Sunday, June 26, 2022

For Fleet and Transport Professionals

Industry comment on Chancellor’s budget

In light of today’s Autumn Budget, Matthew Walters, Head of Consultancy Services and Customer Value at Vehicle Leasing Experts, LeasePlan UK has put together the below comments on how the fleet industry will be impacted:

On the economic forecasts:

“The Budget’s economic forecasts suggest that the UK will recover fairly strongly from the challenges of the past two years. This doesn’t surprise us, although we would add a note of caution: the ongoing pandemic, as well as the after-effects of Brexit, mean that these forecasts are even more uncertain than usual.

“Whatever happens, the fleet industry is well positioned to help the country achieve strong growth. Not only did we account for over half of all new car sales in 2020, but we are also leading the adoption of cleaner motoring technologies.”

On the extended Fuel Duty freeze:

“Ahead of the Spring Budget earlier this year, there was speculation that the Chancellor would add as much as 5p to the rate of Fuel Duty. Thankfully, that didn’t happen – and now a planned increase in Fuel Duty has been postponed for yet another year, until at least April 2023.

“However, while the ongoing freeze is welcome relief for motorists and fleets, its significance shouldn’t be overstated. It won’t really affect prices at the pumps, which are currently at near-record highs – and could go higher due to continuing issues around oil prices and supply.”   

On the lack of big announcements:

“This Budget has left the fleet industry with more questions than answers. So many previously announced consultations – into VED for cars, into VED for vans, into a ZEV mandate, and more – have been allowed to pass without any confirmed legislative action. And just what is the government planning around Road Pricing, which was one of the big talking points ahead of today?

“If the fleet industry is to prepare for the future, then it needs some of these unresolved questions answering as soon as possible.” 

On Company Car Tax rates:

“Unlike his immediate predecessors, Rishi Sunak has given fleets and motorists ample warning of upcoming Company Car Tax rates in his previous Budgets. However, today’s Budget did not give us the rates for 2025-26 or beyond.

“With the Spring Budget due early next year, this isn’t yet an urgent concern. But we would urge the Chancellor to continue his record of transparency – and provide those rates as soon as possible, so that fleets entering into contracts today are able to plan properly for the future.” 

Commenting on the decision to maintain the freeze on fuel duty, Iryna Kocharova, Head of Sustainability at Lex Autolease, said:

“As momentum continues to shift away from petrol and diesel, an alternatively-fuelled future can’t happen overnight. The affordability of electric vehicles remains a key barrier towards adoption for many small businesses and private drivers, with an ICE vehicle remaining the only option for some.  

“With rising fuel prices against the backdrop of the ongoing pandemic recovery, a 12-year fuel duty freeze remains a sensible move; however, if the UK is serious about leading the EV charge, then sustained investment from policymakers which accelerates the UK’s electrification plans has to stay at the top of the agenda.”

Responding to the Budget, Edmund King, AA president, said;

“Most drivers will be relieved that duty hasn’t been increased especially with record prices at the pumps. This is a pragmatic approach by the Chancellor.

“This will bring some ‘pump relief’ but the pain of record petrol prices remains.

“Our research suggests that when fuel prices are high, lower income drivers cut back on general household expenditure, including food and heating, to keep their cars on the road. Freezing duty will help these drivers.

“We will though be looking for more fiscal and infrastructure incentives to support our COP26 positioning to ensure that the UK ‘gets electric done’ as soon as possible. Fleets and company car drivers have a vital role as their new EVs soon find their way onto the used car market.

“The AA welcomes extra funding to improve lorry park facilities as a partial move to attract more HGV drivers and improve efficiency of the road network. Funds to fill an extra one million potholes will be welcomed by those on two wheels and four wheels to cut deaths, improve safety and reduce vehicle damage. ”

Background on fuel prices

Pre-pandemic, petrol was 122p and diesel 125p a litre. Both were falling.

Now they are 143p and 146.5p a litre.

The 21p difference includes 3.5p extra in VAT. That’s more than the 2.84p scheduled increase in fuel duty hence the Chancellor is still taking more tax from drivers.

Fuel duty frozen for 12th year 

Background on roads:

The Spending Review confirms £2.6 billion between 2020-2025 for a long-term pipeline of over 50 local roads upgrades, over £5 billion for local roads maintenance; and funding for buses, cycling and walking totalling more than £5 billion in England over the Parliament

Speaking of today’s Budget announcements, Richard Hipkiss, managing director of Fleet Operations, said:

“After a rise in fuel duty was reportedly tabled, it is welcome relief that the Chancellor has decided to hold fuel duty for the 12th year in a row in today’s Budget.
“However, this announcement is set against a backdrop of increasing pressures on fleet fuel spend, with petrol prices reaching new highs, somewhat offsetting fuel duty campaigners’ triumph over the continued freeze.

“This makes the need for stringent cost control measures and effective fuel strategies all the more critical.

“Changing priorities and ensuring the UK was a forerunner in the race to zero was clear, with a £817 million pot committed for the electrification of UK vehicles and their supply chains, on top of the £620 million of additional investment recently announced for public charging in residential areas and targeted plug-in vehicle grants.

“However, the decision not to cut VAT on household energy in the face spiralling bills could potentially dampen enthusiasm for EV adoption amongst company car users.
“In the Autumn Statement, the government has also underlined its commitment to boosting transport in the city regions, with £6.9 bn injected into train, tram, bus and cycle projects, which, coupled with rising fuel and energy bills, could further accelerate the industry’s inevitable move to a mobility model.

“Whilst the impacts of the budget are yet to be seen or felt, fleets will no doubt be waiting with bated breath to see how these and other factors will affect their fleet spend and makeup over the coming year and beyond.”

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