Chancellor unveils Autumn Budget

Chancellor Philip Hammond has allocated an extra £2.3bn for the research and development of new technologies, with a further £540m supporting the growth of electric cars, including the installation of more charging points.

However, his Autumn Budget penalises diesel drivers with vehicle excise duty for diesel cars that don’t meet the latest emission standards rising by one band in April 2018.

In an effort to protect business, the tax increase will not apply to van owners. Moneys raised from this increase will fund a new £220m clean air fund.

Industry responses have varied.

Simon Benson, director of motoring services at AA Cars, said: ‘The government’s decision to increase the first year VED rate on diesels that don’t meet the latest standards puts new pressure on consumers and manufacturers in a year that has already crippled the market for diesel cars.

‘The move will come as yet another thorn in the side for motorists who were encouraged to buy diesels for more than a decade on the basis that they produced fewer CO2 emissions.

‘In October we saw new diesel car registrations plummet by almost 30% as consumer confidence in these once-fashionable motors has been rocked in recent months.

‘Earlier this year the government announced a ban on the sale of new diesel and petrol cars by 2040, and this move marks the latest step towards making diesels more expensive and inconvenient to own.

‘It appears as though the SMMT’s calls on the Government to restore stability in the market have fallen on deaf ears, as this announcement not only fails to rebuild consumer confidence but it will most likely exacerbate the problem.

‘What consumers need now is clarity: widespread confusion has knocked the market over the course of the year, so drivers need clear information about what charges both new Euro 6 diesels and older vehicles will face so they can make more informed car buying decisions.’

Brian Madderson, chairman of the Petrol Retailers Association (PRA), said, ‘Whilst it is a welcome announcement from the Chancellor that the government will freeze both petrol and fuel duty for a further 12 months from April 2018, it falls a long way short of demands from our members and the haulage industry for a significant cut to fuel duty.

‘Both the PRA and the haulage industry have repeatedly called for a cut to diesel duty which would have been beneficial to the economy by reducing transportation costs for so many products, and for consumers who purchased diesel cars in good faith, encouraged by the taxation regime of former governments.

‘This budget represents a missed opportunity to fuel economic growth and minimise inflationary trends. The PRA will continue to press for fuel duty cuts to boost our economy and to move the UK towards a level playing field with fuel duty levels in EU countries as we head towards Brexit.

‘At present over two million foreign trucks enter the UK via the short-sea ferry, and tunnel routes having already filled their long range tanks with low tax diesel on the near continent.  These vehicles unfairly compete with UK based hauliers and contribute little to the Treasury from fuel taxes. This is a harsh anomaly which the Government needs to address without further delay.’

Matt Dyer, managing director, LeasePlan UK, said, ‘We’re glad that the Chancellor has listened to motorists and the fleet industry, and decided to extend the freeze on Fuel Duty for another year. However, even with a freeze, fuel prices are still rising. If this continues, the Chancellor should consider cutting Duty rates for the first time since 2011.’

He added, ‘We are pleased that the government is keen to encourage the uptake of electric vehicles. As a founding member of the EV100, LeasePlan is committed to an electric future, but we also understand the challenges facing motorists and fleets looking to go green. Government grants for plug-in vehicles and private charge points will help, as will the extra money for the charging network – but a lot more infrastructure still needs to be delivered. It remains to be seen if the new powers the Government is legislating for in the Automated and Electric Vehicles Bill will be enough to make that happen.’

Richard Burnett, chief executive, RHA, said, ‘At a time of Brexit uncertainty, the Chancellor had the golden opportunity to make the production and distribution of UK goods more competitive.

‘Fuel duty makes the UK less competitive – we have the highest fuel duty in Europe -nearly 50% higher than the European average. And despite the seven-year freeze, at 57.95p per litre, fuel duty remains grossly excessive. It has a negative effect on everything we buy and makes all UK made goods more expensive to transport.

‘We implore the Chancellor to amend his budget and introduce a fuel duty rebate scheme for essential users of fuel – a system already adopted by eight EU member states, including our nearest neighbours – The Republic of Ireland, Belgium and France.’

Meanwhile, Alex Buttle, director of car buying comparison website Motorway.co.uk said of the £400m EV fund, ‘While this is fantastic news for motorists, the total investment the Government has allocated to encourage the use of electric vehicles is disproportionate to the opportunity for change.

‘More electric charge points are key, but the Government also needs to put far more resource into encouraging car owners to switch to alternative fuel vehicles in the first place.

‘Electric cars are still far too expensive for the average car owner, and while alternative fuel car sales are on the up, they’re not rising fast enough to phase out fossil fuel cars within the next 5-10 years.

‘The government needs to be far more aggressive with supportive tax breaks and incentives to help consumers make the leap to the more expensive electric car models. It needs to be a no-brainer for motorists to take the leap, and we’re just not there yet.’

But director of valuations at Cazana.com, Rupert Pontin, said,We welcome the government’s announcement of a £400m fund to develop the UK infrastructure for electric vehicle charging, the £100 million for plug-in grants and the additional £40m investment into the development of vehicle charging solutions. This is a positive move which will see the UK begin to lead the market in innovative vehicle technology.

‘The fact that the government has also clarified its position on diesel vehicle taxation should begin to provide stability for the new car market. Increasing VED by one band for older diesel vehicles that don’t meet current legislation should encourage consumers to opt for more modern, cleaner engines, although it is interesting to see that this does not apply to business van use.

‘The freeze on fuel duty is also very welcome at a time when the consumer has just been hit by higher inflation and a rise in interest rates. Using our extensive database and data science-led analysis, it will be fascinating to see what impact these announcements have on the used car market in the coming weeks and months.’

Huw Evans, director general of the Association of British Insurers, said, ‘Not raising IPT further was the right decision by Philip Hammond and reflects the much higher profile the insurance industry has successfully given to this stealth tax. But the pressures on the public purse are not going away so we need to keep up the pressure to protect customers from further increases in future budgets.’