the coronavirus crisis.

“Any concerns that the Chancellor was going to start aggressively clawing back some of the enormous sums that have been spent keeping businesses and individuals afloat over the last year appear to have been largely misplaced, with only a few, relatively minor apparent measures such as the 2023 Corporation Tax increase.”

He concluded: “In terms of absolute specifics though, there was little detail in there of interest to the fleet sector and it may be that we have to wait for the Autumn Statement to find out more about the Government’s post-pandemic transport policies and how they may affect us.”