At the start of this year’s first Budget statement in the Autumn, the Chancellor made clear that it was to be a “balanced budget”, which was both fiscally responsible but protected family incomes and jobs.
Reports earlier in the week from the Petrol Retailers Association suggested that the Chancellor was going to announce a 1p a litre rise in fuel duty on diesel for the first time in 7 years, alongside tax increases on the purchase of diesel cars confirmed by the Treasury a month ago.
Many experts regarded this as the nightmare scenario of a triple price hike in fuel duty, rising oil prices and tax hikes all at the same time.
Fuel duty frozen, car tax rises
To huge relief amongst Britain’s motorists the Chancellor opted to keep fuel duty frozen for the 8th year in a row, which is the longest time in 40 years that fuel duty has not changed, costing the Treasury a cool £46 billion in income.
Unfortunately, he did keep his promise of further taxation on diesel cars. Drivers of new diesel cars will now see an increase in road tax. They will be levied an increase in the first year of ownership on one tax band higher than those buying new petrol cars. Moving up a band for each diesel vehicle means motorists could be charged between £15 to £500 extra. The Treasury estimates that this change will raise £220 million that will be used to invest in a “clean air fund”, more on this later.
But there is an interesting sting in the tail of these road tax changes. The Chancellor also announced that new diesel cars are exempt from road tax increases if manufacturers implement new lower emission technology. We believe he is referring to super low emission diesel technology developed by companies such as Continental that delivers a 60% reduction in NO2 emissions and 4% fuel consumption improvement.
(Credit – Gio April)
Clean air fund
The £220 million raised from hiking diesel duty on new car purchases is going into a fund for cleaner air in towns and cities. The clean air fund is currently in consultation stages, but its purpose is to seek additional measures to support individuals and businesses affected by local NO2 reduction plans that will be rolled out at a local government and council level.
The fund is to support the implementation of local air quality plans by local governments and councils, while recognizing the potential impact on local businesses that these changes will make. The first indication of what these changes look like can be seen in London with the “T-charge” (toxicity charge) and Islington Council imposing a £2 additional charge for diesel cars parking in the Borough.
Concerns amongst local business owners in retail and hospitality is understandable if extra charges on diesel cars becomes prevalent across the UK. It’s bad enough that the gradual removal of free car parking and traffic control measures to reduce cars on high streets has moved footfall away to out of town locations, but to add in additional fees targeting diesel cars would be the final nail in the coffin for some businesses that rely on passing trade to survive.
Impact of the Budget on Business
In another change, the existing diesel supplement in company car tax is also going up by 1% and while this is a small change the key theme is to try to gently discourage companies with fleets to move away from providing fleets with diesel cars.
And for those who charge their electric car at work, this will no longer be a “benefit in kind” for tax purposes and they will be relieved of duty. This falls in line with other recent tax changes, where electric cars worth over £40,000 are now no longer exempt from road tax, which had been a tax loophole employed by companies.
And to add further cheer for Businesses, the tax increases will be on cars only, the Chancellor was keen to stress that “white van man” will not be impacted at all by any of the measures announced today, although what this means for those who use cars to drive for a living (such as taxi firms) means there is no exemption at all.
The main feeling that comes from the Budget is that it is still bad news but it could have been worse. Diesel drivers have been impacted, especially on buying new diesel cars and company car tax, but overall it won’t change behaviour. Fuel prices are going to rise anyway by between 4 to 12 pence per litre over the next 2 months, so freezing fuel duty didn’t relieve drivers, it was a token gesture.
PetrolPrices thinks that the Budget was more an adjustment rather than a change in policy on diesel to try to change buying behaviour. Diesel car drivers continue to be the Government’s focus tackling pollution when the reality its only 15% of the total NO2 impact. It feels as if the Government is scared to go after industries with big toxic emissions, road hauliers, public transportation and local councils to crack down on other leading causes of NO2 emissions. Targeting the car driver is the easy option because it doesn’t have the same level of union protection and lobbyist groups behind it as the other areas do and they can tax more easily.
What do you think of the Budget announcement and impact on you as a motorist? Do you think it was a “balanced budget” or do you think it has gone too far and added more tax than necessary? Let us know in the comments below.