Budget Signals An End To Austerity But Fails To Deliver In Key Fleet Areas
In the 2018 Budget Statement, Chancellor Philip Hammond said that austerity was coming to an end but he failed to address many of the more immediate concerns of the fleet industry, which had called for, amongst others, greater clarity in BIK rates, improved tax incentives for electric vehicles and assurance that company car drivers would not be disadvantaged by the new Worldwide harmonised Light vehicle Test Procedure (WLTP).
In unveiling his Budget Statement on Monday, October 29, exactly five months before the Brexit deadline, the Chancellor said the Budget “set out the government’s plan to build a stronger, more prosperous economy”.
He had clearly signposted before the announcement that it would only be an interim Budget if the UK failed to get a deal in its Brexit negotiations to leave the European Union, and that an emergency Budget might be required in March. He also announced extra funding of £500m for Brexit preparations this year, taking the sum allocated for 2019/20 to £2bn.
Amongst measures announced were:
A review of the impact of WLTP
Although there were no specific measures announced at this Budget regarding changes brought in by the new WLTP, the government announced that it will review the impact of WLTP on Vehicle Excise Duty (VED) and company car tax to report in the spring.
The WLTP regime, the government said, aims to provide a closer representation of ‘real-world’ fuel consumption and CO2 emissions. Vehicle manufacturers are currently able to quote WLTP emissions values correlated to the previous NEDC testing system, before they must switch solely to WLTP values from April 2020.
However, many experts have identified a general increase in CO2 emissions under the NEDC-correlated WLTP values when comparing the old regime to the new, which could increase BIK tax bills.
Freeze in fuel duty
The freeze in fuel duty for the ninth year in a row had already been signposted by Prime Minster Theresa May at the Conservative Party Conference earlier in the month when she announced that duty, which is expected to generate £28.2bn in income for the Government in 2018-19, would not be increased.
The Chancellor said the freeze had “come at a significant cost to the exchequer, but the high oil price and the near-record pump price of petrol and diesel are also imposing a significant burden on motorists”.
He added that in the nine years of the freeze in fuel duty, car drivers had seen a saving of £1,000 and van drivers one of £2,500.
Prices at the nation’s fuel pumps are now at a three year high, according to the AA, with average petrol prices having gone up by 11.5p a litre and diesel up by 14p a litre in the last 12 months.
Increase in road spending
The Chancellor announced an additional £420 million, on top of an existing fund of almost £300m, to tackle the nation’s growing pothole problem and ring-fenced VED for roads funding.
The funding announcement came alongside additional cash to upgrade England’s motorways.
Mr Hammond earmarked around £25.5 billion for Highways England for major road upgrades between 2020 and 2025 – and, in a first, the work will be largely funded by vehicle excise duty (VED).
The government said it was delivering in its commitment to hypothecate English Vehicle Excise Duty to roads spending, announcing that the National Roads Fund will be £28.8 billion between 2020-25. The Fund will provide long-term certainty for roads investment, including the new major roads network and large local major roads schemes, such as the North Devon Link Road.
Changes to Vehicle Excise Duty
From 1 April 2019 VED rates for cars, vans and motorcycles will increase in line with RPI. To support the haulage sector, the government intends to freeze the Heavy Goods Vehicle (HGV) VED for 2019-20.
With regard to VED on vans, the government will shortly publish a summary of responses from the consultation on VED reform for vans, published in May 2018. The response will set out proposals to introduce environmental incentives from April 2021. Bands and rates will be set out ahead of Finance Bill 2019-20.
Fuel benefit charges
From next April, fuel benefit charges will increase in line with RPI and the van benefit charge will increase in line with CPI.
Electric charge points
The 100% first year allowance for expenditure by businesses on electric charging points has been extended to 2023 for corporation tax and income tax.
John Lawrence, Managing Director at CLM, said the Budget had failed to deliver in a number of key areas for fleet operators.
“We welcome the review into the impact of the WLTP emissions testing system, although we would have liked to see some clarity over the tax treatment of electric vehicles and diesels – both of which seem to be unfairly treated from a tax perspective at the moment – but didn’t really get it. The extra spending on roads is also to be welcomed, as is the freeze on fuel duty.”